Rockwell Collins CEO Sees Business-Jet Rally Delayed to 2016

Jan 21, 2014 4:39 pm ET

(Updates with analyst comment in final paragraph.)

Jan. 21 (Bloomberg) -- The slump in business-jet sales since the 2008 global recession probably will last into 2016 as corporate buyers wait for their businesses to rebound, Rockwell Collins Inc. Chief Executive Officer Kelly Ortberg said.

Jet manufacturers and suppliers like Rockwell Collins are seeing tepid sales of smaller private aircraft in part because the economic recovery has been driven by cost cuts, not sales growth, Ortberg said today in a telephone interview.

Business-jet shipments fell 2.1 percent in the first nine months of 2013 from a year earlier, according to data compiled by the General Aviation Manufacturers Association trade group. Ortberg said smaller companies, whose purchases typically drive that market segment, are refurbishing older planes and won’t begin placing new orders until they see robust revenue gains.

“I don’t think it can go down any further,” said Ortberg, whose Cedar Rapids, Iowa-based company makes avionics and cabin equipment for business-jet manufacturers including Textron Inc., Bombardier Inc. and Dassault Aviation SA. “We’re at a low level of sustained production. I think we’ll stay at that low level.”

Rockwell Collins stands to gain sales as jet owners update information technology and entertainment systems on older aircraft, Ortberg said. He said he also expects to see sales rebound after the debut of new models such as Bombardier’s Learjet 85, which missed a target to begin flying in 2013.

Topping Estimates

Rockwell Collins rose 0.8 percent to $78.22 at the close in New York after reporting a first-quarter profit of 96 cents a share, beating analysts’ average estimate of 94 cents. Annual profit will be $4.35 to $4.55 a share as U.S. government sales fall less than expected following a recent budget deal, topping a forecast of $4.30 to $4.50, the company said.

The communications manufacturer’s $1.4 billion acquisition of Arinc Inc. from Carlyle Group LP in December and continued strong sales to planemakers Boeing Co. and Airbus SAS should help compensate for tight defense spending and business jet turbulence, wrote Robert Stallard, an aerospace analyst with RBC Capital Markets, in a report today to clients.

“With improving trends in many of the aerospace markets, we see potential upside on this side of the company offsetting revenue headwinds in government,” Stallard said.

--Editors: Ed Dufner, Stephen West