DN - Defence Notes

B/E Aerospace feels airline and bizjet pain

27th April 2009 - 12:26 GMT | by The Shephard News Team

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Seating juggernaut B/E Aerospace showed lost momentum in the first quarter of the year as the realities of recession struck home.

“There were a number of challenges, including deferrals of retrofit programmes and substantially lower revenues from commercial aircraft spares and consumables,” says chief executive Amin Khoury in comments on the Florida-based company’s newly released first-quarter results. “Our commercial segment was depressed by reductions in air travel, airliner groundings and cash conservation measures by the carriers.”

In the three months to the end of March B/E logged net sales of $523.7 million, up 10.7 per cent compared with the same period last year. But that result included a major contribution from Honeywell’s Consumables Solutions distribution business, which B/E acquired last July. Commercial segment revenues actually fell by $52.6 million (18.9 per cent) while business-jet takings were down $14.3 million (19.7 per cent).

Operating earnings suffered similarly, with the commercial segment slipping 9.5.per cent to $28.5 million and business jets down a horrendous 54.7 per cent to $4.8 million.

There was better news on the orders and backlog front, however. Bookings in the quarter totalled about $475 million, while backlog at the end of March stood at $2.8 billion, up 22 per cent compared with the same time last year though marginally lower than at the end of December.

But Khoury is cautious about orders over the coming months. “The global economic crisis has impacted demand for new aircraft, retrofits, and spares and consumables,” he says. “Lower corporate profits, dysfunctional capital markets and negative political comments on business jet usage have hit demand for both air travel and business jets. These conditions are likely to impede bookings during the rest of the year.”

After surging beyond $2 billion in revenues last year, B/E now projects a reduction by nearly a quarter to $1.9 billion for the current 12 months. But Khoury expects that to represent the bottom of the cycle. “We believe that 2009 will be the trough year for our bookings, backlog and earnings, and look forward to an improvement in orders and sales in our consumables and commercial spares businesses next year,” he says. “2010 will also bring a strengthening in orders and an expansion of our backlog as programme awards turn into purchase orders. That will drive revenue growth in 2011 and beyond.”

Among the orders now paying off for B/E is one from Korean Air for business-class seats in the 11 new Boeing 777-300ERs that the carrier is due to start receiving next month.

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