NBAA: New wave of product introductions critical for Cessna

Wichita
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Something is about to happen at Cessna that has not been done in nearly four years.

For the first time since the introduction of the CJ4 in April 2010, Cessna is scheduled to deliver a new business jet product to the market later this year.

After such a lengthy interval, the end result may seem modest. After all, Cessna’s plan five years ago was to be introducing – around this time – the super-midsize Citation Columbus, the company’s ambitious leap into an all-new market segment.

The Columbus did not survive the paralysing financial downturn that struck the lower end of the business jet market especially hard after 2008. Cessna’s other business jet models have still not fully recovered from the lingering effects of the financial crisis.

Even so, Cessna is now poised to deliver a wave of new product updates, including the entry-level M2, midsize new Sovereign and the midsize new Citation X. Meanwhile, a second wave involving Cessna’s first clean-sheet jet designs in over a decade – namely, the super-light Latitude and midsize Longitude – will follow in 2015 and 2017 respectively.

Other competitors, including Bombardier’s Learjet division and Embraer’s executive aircraft business, have adopted a similar timing strategy for releasing new products.

Although chastened and bruised by the financial crisis, the coming wave of new products shows that the industry’s light and midsize sector champions remain healthy enough to fight for market share, even in a market that is still uncertain.

“We have remained committed to new product development during the down-cycle,” says Brad Thress, Cessna’s senior vice-president of business jets. “So we’ve stayed the course and I think it’s bolstered the confidence of the team here and our customers, to see us continue to do that. Hopefully, they see it the same way, and I believe they do.”

However, Cessna executives also candidly acknowledge that they have no choice but to keep spending on new products if they wish to remain competitive.

“In this type of business, you either invest or you end up in a pretty bad situation,” says chief executive Scott Ernest, who addressed the Kansas Aviation Expo kick-off reception in Wichita on 26 September.

How the market receives Cessna’s latest investments has never been more critical.

After five years of declining or stagnant sales, the Citation business jet division found yet a new low in the second quarter of this year. As the backlog of older models of the Mustang, Sovereign and Citation X ran out and production of the light CJ2/3/4 family slowed, Cessna’s deliveries plunged to only 20 jets in the second quarter. Cessna delivered 49 Citation jets in the same period of 2012.

“The market continues to be a challenge and that’s the current environment when you look around the world,” Ernest says.

Previously strong markets, such as Latin America, have either been erased or overwhelmed by new competitors such as Brazil’s Embraer during the downturn.

“We used to sell 20 to 30 jets a year in South America and that market has dried up,” Ernest says. “We’ve sold one jet so far this year to South America.”

Judged by pre-2009 market conditions when three-year wait times were normal, the order backlogs so far for Cessna’s three new products do not seem encouraging.

Orders booked so far for the new Sovereign extend only “well into” next year’s production schedule, Thress says. The Citation X still has “a couple” of production slots open in 2014, he adds, although some delivery positions are taken all the way into 2015. The M2 backlog is in a similar position as the Citation X.

While that might have seemed a disappointment in previous years, Cessna executives are actually buoyed now by this response from the market.

Aiding the company’s confidence are internal changes installed since 2008 that produce more accurate sales backlogs. Authorised sales representatives for Cessna aircraft around the world are no longer allowed to book an order from any party other than an end-user. More recently, Cessna also stopped a practice of building white-tail aircraft without a buyer, which slowed production but stabilised pricing and the company’s margins.

“Basically, we want to make sure that there’s no speculation in the backlog,” Thress says. “It’s that simple. You just want to call an ace and ace and make sure it’s fair and clean.”

Indeed, Cessna and the entire business aviation market have been forced to recalibrate their forecast models. Market recoveries used to followed downturns in fairly predictable steps. First, corporate profits would recover from the downturn, then sales of business jets would pick back up reliably between six and eight quarters later.

“Well, that happened a long time ago and it didn’t work,” Thress says. “So the metrics we have relied on historically have not really foretold the recovery as we expected. We’re kind of still flying on instruments here.”

There are some encouraging signs in the larger set of data that Cessna now uses to forecast market shifts. Sales of piston-powered aircraft are increasing and the number of used aircraft on the market is declining. While those are positive trends, they are not as helpful as the previous model.

“[Those signs] tell you it’s getting better, but they don’t predict when,” Thress says. “That’s still the magic question.”

However, there is still optimism. All questions about the market’s recovery for Cessna still begin internally with “when” and not “if”. Fundamentally, Cessna still believes that it makes products that serve a basic human need for mobility, and their models do so in an efficient and affordable way, Thress says.

That core belief allows Cessna to continue investing in new products, even if little in the current market outlook guarantees a return.

So Cessna is updating the engines and integrating the Garmin G5000 flightdeck in the M2, new Sovereign and new Citation X. It is following that up by fielding the Latitude to challenge Embraer’s Legacy 450 in the super-light sector and the Longitude to fill a new niche in the market for a 4,000nm (7,400km) range jet with a midsize cabin.

Those projects complete what is publicly known about Cessna’s product strategy for business jets over the next four years.

It remains possible that Cessna has other new products in development that could emerge either within or after that four-year period. So far, the only certainty in Cessna’s long-term product strategy is that it does not include an aircraft larger than the midsize Longitude. Although the Longitude has super-midsize range like the Columbus, it packages that stamina into a midsize cabin.

However, Cessna has no plans to revisit the Columbus programme for a long time.

“I would say that we have no plans to go above the Longitude and that improvements will be within the Mustang and the Longitude in the coming – at least in the coming three to five years,” Thress says.

He also explains that the Longitude’s success partly relies on the potential for upgrading nearly 700 customers who currently operate Sovereigns and Citation Xs. Once Cessna has established a significant base of customers for the 4,000nm range Longitude, there will be opportunity to launch a product to allow them to upgrade further.

At the same time, the company appears to have no interest in launching clean-sheet designs inside the spectrum of products between the M2 and the Longitude within the next five years.

Last year, the company raised eyebrows when it unveiled a “wide-light” cabin at the National Business Aviation Association convention. The move prompted speculation that Cessna may be looking to replace the CJ-series light jets with a new design featuring a wider fuselage cross-section, perhaps to better compete with the roomier Embraer Phenom series.

“That cabin that we had at NBAA was designed to be a tool to get customer feedback on what specific geometries and shapes and comfort levels would be acceptable in a wider-cabin, light jet plane,” Thress says.

However, that does not mean Cessna is considering a project to reinvent the CJ-series family for the light jet category. The goal instead appears to be looking to identify the kind of piecemeal upgrades that will keep customers interested.

Ultimately, Cessna’s product development budget for the near term is already consumed by the Latitude and Longtitude projects.

“The Longitude and Latitude are big programmes and it consumes a lot of resources and to do something on top of that would be huge,” Thress says. “In the near term, we don’t have plans.”

As Cessna looks beyond the next cycle of product introductions, however, some new technologies could be available.

When Cessna parent Textron and start-up AirLand unveiled a light attack and surveillance prototype called the Scorpion in mid-September, the public focus was initially on the potential military applications.

Although supported at the corporate level, the Scorpion relies upon Cessna for aircraft design, manufacturing and testing. Ernest has been clear that the Scorpion faces a highly uncertain future in the military market.

“This is something we’ll either sell 2,000 of them or we’ll sell zero,” Ernest says.

The key thing for Cessna, however, is that Scorpion serves as a technology testbed for all of its markets.

“We really learned a lot about composite technology,” Ernest says. “But that allows us to take that into our next generation of single-engine[d] and jet products.”

Cessna has been among the slowest aerospace manufacturers to embrace composites. While Beechcraft and Learjet have developed all-composite fuselages in recent products, Cessna has held back from taking a leading position. It acquired the all-composite TTx model from Columbia Aircraft, which Cessna purchased in November 2007.

“We’ve always been of the mind that technology needs to earn its way onto the airplane and needs to provide a benefit to the customer,” Thress says. “So we probably are very cautious with adopting technologies very, very early.”

In making the Scorpion, however, Cessna was allowed to test new manufacturing techniques that may overcome what the company considers to be the biggest flaw with composite materials compared with aluminium: the cost of production.

“It is an autoclave process but it’s done in a manner that decreases some of the constraints we have around aluminium and allows us to improve our yields,” Thress says. “We’re excited about possible future applications.”

The Scorpion experiment remains the exception to the rule at Cessna. Although back-office systems and certain techniques have been updated over the decades, the company’s vertically-oriented manufacturing process remains broadly unchanged since the 1970s.

While other companies have outsourced nearly all aspects of aircraft production except final assembly, Cessna has clung rigidly to an internal sourcing model. Sheet metal enters the company’s production complex on East Pawnee Street in southeast Wichita, and departs as fully-formed parts and sub-assemblies. The parts then travel about 21.9km (13.6 miles) down the road to Cessna’s sprawling final assembly centre.

Even the landing gear for the Citation jets is designed and forged inside the company’s factories.

“You could argue that someone who does nothing but landing gear could do that landing gear more efficiently,” Thress concedes, “but when we
look at it and we do a make/buy comparison, because we’re very cost-conscious, it is rare that it is cheaper than our internal cost to do it.”

Even so, it appeared that prior to the market downturn Cessna was becoming more open to outsourcing work to lower-cost manufacturing areas, such as Mexico. In 2006, Cessna opened a production plant in Chihuahua on the Mexican border. However, the move actually reflected how overwhelmed Cessna’s Wichita factory was before the downturn, rather than a shift in sourcing philosophy.

“We were literally busting at the seams and we couldn’t get and nor could we get our local suppliers here in Wichita [to hire] an easily trained workforce,” Thress says. “So no matter what you did, you were going to be training people and building facilities, so we elected to try to do that in a low-cost region. But we have capacity here in Wichita and we plan to use that capacity. It’s much easier for us.”