GRAHAM WARWICK / WASHINGTON DC

Raytheon has put aside $745 million to cope with expected losses on its commuter and general aviation aircraft activities, as the company struggles with a growing inventory of used aircraft. The charge pushed the company into a third-quarter loss of $262 million, despite higher defence earnings.

It includes establishing a $693 million reserve to cover expected losses on the commuter aircraft business. By early last month, Raytheon Aircraft (RAC) had 103 used Beech 1900s in its inventory, with the number expected to reach 125 by year-end. The glut is a result of efforts to shore up production in the 1990s by offering customer financing, with an increasing number of aircraft now being returned off lease as regionals turn to jets, says Raytheon chief financial officer Frank Caine. Production of the19-seat turboprop, once running at 60-65 a year, has been cut to one a month.

RAC also had 59 general aviation aircraft in inventory at the beginning of last month. The company has cut production, but sales have fallen dramatically. RAC shipped 73 aircraft in the third quarter, compared with 114 a year ago, but orders for Beechjet 400A and Hawker 800XP business jets, King Air turboprops and piston-powered types dropped to 36 aircraft from 106 last year, says Caine. RAC expects to deliver 380 next year, down from 420 this year. The company is expected to lose money this year and break even the next, he says. Lay-offs at Wichita, Kansas-based RAC have been stepped up from 450 to 1,700 by early next year.

Raytheon is not alone in its struggles in the general aviation market. Textron has reported a third-quarter loss of $330 million, as revenues and profits fell at Cessna and Bell Helicopter. Sales of piston singles at Cessna have slumped.

Raytheon's defence sector continues to perform well, and the company has been boosted by Hughes Electronics' agreement to refund $635.5 million of the $9.5 billion Raytheon paid in 1997 for Hughes Defence. Raytheon is also reported to have solicited bids for its Aircraft Integration Systems unit from Boeing and L-3.

Source: Flight International