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Gulfstream Orders Suggest Recovery in Business Jets

Published Oct 30, 2010 on Pilot Jobs

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General Dynamics said Wednesday that its Gulfstream unit received orders for more business jets in the third quarter than in any comparable period since mid-2008, another indication of recovery in the market for corporate planes.


Jay L. Johnson, the General Dynamics chief executive, told analysts that one-third of the orders came from Latin America and Asia, and the increase reflected demand for two high-speed models being tested.

General Dynamics, based in Falls Church, Va., does not release quarterly order numbers.

But in another measure of how its business is starting to bounce back, the company said it delivered 23 Gulfstream planes in the third quarter, up from 17 in the year-earlier period. Its deliveries had peaked at 41 just as the economy collapsed in the last three months of 2008.

Buoyed by the improvement in its aerospace business, General Dynamics, which is also a large military contractor, said its overall profit rose by 13.6 percent in the third quarter.

Analysts watch the sales of business jets as an indicator of how willing corporations are to spend money as the economy rises and falls.

Heidi Wood, an analyst at Morgan Stanley, said in a research note on Wednesday that business jet flights had increased since late last year, and that a recovery “appears under way.”

She said earlier this week that there was consistent demand for large planes, while the market for midsize and smaller ones remained “painfully quiet.”

She added that the consensus at a trade show last week was that 2012 would be the start of a new sales cycle for new planes, after a glut of used jets was purchased next year.

General Dynamics said its deliveries in the third quarter included 17 large planes and six midsize ones. Mr. Johnson said Gulfstream now expected to deliver 75 large jets and nearly 30 midsize aircraft this year, compared with 156 planes in 2008.

Textron the owner of the Cessna Aircraft Company, said last week that its orders had picked up somewhat in September, though Cessna shipped only 26 business jets in the third quarter, compared with 68 a year earlier. Cessna cut 700 jobs in September and slowed production.

But Scott C. Donnelly, Textron’s chief executive, told analysts last week that Cessna expected a significant increase in deliveries in the fourth quarter.

Cessna also unveiled plans last week for a larger and more advanced version of its Citation X plane, which can seat nine passengers. It expects the first delivery in 2013.

Mr. Johnson, the General Dynamics chief executive, said his company’s new and faster large jet, the G650, which seats eight people, should be ready for delivery in 2012. He said it had already attracted 200 orders.

Mr. Johnson said orders were also coming in for Gulfstream’s new G250 jet, which has a midsize cabin, and should be ready by late next year. “Our timing relative to the recovery in the midcabin market looks pretty good,” he said.

And as tighter military budgets slow the company’s growth in combat systems and warships, “our aerospace business will be the growth engine through the near and intermediate time frames,” Mr. Johnson said.

General Dynamics said its net income increased to $650 million, or $1.70 a share, in the third quarter, from $572 million, or $1.47 a share, a year earlier. Revenue rose 3.8 percent, to $8.01 billion.

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