May 8, 2020
COVID-19’s effects have spread to business aircraft manufacturing, with Gulfstream parent General Dynamics announcing recently that the pandemic has dampened the Savannah, GA-based OEM’s deliveries for the first quarter of 2020. Textron Aviation also recently reported a $262 million decrease in total revenue and fewer aircraft deliveries in first quarter 2020 compared to the first quarter of 2019. Such effects are expected to linger through the remainder of the year.
Point of Impact: Gulfstream
In an April 29 earnings call with investors and the media, General Dynamics Chairman and CEO Phebe Novakovic said Gulfstream manufactured 34 aircraft in the first quarter but could only deliver 23 due to ongoing restrictions that preclude international customers from traveling to take delivery of their jets. This resulted in an estimated $600 million hit to the company’s anticipated revenues for the three-month period due to those delayed customer payments.
While such travel restrictions should be eased in the months ahead, the pandemic’s burgeoning effects have also led Gulfstream to adjust its production rates for the year, “driven primarily by supply chain issues and the shutdown of one of our own facilities,” Novakovic said. “To a lesser degree, our own workforce is less efficient due to absenteeism, and [also due to] our strict compliance with CDC guidelines.” The company is “working with” suppliers experiencing difficulties, she added.
Those factors do not appear to have affected demand for Gulfstream aircraft, however, which Novakovic reported continues to be healthy and the opposite of what the company experienced following the Great Recession. Although the planemaker did suffer four order cancellations for the quarter, Novakovic expects three of those aircraft to be delivered later. “We’ll deal with any additional impacts to the backlog, but so far, we’re not hearing noises coming out of the customer base.”
A possible long-term effect from the pandemic lies in the move toward online conferencing, as COVID-19 mitigation measures preclude face-to-face meetings with customers. However, Novakovic said it’s too soon to tell if the use of teleconferencing will become a long-term trend that could affect the use of business aviation.
Point of Impact: Textron Aviation
Textron Aviation delivered 23 Citation jets and 16 turboprops in the first quarter of 2020. In the first quarter of 2019, the company delivered 44 jets and 44 turboprops. Textron said the decrease in airplane deliveries was attributed to delays in acceptance of aircraft related to travel restrictions issued in response to the pandemic. Textron’s Bell unit delivered 15 commercial helicopters in first quarter 2020, compared to 30 helicopters in the first quarter of 2019. However, Bell’s first-quarter 2020 profit was up compared to Q1 2019, partly due to higher military volume.
The decreased deliveries translate into a $100 million decrease in profit. Backlog is also down: $1.4 billion at the end of Q1, compared to $1.7 billion at the end of 2019. Temporary plant closures and employee furloughs also impacted the company’s first quarter financials.
“Our team is meeting the unprecedented challenges presented by this pandemic with a commitment to the health and safety of our employees and communities while meeting customer commitments,” said Textron Chairman and CEO Scott C. Donnelly.
Donnelly is optimistic about the future, saying, “Textron is well-prepared to handle this period of uncertainty. Our financial profile consists of ample liquidity and diversified revenue streams. We are confident in the actions we are taking during this downturn, and we expect them to position us for success as we begin to exit this global shutdown.”