“In the [second] quarter, our team delivered higher revenue, earnings per share, and cash flow,” said Scott C. Donnell, chairman and CEO, Textron. “At Aviation and Bell, we continued to execute on key programs, including the Citation Ascend and FLRAA.”

The YoY $113m increase in revenue came from higher pricing of $57m and higher volume and mix of $56m.

Textron Aviation delivered 42 jets in the quarter, down from 44 in the second quarter of 2023, and 44 commercial turboprops, up from 37 in last year’s second quarter.

On the bottom line, the aviation segment’s profits increased to $195m, up $24m from same quarter last year.

Meanwhile, the company’s backlog at the end of the second quarter was $7.5bn slightly higher than $7.3bn at the end of first quarter 2024.

Overall, Textron’s second quarter revenue increased by 3%YoY to $3.5bn attributable to growth in Aviation, Bell and Systems segments which offset the decline in revenues from Industrial and eAviation segments.

Despite higher topline, the company’s net income declined during the quarter under review to $259m in the second quarter from $263m from last year. The company booked special charges of $13m, which the company said was due to “headcount reductions in the Industrial, Textron Systems and Bell segments.”

This translated in to earnings of $1.35 per share, as compared to $1.30 in the second quarter of 2023.

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“Investing in a larger and modern Textron Aviation Service Center facility in Perth allows us to grow our capacity and better assist customers with scheduled maintenance, modifications and aircraft-on-ground support,” said Brian Rohloff, senior vice president, Customer Support at Textron.

The company also announced that it will rename the recently-acquired Australian service center Premiair Aviation Maintenance to Textron Aviation Australia to fully integrate the Perth, Gold Coast and Melbourne facilities into its service network.

Beechcraft, Cessna and Hawker customers receive factory-direct support, maintenance and modifications by Textron Aviation through its global network of service and parts centers, mobile service units and 24/7 1CALL AOG (aircraft-on-ground) support.

Aftermarket parts and services accounted for nearly 39% of the Textron’s revenue during the first quarter of 2024.

The company said that it is moving to larger and modernised facilities at both Jandakot airport in Perth and Essendon Fields airport in Melbourne to grow service capacity and support parts availability in the region.

The company expects larger facility at Jandakot to increase shop capacity and aid in faster scheduling with minimal down time to keep customers flying. The new facility is expected to be fully operational by the end of July 2024.

Moreover, in Melbourne, Textron said it is adding 5,000 square feet of new parts storage to a facility near Essendon Fields airport, located within five minutes of all major carriers and the Textron Aviation Service Center. Textron Aviation anticipates being fully functional in the expanded Melbourne facility by the end of June 2024.

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“In the quarter, we saw profit growth across our Aviation, Bell, and Systems businesses,” said Scott C. Donnelly, chairman and CEO, Textron. “At Aviation, we saw continued strong market demand which contributed to $177m in backlog growth. At Bell, we saw revenue growth driven by the FLRAA program.”

The company said that the Textron Aviation’s revenues increased by $39m from last year’s first quarter, reflecting higher pricing of $48m, partially offset by lower volume and mix of $9m.

Meanwhile, Textron Aviation delivered 36 jets in the quarter, up from 35 in the first quarter of 2023, and 20 commercial turboprops, down from 34 in last year’s first quarter.

In terms of profitability, the aviation segment’s profit increased by $18m to $143m during the quarter under review driven by the favourable impact from pricing, net of inflation of $14m.

The segment’s backlog at the end of the first quarter was $7.3bn.

Overall, Textron’s revenue increased by 4%YoY to $3.1bn with a major boost of this coming from the higher sales in aviation and helicopters segment (Bell). This translated in to net income of $1.03 per share, as compared to $0.92 per share in the first quarter of 2023.

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“Owners have increasingly become interested in solutions that mitigate the carbon footprint of operating their aircraft,” said Brad White, senior vice president, Textron Aviation.

The program, in collaboration with 4AIR, is set to launch in January 2024 and will be available to eligible customers who own and operate Cessna, Beechcraft and Hawker turbine aircraft worldwide.

4AIR will provide aircraft owners a personalized, annual report that will document offset purchases in addition to helping them meet their monitoring and compliance reporting requirements.

“SustainableAdvantage provides them the opportunity to have a seamless option to offset their carbon emissions through a Textron Aviation approved program and supplier,” added White.

Textron Aviation will administer SustainableAdvantage programs and connect aircraft owners with 4AIR.

SustainableAdvantage will offer owners the option to offset their aircraft emissions footprint with 4AIR’s Bronze Level. Carbon offsets reduce emissions elsewhere which can be claimed against the carbon footprint from operating aircraft.

“We are excited to provide Cessna, Beechcraft and Hawker owners with sustainable solutions that address and meet their environmental commitments and goals,” said Nancy Bsales, chief operating officer, 4AIR.

The SustainableAdvantage portfolio, managed by 4AIR, supports four projects around the globe including Rainier Gateway Forestry Project, Cookstove Project, Bundled Solar and Solar Energy – Renewable Power by Adani.

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This agreement extends NetJets’ existing agreement, and includes options to increase the number of aircraft each year, with a choice of Cessna Citation Ascend, Citation Latitude and Citation Longitude aircraft.

NetJets has also been named the fleet launch customer for Textron Aviation’s newest jet — the Citation Ascend. Currently under development, deliveries of the Citation Ascend are expected to begin in 2025.

“NetJets customers around the world continually select Citations as their aircraft of choice. We’re honored to be the largest provider of industry-leading aircraft to NetJets and look forward to continuing to work together to design and deliver the best aviation experience based on customer feedback,” said Ron Draper, president and CEO, Textron Aviation. “Expanding and adding the Citation Ascend to the NetJets fleet will provide its global customers with even more versatility and flexibility to accomplish their missions, building upon the exceptional performance and popularity of the Latitude and Longitude.”

Since the inception of the more than 40-year relationship between the companies, NetJets has taken delivery of more than 800 aircraft from Textron Aviation.

Doug Henneberry, NetJets executive vice president, Aircraft Asset Management said: “As a long-time, trusted ally who shares our commitment to safety and service, Textron Aviation is the ideal partner to help us expand our offerings to NetJets Owners with the introduction of the new Ascend to our midsize jet class, as well as by growing our overall fleet. Based on past demand for the popular Citation Latitude and Longitude, the new Ascend and all our new Citations will undoubtedly be well received by our Owners, particularly those who depend on NetJets to help them do more and miss less.”

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There are two reasons for this. First, corporate buyers are ordering aircraft. Second, many of the new entrants that discovered business aviation are happy. OEMs did see a brief pause in sales when several US banks had issues, but demand has bounced back since.

Demand in the second quarter was at the same level as the demand in the first quarter. It felt very similar,” said Phebe Novakovic, chair and chief exec of Gulfstream parent General Dynamics on an analyst call this week. “As we enter Q3, we have a very strong pipeline.”

 General Dynamic’s Aerospace division (which includes Jet Aviation) had a book-to-bill ratio of 1.3 in the second quarter of this year. This is down from 1.96x in the second quarter of 2022 (and 2.03x in 2021). A 1.3x ratio shows the market may be down but is far from out. Gulfstream delivered 24 aircraft in this quarter versus 22 in 2022.

 “It’s really the Fortune 500 that are really driving the demand. These are long-established customers as well as new Fortune 500 customers,” said Novakovic. She says that ultra-high net worth buyer demand is still strong. Gulfstream is also seeing strong demand from the Middle East and Asia.

Dassault saw a slowdown in the last quarter of 2022 which has continued for the first half of this year. The French manufacturer booked 12 new Falcon orders in the first half of 2023 compared with 41 in the first six months of 2022. This gave the company a book-to-bill of 1.33.

Dassault delivered nine Falcon business jets in the first half of the year against 14 in the first half of 2022. It expects to deliver 35 aircraft – including Falcon 6X. While orders are down, it has a backlog of 90 aircraft compared to 87 at the end of June 2022.

Textron Aviation had a book-to-bill of 1.2x. “The market is still quite strong and we’ve posted a strong book-to-bill again in the quarter,” said Scott Donnelly, chair, president and CEO of Textron (we hope he gets three salaries for doing all these jobs). “We continue to be really happy with how the market is behaving in terms of demand and pricing.”

Textron Aviation’s backlog at the end of the second quarter was $6.8 billion – up from $6.4 billion at the end of 2022. Textron had hoped to deliver around 200 jets this year, it expects to deliver fewer now (in 2022 it delivered 178) because of issues with getting parts from suppliers.

Gulfstream had planned to deliver about 145 aircraft in 2023, it is now expecting to be closer to 140 jets. Some of these are likely to be its new G700.

Supply chain problems are easing but manufacturers will not rush to increase production when things improve. This prudence and the new customers who have entered the market mean that the industry is well placed for a soft economic landing – and in a better position for a hard one.

“The demand environment is driven by the fact that people – in particular people who have come into this market and started using aircraft and experienced what private aviation is all about – have had a great experience,” said Donnelly. “They are time machines, right? It allows you to do things that you just can’t do if you’re using commercial transportation. The productivity, the efficiency, the ability to get from anywhere to anywhere on your time and in an expeditious way is something that more and more people have been exposed to.”

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Daniels, who previously worked for Cessna for 25 years, will be based at Jet East’s Dallas facility. The maintenance firm said he will “use his expertise and skill set to advance the company’s growth”.

Brian Leitschuck, general manager, Dallas facility, Jet East said: “There is no better feeling than knowing that the Jet East name is being represented by the best that the aviation industry has to offer. Mark’s knowledge, coupled with the relationships he has established, make him the perfect candidate for this position.”

Daniels said: “I believe this is a company that truly values its employees and customers alike. I am devoted to contributing my best to the team and helping the company reach new heights.”

In October last year, Jet East acquired a full-service maintenance facility in Statesville, North Carolina.

The company was acquired by Gama Aviation in January 2021 for $8m to grow its market capabilities and close to double its US maintenance business.

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Business jet manufacturers did significantly better.

Textron Aviation achieved a book-to-bill of 1.55x (it booked 1.55 aircraft orders for every aircraft it delivered); Bombardier 1.8x; Gulfstream 1.96x and Embraer 2.5x.

These ratios mean that backlogs continue to rise. Gulfstream’s hit $18.786bn (up $5.3bn in 12 months), Bombardier $14.7bn (up $1.2bn), Textron’s hit $5.8bn (up $2.7bn).

These are fantastic results showing two things: first, increasing production is still hard and second, demand is still strong.

It is hard to see OEMs speeding up production significantly. “We do face, what I would call a crosswind on supply chain,” said Éric Martel, chief executive, Bombardier on his analyst call.

Jefferies says that Bombardier, Textron Aviation, Gulfstream, Embraer and Dassault Aviation delivered 126 jets in the second quarter. This is up from 117 jets last year. But this is still down 14% compared to the 147 jets they delivered in the second quarter of 2019.

“We are seeing all the OEMs practicing commendable restraint on supply, and even if they did try to make more aircraft than currently planned, we doubt if the supply chain could accommodate anything before 2024,” said Robert Stallard, partner, Vertical Research Partners.

Whether demand stays is the biggest question. The number of pre-owned aircraft for sale is slowly rising (see dashboard below), but there are still few recently delivered jets available.

“There’s a lot of talk out in the market about interest rates, inflation, the stock market recession potential and so on,” said Jason Aiken, CFO of General Dynamics (and former CFO of Gulfstream) during an earning call.  “But to be completely frank, we have not yet seen any impact of that in terms of our order pipeline and the resulting order activity that we’ve seen. There continues to be a very strong customer demand.”

Scott Donnelly, CEO, Textron, had a similar view on the Textron analyst call. “The market feels about the same. Demand is strong and there continues to be a strong business jet market in North America. In the quarter we saw a significant pickup in international activity, particularly in our turboprop business. We see some more of the corporates, coming back in as corporate flight activity picks up, but still seeing a lot of new entrants into the market as well. The beginning of Q3 is indicative of really strong demand across the entire portfolio of products.”

Bears may say that OEMs were saying the same thing in 2008. But the market was very different. In the second quarter of 2008, OEMs delivered 270 jets – more than twice this quarter’s 126 aircraft. In 2008 Cessna alone delivered an astonishing 117 business jets. Hawker Beechcraft built 38.

With a global downturn now expected, it would be no surprise to see some drop in orders. OEMs, however, stress that backlogs are much stronger now than they were in 2008. Some of this is true as manufacturers have worked hard to stop speculators. But you only discover how strong backlogs are after a downturn.

Gates, a keen business jet user and a major investor in Signature Aviation, is also warning of a global slowdown. Last week in an interview with CNN (to publicise his book) he said: “You can only be optimistic in the long term if you are pessimistic enough to survive in the short term.”

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