Textron Aviation will trim production of legacy models such as the Citation X+ and Sovereign+ as it expands the output of newer models, such as the Latitude and, later this year, the Longitude.
Textron Aviation expects to boost its Citation Latitude output by nearly 30 percent in 2017, but at the same time is planning production rate cuts by almost as much throughout the rest of its Citation jet line, company executives told analysts this morning. Releasing its fourth quarter 2016 results today, Textron forecast that revenues for Textron Aviation 2017 would remain flat at roughly $5 billion.
The forecast comes on the heels of a fourth quarter in which both business jet and turboprop deliveries slid for the Wichita-based manufacturer, causing revenues to dip by $52 million and profit to slip by $3 million.
Textron Aviation delivered 58 new Citations and 28 Beechcraft King Air turboprops in the fourth quarter of 2016, down from the 60 jets and 33 King Airs shipped in the fourth quarter of 2015. As a result, revenues dropped to $1.436 billion and profits to $135 million in the fourth quarter of the year.
For all of 2016, revenues were up by $99 million to $4.921 billion, but profits were down by $11 million to $389 million.
Backlog also inched downward in the quarter by $73 million to $1 billion.
Scott Donnelly, chairman, CEO and president of Textron Aviation parent Textron Inc., pointed to pricing pressures that escalated in the fourth quarter in the decision to adjust production of legacy Citation models. Donnelly did not break down cuts for the individual models but said the total would be about the same as the increases in Latitude production.
Noting the demand is “not there” for aircraft at higher prices, Donnelly said, “it just reached a price point where it doesn’t make sense for us to build the aircraft.” Latitude sales have remained strong, he added, and expects the increased production there to be split evenly between NetJets and its other customers.
However, Latitude pricing also has been “very difficult,” Donnelly said. “It has been improving but…[at a level] we’re clearly not happy with.”
Textron Aviation also saw turboprop sales diminish as the Joint Primary Aircraft Training System (JPATS) program winds down. Textron Aviation's Beechcraft sector supplied the T-6 Texan II turboprop single for the program.
While the market remains soft, Textron continues to invest in its new programs, with plans to bring the Longitude to market by the end of 2017. Textron Aviation expects to certify the model, which would be its largest yet, by the end of the year and deliver the first few to customers, Donnelly said. Production ramp up would follow.
Textron Aviation also is continuing its development of the Hemisphere, part of an overall strategy to move further into the large-cabin sector as market preferences have shifted in that direction.
(Kerry Lynch - AINOnline News)