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Monday, January 23, 2012

Cessna Doubles Down On Bizjet Market Lower End

The top executive at Cessna Aircraft’s parent company says the struggling business jet manufacturer needs to stay focused on its core market of small- and medium-sized aircraft and dismisses talk it could revive a project to develop a larger jet anytime soon.
Scott C. Donnelly, the chairman, president and CEO of Textron, expresses confidence that the hard-hit lower end of the business jet market will rebound and says Cessna’s priority should be to protect its leading position in that segment against newcomers, particularly Brazil-based Embraer. “The fact of the matter is the light to mid-sized market is the core of what Cessna is all about,” Donnelly said in an interview with Aviation Week. “The best thing for us to do is invest and strengthen that market, which has been our most important.”
Demand for small jets was hit particularly hard when the onset of a global credit crisis in 2008 left scores of buyers unable to pay for aircraft they had ordered. Since then, the value of Cessna’s backlog has shrunk from $16 billion to just $2.2 billion. But Donnelly is confident the hard-hit market segment will rebound. “I believe there is no fundamental change in why people buy light to midsized jets,” he says. Demand for aircraft that can travel 3,000 mi. or fewer “is going to come back to being a robust, vibrant, necessary marketplace.”
Donnelly also dismisses speculation that Wichita-based Cessna might revive a $775 million project to develop the Citation Columbus, a larger, super-midsized jet that would compete with the Gulfstream 280, Hawker 4000 and Bombardier Challenger 300.
Launched with great fanfare in 2008, it was scrapped a year later after the downturn hit. “Could Columbus come back someday? Possibly,” he says. “But in the near to midterm, I think it’s a lot more important for us to make the kind of investments we’re making … to strengthen and make sure that we retain that light to mid-sized marketplace.”
Two of those investments—the Citation M2 and the Citation Latitude—were unveiled last fall to counter new competitors in the light jet market. The M2 will take on Embraer’s popular Phenom 100 light jet and Honda Aircraft’s HondaJet, while the Latitude will compete directly with Embraer’s Legacy 450. “Obviously, there’s more stuff in the works,” Donnelly said.
The Textron chief shook up Cessna’s management team last May, ousting longtime CEO Jack Pelton. While avoiding direct criticism of Pelton, he says that Cessna had been too complacent about the challenge from Embraer’s entry into the light jet market. “I saw what happened with Embraer in other market segments,” he says. “And I looked at Embraer and I said … We need not to sit back and say, ‘OK, we’re going to give up a certain amount of share to the new guy.’ We need to sit down and say, ‘How do you compete and win against this company?’”
In addition to Cessna, Textron’s aerospace businesses include Bell Helicopter and Textron Systems. Donnelly’s interview came as Wall Street was buzzing about a report from Reuters that the company was conducting a strategic review that could lead to the spin-off of one or more of its divisions. While he declined comment on that speculation, he does not rule out the sale of a major unit. “If we thought there was something that didn’t belong in the portfolio … we would pursue that,” he says.
At the same time, Donnelly reiterates that Cessna, which was Textron’s profit engine before the downturn hit, remains a core property. “Let me assure you that Cessna is a very, very important part of the future of the company,” he says.

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