Textron Sees Recovery At Light End Of Bizav

King Air 250
Credit: Textron Aviation

Textron Aviation is seeing a pickup in orders for light turboprops and jets from private buyers, but demand from corporations for larger business jets has yet to show signs of recovery, parent company Textron told analysts on July 30.

“The level of activity and orders that are closing have been stronger on the light side,” CEO Scott Donnelly said on Textron’s second-quarter (Q2) results call with analysts. “King Air 250s right now are very strong. [Citation] M2s are strong. So they’re more the private-business, high-net-worth-individual sort of customers,” he said.

“Those corporate customers that are more of our [Citation] Latitude and Longitude [buyers], there’s a lot of dialogue going on,” Donnelly said. But corporate customers are reducing capital expenditure (capex) to conserve cash through the COVID-19 economic downturn.

“I think the pace of how the economy recovers and provides certainty is going to be really important to seeing that segment of the market start to put down deposits and sign deals,” he said. “As people go into the end of the year and certainly beginning of 2021, we expect to see an uptick in the order activity there.”

Second-quarter revenues at Textron Aviation were $747 million, down $376 million from a year earlier on $178 million lower Citation business jet volume and $120 million lower aftermarket volume, Frank Connor, Textron chief financial officer, told analysts.

Textron Aviation delivered 23 business jets, down from 46 a year earlier, and 15 commercial turboprops, down from 34. The reduction in Citation deliveries was due to the decline in demand caused by the pandemic and, to a lesser extent, to travel restrictions preventing the acceptance of aircraft, he said.

The Aviation segment plunged to a $66 million loss in the second quarter, down from a $102 million profit a year earlier. This was due primary to lower volumes, but included $53 million of costs for idling facilities during the pandemic. All manufacturing operations have been restarted, Donnelly said.

The loss at Aviation was offset somewhat by improved performance at Bell because of higher military volume. Revenues at Bell were up $51 million from a year earlier at $822 million, and segment profit was up $15 million at $118 million, Connor said.

Commercial helicopter deliveries were down at Bell, to 27 aircraft in the second quarter from 53 a year earlier, largely driven by lower demand for the light single-turbine Model 505. 

“The only area where we’ve seen lighter activity [at Bell] has been in aircraft that we sell on a more short cycle,” Donnelly said. “It’s a high net worth individual. It’s more of a discretionary spend, which is some of the 505 ... where I think we’ll see lower volume through the balance of the year.”

Textron Aviation, meanwhile, has reset its production rates for the rest of 2020 and 2021, and is expected to improve its financial performance through the third and fourth quarters. 

“The sales team is back in the field, meeting with customers and arranging demonstration flights,” Donnelly said. “We saw a pickup in business jet flight activity in the latter part of Q2. And we expect to see higher new aircraft deliveries and aftermarket revenue in the second half of the year on a sequential [quarter-on-quarter] basis.”

While Textron is encouraged by the recovery in business aviation, “we need to see that continue to progress and start to head back to some degree of normalcy,” Donnelly said. “That’s why we look at more of the latter part of Q3, into Q4 and even probably deliveries out in the beginning of 2021 as the corporate piece of America starts to make capex commitments again.”

Graham Warwick

Graham leads Aviation Week's coverage of technology, focusing on engineering and technology across the aerospace industry, with a special focus on identifying technologies of strategic importance to aviation, aerospace and defense.