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Aviation History
1985
1985 - 0017.PDF
BUSINESS AVIATION Cessna reviews 1984 WICHITA Cessna faced a continued slump in General Aviation sales during 1984, much like conditions during the pre vious two years, when the company reported reduced earnings in 1982 and a loss in 1983. In contrast, sales at the Fluid Power Division increased during 1984, with a corresponding improvement in profitability as market demand for fluid power com ponents recovered from the low levels of 1983. Sales and profits at the McCauley Accessory Division also improved. Cessna says: "although we are disappointed that a much healthier domestic economy has not yet generated the anticipated turnaround in our aircraft business, we achieved several important objectives during the past year. Our first priority was to return to pro fitability during the last half of the year. While earnings were modest, we made a small operating profit in both the third and fourth quarters. In addition, the beneficial effect of federal tax legislation enabled us to report an after tax profit for fiscal 1984. Other objectives included con solidation of the aircraft manufacturing divisions, implementation of a new air craft distribution system, and the successful start-up of several important aircraft which we believe are essential to our industry leadership position." The composition of Cessna's aircraft sales has changed dramatically in recent years, and the company expects certain segments of the market to recover more rapidly than others. Inter national aircraft sales, nor mally at least 25 per cent of Cessna's total aircraft revenue, have been hit by the "extraordinary" strength of the dollar and severe econ omic problems in several coun tries which have historically been among Cessna's best customers. While export sales have declined, competition in the USA has increased from foreign aircraft manu facturers, "most of which are owned or heavily subsidised FLIGHT International, 5 January 1985 by foreign governments". Although deliveries of general-aviation aircraft remained at depressed levels throughout the year, increasing shipments of the Citation III business jet and benefits of recent tax legis lation enabled Cessna to report a modest profit in the fourth quarter and for the 1984 fiscal year which ended on September 30. Annual revenues reached $693 • 6 million, an increase of 32 per cent from the $524-4 million in fiscal year 1983, contributing to a net profit of almost $1 million and earn ings per share of 5 cents, versus an annual net loss of $18-8 million or 98 cents per share the previous year. The Deficit Reduction Act passed by Congress in the summer of 1983 provided a forgiveness of tax liabilities which had previously been accrued under the Domestic International Sales Cor poration (DISC) programme. Since 1977 Cessna had accu mulated $10-8 million in reserve for this tax, which was recognised as a benefit in Cessna's fourth quarter. Deliveries down Cessna delivered 922 air craft worth $603 million in fiscal 1984, down from 1,371 last year, but up in dollar volume from $452-7 million in 1983. Turbine aircraft rev enues increased 64 per cent, from $253 • 8 million in 1983 to $417-3 million in 1984. Cita tion deliveries reached 96, compared with 73 last year, and included 47 Citation Ills compared with 11 in the pre vious year. Piston aircraft deliveries fell to 786 from 1,238. Export shipments con tinued the downward trend of the past several years, falling to 160 piston and turbine air craft worth $88-6 million, compared with 294 aircraft worth $93 million shipped to countries outside the United States in the previous fiscal year. Cessna's Fluid Power Division reported a 26 per cent increase in annual revenues from $71-7 million to $90-6 million. Early in the year Cessna announced the sale of the ARC Avionics Division near Morristown, New Jersey, to the Sperry Corporation. Cessna retained ownership of the 122-acre ARC complex, and recently announced its sale to a New Jersey company. Research and development expenditures were about 8 per cent of gross revenues for the second successive year, total ling $57 million, up from $45 million in fiscal 1983 and $52 million in 1982. The new and improved products resulting from this investment include the Citation S/II and its Navy version, the T-47A; the Caravan I and Caravan II utility aircraft; refinements to the Citation III; and two advanced models of the Centurion family. "We received certification of the Citation S/II business jet in the fourth quarter, just ten months after it was announced, and customer deliveries began in August. The S/II is a substantially improved successor to the Citation II, which has been the world's best-selling busi ness jet since its introduction six years ago. With a new wing and numerous other aero dynamic and system improvements, the S/II is much faster than the Citation II, especially at the higher cruising altitudes. It has more range, an expanded cabin, increased baggage space, and greater overall operating flexibility". Cessna's Caravan I has also received its FAA certification, and deliveries of this single- engine utility turboprop will begin in early 1985. All the Caravan Is to be produced next year have been sold, including 30 specially equipped Caravan Is that will be used by Federal Express to expand its overnight delivery service to smaller cities. Federal Express also holds an option to purchase 70 addi tional Caravan Is. Its twin- engine counterpart, the Cara van II, will be certificated early next year. This nine- passenger utility turboprop is a joint project of Cessna and Reims Aviation in France, where final assembly will take place. The Caravan II will be marketed by Cessna directly to airline customers as an alternative to Cessna's piston-engine commuter/ cargo aircraft, already being used by many regional carri ers. "We believe it will also be well received in foreign coun tries where aviation gasoline is either in short supply or much more expensive than jet fuel," says the company. The US Navy T-47A Cita tion will enter service soon to train undergraduate naval flight officers (UNFO) in the use of radar and operational procedures for navigation and airborne target acquisition. Fifteen of these UNFO air craft will be used as part of a five-year Service agreement. The contract, which contains an option by the Navy to extend for three years, includes aircraft, pilots, simu lators, and maintenance ser vices for the aircraft and simulators. All 15 Navy Citations should be in service at Pensacola, Florida, by May 1, this year. New types planned Cessna says: "In addition to these products, we have defined other new and improved aircraft which will be announced in 1985. We see several excellent near-term opportunities, especially in the turbine market segment, which will complement our existing line of Conquests and Citations. "We released details of a major reorganisation of Cessna's aircraft distribution system in the fourth quarter, and response from our dealers has been very positive. The new system includes revised marketing areas, increased sales and service oppor tunities for each category of dealer, and numerous market ing support programmes. "Cessna Pilot Centres were also informed of expanded learn-to-fly programmes and a direct factory relationship for the sale of Model 152 air craft. All these changes are designed to strengthen our independent dealers and enable them to better serve our customers, while main taining stable and profitable operations". 15
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