Business jet sales in North America are driving a tepid recovery in the sector as orders dry up in China, Russia and Latin America, the head of Textron Inc. said Tuesday.
Chief Executive Scott Donnelly said North America is generating 80% of corporate jet sales as emerging market business cools, well ahead of the region’s share of around 50% in recent years.
Textron booked more orders than deliveries for its Cessna line of jets and turboprops for the first time in seven years, boosted by booking the first batch of a big order from plane-sharing service NetJets Inc., and Mr. Donnelly said the glut of used aircraft that had weighed on sales was now abating.
“North America is really what’s keeping us strong,” Mr. Donnelly said on an investor call after Textron reported a forecast-beating 16% rise in second-quarter profit
Textron’s Cessna unit is the world’s largest business jet maker by unit sales, though lags behind by revenue Bombardier Inc. and the Gulfstream arm of General Dynamics Corp, which produce larger, pricier planes.
Cessna relies heavily on sales of small and midsize jets to North American companies, but traffic growth has been tepid in recent months, and the company has trimmed production. The number of takeoffs and landings by business jets at U.S. airports rose 2.2% in June from a year earlier, according to the Federal Aviation Administration, better than the two prior months, but lagging the growth experienced last year.
The small and medium-size sector was hardest hit by the collapse in sales following the 2008 recession, but investors have expressed concern in recent months that weakness was spreading to larger jets, with used prices declining. That could force Bombardier and Gulfstream to trim output of existing planes as they prepare to launch new jets into the market. Both companies report earnings this week.
NetJets said it is due to receive next summer the first of 25 Cessna Citation Latitudes that formed part of a huge order in 2012 valued at $9.6 billion before discounts. It also has options on another 125 of the planes. The unit of Berkshire Hathaway Inc. also placed firm orders for 100 Bombardier Challenger jets, and has 18 of the 350 model, with the first of its 650 series jets due to arrive in the fourth quarter.
France’s Dassault Aviation SA last week said the it booked 25 new orders for its Falcon business jets in the first half of the year, though NetJets canceled a deal for 20 of the Falcon 2000 model that dates from 2006.
Dassault Chief Executive Eric Trappier said he expects the second half of the year to be more robust, though business in Brazil and India remains difficult. Still, he said “the market is very active” with prospects in the U.S., northern Europe, and even Russia, where the economy has struggled amid western sanctions.
Textron reported net profit of $167 million for June quarter compared with $144 million a year earlier, with per-share earnings climbing to 60 cents from 51 cents. Revenue slid 7% to $3.25 billion, weighed by a 24% slump in sales at its Bell helicopter unit.
Bell, like rivals, has been hit by the slowdown in business from global oil and gas exploration and reduced sales from energy-dependent nations.
Textron shares were recently up 3% at $41.73.
—Robert Wall contributed to this article
http://www.wsj.com/articles/textron-says-north-america-sales-keeping-it-strong-1438094164