We know where the market is going because the customer told us
Posted Date: 11/05/2009
Issue: Executive & VIP Aviation International June 2009
Publication: Executive & VIP Aviation International
Roger Whyte (RW), Senior Vice President Sales and Marketing at Cessna, says that Cessna’s development programmes are based very firmly on customers’ needs and there is no need to guess where market requirements are going. Executive & VIP Aviation International (EVA) puts our questions to RW
EVA Given shareholder panic over corporate spending and Cessna's move to explain what business aviation contributes to world economies, can you please explain more fully to me how Cessna accommodates the utilitarian approach to business aviation, including its approach to aftermarket support?
RW Foremost in our approach to providing real value during and after the sale is our long history of providing operational advice and product support to business aircraft for decades. We listen to the customer and then provide real solutions to each customer’s unique requirements. We’ve been doing this a long time and our reputation for customer service is unrivaled.
In general, our sales team is will first listen – what is the requirement, how will the airplane be used. What comes next is a solution – what will best fit the requirement profile. Everything about the process is based on business requirements and business considerations. We have access to new aircraft, pre-owned aircraft or supplemental lift through CitationShares – this gives us unprecedented capability in meeting a customer’s needs. I don’t know of any other companies working in such an integrated method.
The aircraft themselves are designed for productivity and efficiency of operation. We take customer input – pilot and passenger – into the design process, adding those systems and capabilities they say they need. Most of all, we design in reliability so that the customer meeting or sales presentation or technical mission goes off without a hitch.
Our Customer Service group is focused on keeping the airplane in operation – that is where it makes money for the customer. We have local service centers around the world; we have special parts delivery operations; sensible maintenance plans that factor in business requirements; and we are constantly honing our operation to enhance the ownership experience of the business aircraft.
EVA Is it the case that this functional attitude to private flying is more visible in the US than in Europe and Asia? If so, is this something that non-US cultures are now more ready to absorb?
RW I think the value of the business jet as a business tool is realised by companies around the world. Europe has traditionally been a very strong market for us and it is the business operator driving that demand, whether through direct ownership or through charter use. The competition is slightly different in Europe due to the well-developed train system. But the challenges faced by businesses in Europe are the same – how do get to where you need to be, when you need to be there with the most efficient use of time and money.
In Asia, the environment is slightly different, literally. The distance between major business centres is vast and not as conducive to business jet travel as in Europe or the US. Commercial air carriers still have an advantage in the region.
We are seeing changes, though, in places like China, Malaysia and Australia with in-country operations of business aircraft. There are still some obstacles to overcome having to do with infrastructure and airspace access, but these areas hold promise. To get directly to your question, yes. The business aircraft is becoming more commonplace around the world and this has been reflected in our annual delivery numbers. Where we used to delivery about 30% of our aircraft outside the US five years ago, we are now exporting about half our annual deliveries.
EVA We have seen plenty of emphasis on private aircraft as flying offices, flying living spaces, flying bathrooms, etc. Will the market now focus more on the underlying asset and less on the frills or do you think private aircraft buyers are more emotional in their buying decisions than this? Will this downturn have a far-reaching effect in this way?
RW For the most part, our business customers have always looked at the business aircraft as a tool or an asset. They want the best value for the price they pay. For our part, we work hard to match their specific requirement to the aircraft model that best fits that requirement. Our corporate customers are quite savvy in the selection process though I’m sure there is some amount of emotion for some buyers. We do have, as customers, a few very wealthy people who use the aircraft for personal travel and there is nothing wrong with that. I am quite confident in saying that.
At Cessna, we have tended to focus on the utility of our aircraft in our marketing and advertising. I don’t think we’ve ever portrayed our products as fit for “caviar and champagne”. But in light of some of the negative publicity arising over misconceptions of the industry we have become more of an industry advocate. Our Cessna Rise (www.cessnarise.com) campaign has made an enormous impact in reversing the negative press by telling the real story of business aviation. That effort has been echoed by other manufacturers and has been picked up by industry groups around the world.
EVA No one is escaping these harsh conditions. Can you please explain what this downturn has meant for Cessna in terms of manpower, facilities, cancellations, deferrals and ongoing order book?
RW You are right – no company and few industries are coming through the current economic downturn unscathed. We first detected issues that would impact the business in the middle of last year and started working immediately to minimise that impact. The dynamics though have been unprecedented and conditions have changed quite quickly. We do not share specific data on order cancellations or deferrals other than to say it is considerable.
We had been staffing and planning to continue to increase production in 2009, but it became apparent we would be reducing instead. To match production to demand, we moved first to reduce our production and that brought with it a need to reduce the work force. To date, we have eliminated 4,600 positions companywide, and just recently announced the need for further reduction, though we have no specifics at this time. We have also instituted reduced work weeks in some areas, and we use temporary furloughs as needed within the company. We remain committed to investing in new product development, but at a slightly slower pace. We announced an adjustment in the schedule of the Citation Columbus programme that pushes milestone to the right by at least six months. There will be a number of other actions we can or will take to continue to maintain the long-term viability of the company.
EVA What are you seeing at the very small end of the jet market? Have you found flimsy business models that have had a negative impact on your confirmed orders or have you been pleasantly surprised by the robustness of Mustang operators' business models?
RW The introduction and entry into service of the Citation Mustang has proven to be one of the most successful in our history. It continues to be a consistent strength in our product line. We reached full-rate production in little more than a year after entry into service and, while I am biased, our quality is superb because our customers are telling us that. Delivering a Mustang with no inspection discrepancies is commonplace. Most important, demand for the Mustang remains consistent. It combines high performance and capability with affordable acquisition and operating costs that make sense even in a challenged economy. And it is sized right for these small companies where the company owner is usually the pilot and his or her business locations are in small towns not served by commercial service.
EVA Aviation downturns appear to occur regularly every eight years or so but this one has a different flavour about it as the world is having to build a new banking sector. Does Cessna take the view that this is just another downturn or are you having to consider arrangements that accommodate the new environment for low liquidity? Is vendor finance an option from Cessna? Will fractional shares become more desirable?
RW We agree that downturns seem to happen with some regularity, and also agree this one is different. In the past, it may have been isolated to one or maybe a couple of regions around the world. This one is global. It impacts our customer’s profitability and his or her ability to finance the airplane. I have directed the creation of a position here at Cessna to act as the single point of contact for financing issues with the customer. This position will facilitate the search through private lending firms for financing for the customer. And as part of Textron, we have access to Cessna Finance Company which is part of the finance arm of Textron. We think we can help educate lending institutions on the value of the product.
As for predictions about fractionals, I can’t be of much help. We try to speculate. I can tell you that Cessna has blended it sales function so that we offer customers solutions, based on our access to previously owned aircraft and supplemental lift options through CitationShares. This means that we listen to the needs of the customer and can offer the optimum answer – whether it is their own aircraft or just hours in someone else’s. This is a unique capability made possible only by a global company.
EVA To what extent does your new product development have to accommodate future unknowns? Do you think we will evolve from this downturn to find a very different market for business aviation or are there some certainties that will never change and these are the elements to which you will adhere in your plans for the future?
RW The hallmark of Cessna is that we listen to the customer and our development programmes are based very firmly on the needs they tell us they have. We don’t try to guess where market requirements are going – we know where they are going because the customer told us. Now we will guess sometimes at what technology will be needed to fulfill a requirement and that is based on years of working in these technologies, so it is more of a very educated guess as to what kind of technology may solve the need. Cessna is a market leader for a reason. We provide our customers what they want – well-made, high-performance aircraft that are reliable, efficient with a world-class support network. And we listen.
