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
batch of the 25 planes ordered by 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 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.
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.
Write to Doug Cameron at doug.cameron@wsj.com
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