Gulfstream results spark large cabin optimism for 2018

Demand for Gulfstream’s flagship G650 and G650ER recovered dramatically in the fourth quarter, with parent company General Dynamics reporting a 78% year-over-year jump in new orders for the ultra-long-range, large cabin jet, says chief executive Phoebe Novakovic.

The growth in orders represented the second best quarter for the models since Gulfstream launched the product line in 2008 and prompted Novakovic to express new optimism for the large cabin sector in 2018 amidst a projected global economic growth spurt.

“My sense is that order activity and customer interest are picking up across the industry,” Novakovic told analysts on a fourth quarter earnings call on 24 January.

The potential shift in demand comes at a critical time for the Savannah, Georgia-based Gulfstream. The company delivered the last G450 in mid-January, ending a 30-year production for the GIV product line. The G550 has slowed to a minimum annual production rate. Meanwhile, Gulfstream plans to deliver the G500 and G600 later this year, as the larger and longer-range G650 increases in demand.

As demand for the G650 rebounds after a two-year lull, Gulfstream will have new pricing power. That should help offset a contraction in operating margins as Gulfstream introduces the first production lots of the G500 and G600.

“As we get the first lot of the 500 and 600 out at the production line and we improve our learning, which we have done historically and I’m confident we will do again, then we will eventually see margin expansion,” Novakovic says.

Gulfstream delivered 94 large cabin aircraft and 27 mid-cabin aircraft in 2017, exceeding the large cabin result in 2016 by six aircraft and matching the mid-cabin total.

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