General Dynamics: 2012 for Jet Aviation recovery

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Gulfstream parent company General Dynamics said new management being put in place at its Jet Aviation completions subsidiary in Basel, Switzerland, will solve throughput issues, as the demand for completions begins to recover in 2012.

Jay Johnson, chief executive of General Dynamics, said a marked reduction in completions orders from airframer customers - and "less than optimal performance" on several narrowbody and widebody completions at the Basel facility - were partially behind a reduction in its aerospace division's operating margins in the first half of the year, compared to 2010.

"We brought them in the front door, but couldn't get them out the back door in a timely manner," Johnson said of the completions, adding that the quality of the finished product was not at issue.

"We put a lot of new talent in there to help those on the shop floor," he added.

The company reported a continued decrease in operating margins (earnings as a ratio of revenue) in the first and second quarter, compared to 2010.

The reduction was due to research and testing expenses from the company's two certification programmes - the G280 and G650 - but also from the poor performance at the completions arm of Jet Aviation, a subsidiary General Dynamics acquired in 2008.

Johnson, speaking to analysts during the company's second-quarter earnings call on 27 July, said new management at Jet Aviation and a "healthy demand" for completions would help to ensure "improved performance", after eliminating overheads and restructuring the business over several quarters.

Jet Aviation announced in June that group president Peter Edwards, who has held the position for four years, would leave the company on 31 August, to be replaced by Daniel Clare, a vice president at General Dynamics.

The director of the Basel facility, Charley Celli, was replaced on 1 July by Stephan Krenz, who joined Jet Aviation in March after working at Bombardier.

The issues with completions were counterbalanced by a healthy service business at Jet Aviation, and continuing strong performance for large cabin jets at Gulfstream.

Second-quarter order intake at Gulfstream was "the largest we've seen since downturn started", said Johnson.

He expects to deliver 80 "green" large cabin aircraft by the end of the year, including 10-12 G650s, as well as 15-20 mid-size cabin aircraft - a sector that continues to slowly recover since the downturn.

The company plans to certify both the new mid-size G280 and large cabin G650 by the end of the year.