Cessna Trims Fat Amid Tough Times


Cessna Cutting Turbine Production, Furloughs Workers …

Cessna Aircraft, reacting to “uncertain worldwide economic conditions,” announced a series of measures in late March to reduce production of its turbine-powered aircraft models and cut personnel costs through furloughs and layoffs. The Wichita-based manufacturer said it is again reducing the production schedule for its Caravan turboprop and Citation business jet lines. A final determination of production rates was not completed by our deadline, but in a statement, Cessna projected 2003 Citation deliveries to be “in the range of 180-195 aircraft.” The company now expects to produce about 50 Caravan utility aircraft, down from 80 Caravan deliveries in 2002.As a result of the production cutbacks at Cessna, its parent company, Textron, said it “will be reducing its 2003 earnings guidance,” adding that the company “will communicate new earnings targets after it has completed negotiations and has fully assessed the impact on its business.”In order to align the workforce with the new production schedules, Cessna plans to implement a seven-week furlough for about two-thirds of its workforce from June 2 through July 18. Workers can use accrued vacation or sick leave to remain on the payroll, but otherwise furloughed workers will not be paid for those six weeks. In addition, the company plans to begin notifications March 31 of more than 1,200 employees whose jobs are being eliminated. About 6,000 employees will be affected by the furlough. Cessna currently has 9,200 employees in the Wichita area and 10,800 worldwide.

… While Cutting Benefits, Outsourcing Work …

Acting to offset the effect of lower earnings, Cessna is also looking at outsourcing activities not related to building airframes. “We’re still looking at what’s the best thing for our customers, (and) how we can build the best possible product for the best cost and quality that we possibly can,” Cessna spokeswoman Marilyn Richwine told The Wichita Eagle. Overall, Textron plans to do more global outsourcing. As Cessna prepares to lower production and cut 1,200 jobs, it is also looking at other cost-cutting measures, including whether to reduce some employee benefits. “Cessna has cut some of the costs associated with the way benefits are delivered to employees,” said Richwine. For example, workers can go online to view information on their pension plans. And at the first of the year, Cessna changed the health care plans of nonunion represented employees. Without a vote by Machinists union members, no changes can be made to benefits in the labor agreement, which expires in September 2004.

… As Cancelled Orders Are To Blame …

Aside from the economic downturn, Cessna is dealing with a slew of cancelled orders for aircraft. “The current economic and geopolitical situation has worsened and is affecting business jet demand much more severely than expected,” said Textron in a statement. “Most significantly, one of Cessna’s largest customers recently informed the company of a significant reduction in the number of jets that it plans to purchase in 2003,” Textron said. The statement added that Cessna is “currently in negotiations with the customer to determine the specific changes.” Textron lowered its earnings outlook for this year as it faces economic uncertainty and the cancellation of the business-jet orders, which have been linked to NetJets, the fractional jet operator. Full-year earnings per share now are expected to be between $2.40 and $2.60, compared with an earlier estimate of $3.05. Cessna plans to deliver between 180 and 195 jets this year, instead of an earlier expectation of 220.

… And The Company Focuses On New Programs

Cessna reports the new CJ3 is slated to make its first flight sometime in May. The company also reports its largest jet, the Sovereign, is also progressing as planned.Cessna has selected the Garmin G1000 integrated avionics system for the new Citation Mustang business jet. The Mustang panel features a 15-inch multi-function display (MFD), located next to pilot and co-pilot 10-inch primary flight displays (PFDs). All information — from aircraft attitude and air data to engine instrumentation, real-time weather data link, traffic and terrain — is integrated and digitally depicted on the dual large-format PFDs and MFD. The Garmin 1000 also features:

  • Dual integrated radio modules that provide WAAS-capable IFR oceanic-approved GPS; VHF navigation with ILS; and VHF communication with 16-watt transceivers and 8.33-kHz channel spacing
  • Dual Mode-S transponders with Traffic Information Service
  • Dual solid-state Attitude and Heading Reference Systems
  • Dual RVSM-compliant digital air data computers
  • Three-axis digital Automatic Flight Control System
  • Four-color digital weather radar
  • Integrated Class-B Terrain Awareness and Warning System with worldwide terrain and obstacle database

Introduced at NBAA 2002, the Citation Mustang will be certified as a FAR Part 23 aircraft, with cruise speed of 340 knots, and a maximum operating altitude of 41,000 feet. Cessna anticipates type certification in mid-2006 with first customer deliveries in the fourth quarter 2006.