Cessna expects further drop in jet deliveries in 2010

Washington DC
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Cessna is starting to see signs of recovery in the business jet market, but expects delivery rates, which have already plunged more than 40% compared with last year, to drop further in 2010 before increasing again 2011.

Chief executive Jack Pelton says that after "a very rough period of rapid decline in our industry" the manufacturer is "starting to see great signs". He says the order intake has increased and "the used aircraft market is starting to relieve itself of the excess inventory".

After booking an average of only three new orders a month during the first five months of the year, Cessna booked seven orders in June for delivery in 2009. And, in June cancellation rates started to slow, a trend that continued in July.

"It's starting to feel better," Pelton says. "I'd hate to say we can call it the bottom, but I think we're at least stabilising."

Cessna delivered 467 jets in 2008 but now expects to deliver only 275 in 2009, compared with the 535 it had planned for before the economic downturn forced it to slash production and furlough about half of its workforce. Second quarter revenues were down 42% year-on-year.

While market conditions seem to be improving, Cessna will not increase production until at least 2011. Vice-president for Citation sales Gordon Vieth says: "We want to come out of 2010 with a reasonable backlog."

For the remainder of this year and 2010 the company will focus on selling off its inventory of white tails, which swelled in the first half of 2009 because the manufacturer did not want to stop producing aircraft that were cancelled but already in the pipeline.

Vieth says the entry-level Mustang has been the best-performing model during the downturn and will account for 125 aircraft, or one-third of Cessna's jet deliveries this year, compared with 101 units and 22% last year. "When we get a cancellation we have no problem selling it," he says.

Cessna has not released a piston forecast for 2009 and 2010, but Pelton says piston deliveries started to go down last year and have now stabilised: "We believe it will start picking back up again next year," Pelton says.