CALDC9
28th Apr 2008, 20:41
:ok:New Gulfstream Bizjet
Apr 28, 2008
By David Collogan http://www.aviationweek.com/media/images/ba_images/Gulfstream/G650GULFSTREAM.jpg Gulfstream Aerospace generated a tsunami of market interest for its recently announced Gulfstream G650 business jet and officials are now sorting through letters of intent representing potential orders for hundreds of the $60 million aircraft, the chairman of Gulfstream parent General Dynamics told financial analysts Wednesday.
The Savannah, Ga. manufacturer announced plans last month to build the largest nonairliner business jet in the market, an aircraft with an array of sophisticated electronic systems for use by pilots and passengers. The G650, in addition to offering the largest cabin among conventional business jets, will have a maximum operating speed of .925 Mach and be capable of nonstop flights of up to 7,000 nautical miles at speeds of .85 Mach (BA, March 17/118). Units slated for delivery in 2012 carry a price of $58.5 million. That price will rise to $59.5 million for deliveries the following year.
Nicholas Chabraja, GD chairman and CEO, offered a low-key response to an initial question from analysts about the G650, saying the new airplane was "well received" in the marketplace. But he soon acknowledged that the number of potential orders received to date has far exceeded the most optimistic projections of company officials. Gulfstream started taking letters of intent for the G650 from potential customers immediately after the March 13 announcement, but it did not begin accepting refundable deposits of $500,000 until April 15. As of April 23, the company had received "what some might call an overwhelming response," Chabraja said. While he did not mention a specific number, analysts said Gulfstream has received letters of intent representing some 500 G650s, and Chabraja's comments suggest that estimate is accurate.
Despite the magnitude of building and certifying an all-new, clean-sheet-of-paper airplane, Gulfstream said in March it expects to begin delivering G650s in 2012, just more than four years from now. Chabraja said Wednesday that Gulfstream plans to deliver 17 G650s in 2012, and a combined 66 more in 2013 and 2014, for a total of 83 aircraft in the first two and one-half years of production. But the initial market response indicates there is demand for six to seven times that many G650s, Chabraja said, which would equate to somewhere between 498 and 581 aircraft. "So we'll see how all that shakes out," Chabraja added.
The GD chairman acknowledged that "our initial production planning is inconsistent with the demand" for the G650. "We'll have to replan and pulse our supply chain and take them kicking and screaming" if Gulfstream decides to significantly ramp up initial production, Chabraja said, adding, "It's going to be a successful program for everyone." He told analysts during Wednesday's conference call that "We're at the very early stages of dealing with demand we didn't anticipate."
When launching new aircraft programs in the past, Gulfstream traditionally offered delivery positions for the new model to its existing customer base first. In the case of the G650, officials said there were presentations made to about 100 potential customers after the March 13 program launch announcement. But, because the G650 is an entirely new airplane and not just an extension of an existing model line, the decision was made to accept letters of intent (LOI) from any qualified buyers. The $500,000 refundable deposits were transmitted to a bank designated by Gulfstream and delivery positions were assigned to each LOI signee on a first-come, first-served basis, depending on the precise time the deposit was received and logged by the bank.
That has upset some customers who found themselves with tentative aircraft deliveries scheduled years into the future. "A lot of very good friends, [including] friends of mine, are very unhappy about their position in the queue," Chabraja told the financial analysts. "We'll see how it sorts out" and find out "who's for real in the signup process," he added.
Gulfstream contract officials are now contacting LOI signatories to confirm their aircraft delivery positions and determine if the customer is still interested in proceeding. If so, a contract will be negotiated and a schedule of nonrefundable deposits will be established. Asked how large fleet customers are being handled in this process, a spokesman told BA that Gulfstream is trying to satisfy as many individuals as possible before taking care of bulk orders. Customers ordering multiple aircraft are being told they can expect to receive only a limited number of G650s per year.
Major Expansion Under Way
The Savannah, Ga. aircraft manufacturer is two years into a seven-year, $400 million facilities expansion program. One major element of that expansion is a new 306,104-square-foot manufacturing/assembly building where the G650 will be built. The company broke ground on that building just a year ago and it is largely complete, with fixtures and other equipment now being installed. The new building will accommodate two G650 production lines, but original plans called for initially operating just one line - with a capacity of 45 aircraft per year - with the possibility of the second line starting in 2014. The huge market response to the G650 is now causing officials to reconsider those schedules.
Trying to find the right answer on production levels is a complex issue, one that is challenging not only top executives but also specialists in a variety of disciplines including manufacturing, material and engineering, according to a company spokesman. And determining how many aircraft to build depends not only on Gulfstream's production capacity, but also on that of its vendors. "It's not just us," the spokesman said, "it's everything that goes into [the G650]," from engines and avionics to transparencies and landing gear.
A desire to boost production rates to shorten the time from aircraft order to aircraft delivery also must be balanced against the increased costs that a sharper production ramp-up would impose. Ultimately, the company must determine "What is the valid business case?" the spokesman said. While the business jet manufacturing industry is currently enjoying record and unprecedented demand for its products, the Gulfstream spokesman said officials don't want to risk raising production rates to levels that cannot be sustained. He noted it was just five years ago that the company announced one-month furloughs for some 1,000 of its initial-phase manufacturing employees in Savannah because of slowing sales of new aircraft (BA, May 5, 2003/203).
Apr 28, 2008
By David Collogan http://www.aviationweek.com/media/images/ba_images/Gulfstream/G650GULFSTREAM.jpg Gulfstream Aerospace generated a tsunami of market interest for its recently announced Gulfstream G650 business jet and officials are now sorting through letters of intent representing potential orders for hundreds of the $60 million aircraft, the chairman of Gulfstream parent General Dynamics told financial analysts Wednesday.
The Savannah, Ga. manufacturer announced plans last month to build the largest nonairliner business jet in the market, an aircraft with an array of sophisticated electronic systems for use by pilots and passengers. The G650, in addition to offering the largest cabin among conventional business jets, will have a maximum operating speed of .925 Mach and be capable of nonstop flights of up to 7,000 nautical miles at speeds of .85 Mach (BA, March 17/118). Units slated for delivery in 2012 carry a price of $58.5 million. That price will rise to $59.5 million for deliveries the following year.
Nicholas Chabraja, GD chairman and CEO, offered a low-key response to an initial question from analysts about the G650, saying the new airplane was "well received" in the marketplace. But he soon acknowledged that the number of potential orders received to date has far exceeded the most optimistic projections of company officials. Gulfstream started taking letters of intent for the G650 from potential customers immediately after the March 13 announcement, but it did not begin accepting refundable deposits of $500,000 until April 15. As of April 23, the company had received "what some might call an overwhelming response," Chabraja said. While he did not mention a specific number, analysts said Gulfstream has received letters of intent representing some 500 G650s, and Chabraja's comments suggest that estimate is accurate.
Despite the magnitude of building and certifying an all-new, clean-sheet-of-paper airplane, Gulfstream said in March it expects to begin delivering G650s in 2012, just more than four years from now. Chabraja said Wednesday that Gulfstream plans to deliver 17 G650s in 2012, and a combined 66 more in 2013 and 2014, for a total of 83 aircraft in the first two and one-half years of production. But the initial market response indicates there is demand for six to seven times that many G650s, Chabraja said, which would equate to somewhere between 498 and 581 aircraft. "So we'll see how all that shakes out," Chabraja added.
The GD chairman acknowledged that "our initial production planning is inconsistent with the demand" for the G650. "We'll have to replan and pulse our supply chain and take them kicking and screaming" if Gulfstream decides to significantly ramp up initial production, Chabraja said, adding, "It's going to be a successful program for everyone." He told analysts during Wednesday's conference call that "We're at the very early stages of dealing with demand we didn't anticipate."
When launching new aircraft programs in the past, Gulfstream traditionally offered delivery positions for the new model to its existing customer base first. In the case of the G650, officials said there were presentations made to about 100 potential customers after the March 13 program launch announcement. But, because the G650 is an entirely new airplane and not just an extension of an existing model line, the decision was made to accept letters of intent (LOI) from any qualified buyers. The $500,000 refundable deposits were transmitted to a bank designated by Gulfstream and delivery positions were assigned to each LOI signee on a first-come, first-served basis, depending on the precise time the deposit was received and logged by the bank.
That has upset some customers who found themselves with tentative aircraft deliveries scheduled years into the future. "A lot of very good friends, [including] friends of mine, are very unhappy about their position in the queue," Chabraja told the financial analysts. "We'll see how it sorts out" and find out "who's for real in the signup process," he added.
Gulfstream contract officials are now contacting LOI signatories to confirm their aircraft delivery positions and determine if the customer is still interested in proceeding. If so, a contract will be negotiated and a schedule of nonrefundable deposits will be established. Asked how large fleet customers are being handled in this process, a spokesman told BA that Gulfstream is trying to satisfy as many individuals as possible before taking care of bulk orders. Customers ordering multiple aircraft are being told they can expect to receive only a limited number of G650s per year.
Major Expansion Under Way
The Savannah, Ga. aircraft manufacturer is two years into a seven-year, $400 million facilities expansion program. One major element of that expansion is a new 306,104-square-foot manufacturing/assembly building where the G650 will be built. The company broke ground on that building just a year ago and it is largely complete, with fixtures and other equipment now being installed. The new building will accommodate two G650 production lines, but original plans called for initially operating just one line - with a capacity of 45 aircraft per year - with the possibility of the second line starting in 2014. The huge market response to the G650 is now causing officials to reconsider those schedules.
Trying to find the right answer on production levels is a complex issue, one that is challenging not only top executives but also specialists in a variety of disciplines including manufacturing, material and engineering, according to a company spokesman. And determining how many aircraft to build depends not only on Gulfstream's production capacity, but also on that of its vendors. "It's not just us," the spokesman said, "it's everything that goes into [the G650]," from engines and avionics to transparencies and landing gear.
A desire to boost production rates to shorten the time from aircraft order to aircraft delivery also must be balanced against the increased costs that a sharper production ramp-up would impose. Ultimately, the company must determine "What is the valid business case?" the spokesman said. While the business jet manufacturing industry is currently enjoying record and unprecedented demand for its products, the Gulfstream spokesman said officials don't want to risk raising production rates to levels that cannot be sustained. He noted it was just five years ago that the company announced one-month furloughs for some 1,000 of its initial-phase manufacturing employees in Savannah because of slowing sales of new aircraft (BA, May 5, 2003/203).