Gulfstream didn’t deliver as many planes in the first three months of 2023 as it did the year before, and it might not set the world on fire with the number that it puts into the hands of customers over the next three months.
After that, expect the number of new Gulfstreams to soar, as the Gulfstream G700 starts rolling out. That was the message delivered on Wednesday as General Dynamics Chair and CEO Phebe Novakovic addressed stockholders in the company’s quarterly earnings report.
“Aerospace held its own in a very difficult operating environment,” she said, noting that Gulfstream Aerospace, a subsidiary of General Dynamics, delivered four fewer jets than it did in the first quarter of 2022.
There were 21 Gulfstream jets delivered in the first quarter of this year. Novakovic said that was three fewer than the company had planned.
Two Gulfstream G280 aircraft were not delivered in time, because the engines arrived late. Another large-cabin Gulfstream model set for delivery to an international customer was held up by “bureaucratic registration delays in the owner’s country,” Novakovic said.
She noted that this was the first quarter that Gulfstream had missed a delivery due to supply chain issues, noting that Gulfstream cannot increase its build rate until supply-chain challenges improve.
“There is light at the end of the tunnel,” she added, saying that the company expects most supply issues other than with “a couple of” suppliers to be ironed out by the third quarter of this year.
What to expect next for the Gulfstream G700
Novakovic said that there will be some short-term growing pains, as General Dynamics is already ramping up production on the Gulfstream G700.
The company’s first-quarter margins were squeezed by ongoing prebuilds of the aircraft, along with supply-chain issues and modest increases in parts costs.
We can expect a “considerable number” of G700s to be delivered in the third and fourth quarters, the company’s leadership says, with FAA certification targeted for late summer.
“To do that, we must build them now and incur some period costs without the related revenue,” Novakovic said. “Relief is in sight as deliveries commence.”
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Originally slated for a targeted certification range for 2022, Gulfstream announced one year ago this month that the timetable would be delayed due to additional software testing required by the FAA, going line-by-line through the code.
That decision came in the wake of the agency looking to bolster standards of ensuring safety in the wake of the Boeing 737 MAX failures of its MCAS system that led to a pair of deadly airliner crashes.
Since then, the test model of the Gulfstream G700 has gone on to fly on a world tour, setting 25 city-pair speed records. The next-generation private jet has garnered plenty of interest from high-profile buyers, including Elon Muck looking to upgrade his fleet with a G700.
“Production of customer G700s is well underway and we are preparing for entry into service,” Novakovic said on Wednesday. “We will deliver a mature and high-quality aircraft.”
What else we learned about Gulfstream from the earnings report
Despite the delivery of four fewer aircraft year to year in the first quarter, Novakovic said that revenue for the aerospace division was only $11 million lower.
“Fewer aircraft deliveries were almost completely offset by higher revenue of Gulfstream services, jet aviation volumes and special missions work at Gulfstream,” she said.
She also noted that the failure of two U.S. regional banks during the quarter led to a momentary chill of prospective demand for new aircraft. However, Novakovic said that the pause only lasted around two weeks and that sales activity and customer interest have since resumed, with the U.S. and Middle East markets remaining strong, while China continues to lag.
Gearing up for G700 production, Gulfstream now forecasts it will deliver 23 planes in the second quarter of 2023, Novakovic said, “with rapid increases in the third and fourth quarter deliveries, as we have previously indicated.”
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