Cessna executives have started thinking about the merits of expanding manufacturing operations in high-growth markets outside China, where the company is already committed to build three aircraft models using local partners.
"We don't have anything on the plate today," says Brad Thress, Cessna's senior vice-president for business jets, "but we are contemplating - we are asking ourselves, I would say - and studying that question of whether there is benefit in some of the other [growth] markets."
The internal study has begun as Cessna has reduced light jet production rates and slashed its delivery outlook after an expected recovery failed to materialise in the first quarter. The company is now entering the fifth straight year of declining sales for the light jet sector.
Cessna still hopes for the market to recover soon, but has tempered expectations about the rate of improvement. "We're not going to see a quick rebound like we've anticipated," Thress says. "That will be dampened by what's going in Europe and many, many other factors."
As the North American and European markets remain stagnated, aircraft manufacturers have turned to high-growth markets in Asia and Latin America to boost orders.
Cessna, in particular, has focused on growing in China. The country held only about 20 of its roughly 6,000 aircraft in service worldwide last year. But the country's aviation needs are expected to grow significantly over time, although at an uncertain pace.
Last year, Cessna signed agreements to establish two joint ventures with Chinese companies affiliated to provincial capitals: Zhuhai and Shijiazhuang. The latter joint venture is signed up to build the Cessna 208 Caravan, and it is moving more rapidly than the agreement with Zhuhai to build the Citation XLS, Thress says.
Manufacturing facilities in Shijiazhuang could be ready to open as soon as the third or fourth quarter, he adds, although the impact on Cessna's bottom line could take time to be noticed.
"We think initially it will be quite modest, but then grow at the rate [of], or slightly faster than that market's growth," he says.
As Cessna considers other markets, it is taking the same approach as it did in China. Company officials are less concerned about the possibility of reducing costs than about using access to generate more sales.
"Probably the biggest single factor is market access and does it improve my ability to sell and deliver product into those markets," he says.
Moreover, labour expense represents only 8-11% of Cessna's product cost, Thress says, so any reduction in that amount is usually offset by increases in logistics costs.
Source: Flight International
