Aviation Margins
Q: Can you sustain 13% margins in Aviation?
A: Scott Donnelly acknowledged that while the 13% margin achieved is extremely strong, they may not maintain this level throughout the year. He expects margins to be solidly in the mid-12% range, noting headwinds like a lower price inflation spread and mix issues due to more Latitude deliveries, especially to fractionals which have lower margins. However, the business is performing well, with strong profitability, and remains within guidance.

Aviation Demand and Backlog
Q: What are you seeing in Aviation market demand and pricing?
A: The end market continues to be robust, with strong demand across jets and turboprops, and across all models. They are targeting a one-to-one book-to-bill ratio, indicating sustained demand. Pricing remains strong, and the service business grew particularly well, with aftermarket revenue up 13% in the quarter.

Industrial Margins Improvement
Q: How will Industrial margins improve in the second half?
A: Margins in the Industrial segment are expected to continue growing through the year. About one-third of restructuring costs were incurred in Q2, with more to come in the second half as they align costs with volume. They are currently running about 100 basis points below where they should be, and the cost actions are expected to address this gap.

Supply Chain Challenges
Q: What is the status of the supply chain at Aviation and Bell?
A: Supply chain issues persist but are improving, with fewer problems than before. Challenges with late deliveries from suppliers are causing flow disruptions and inefficiencies in factories, affecting performance. At Bell, they're missing some key components but are working with suppliers. Despite these issues, the teams are managing through and continue to drive higher revenue and margins.

Share Repurchase Plans
Q: What should we expect for share repurchases in the second half?
A: Textron continues to focus on share repurchases, having bought back $358 million worth of shares in Q2. They are generating strong cash flow and plan to continue allocating a significant portion to buybacks, maintaining the pace seen in the first half.

Business Jet Lead Times
Q: Are long lead times causing lost sales in business jets?
A: Long lead times are an industry-wide phenomenon, and Textron is not at a competitive disadvantage. They continue to have a book-to-bill above one, delivering aircraft while taking orders into future years. Demand remains strong, and they're managing lead times effectively.

Bell Military Opportunities
Q: How are military programs like V-22 and H-1 performing?
A: The military business outside of FLRAA is performing well. They added an order of 12 H-1 aircraft from Nigeria and are ramping up production. V-22 production continues, with five aircraft added in FY24. There's ongoing work on upgrades and modernization efforts for both H-1 and V-22, which will help maintain a solid base as they move towards FLRAA production.

Aftermarket Growth
Q: What's driving the 13% aftermarket growth?
A: The aftermarket business is experiencing strong demand as aircraft are flying more. They also had a strong military quarter, building spares around the METS Program for the Navy contract. Overall, demand for services remains robust.

Order Activity in Aviation
Q: Where is the Aviation order activity coming from?
A: Demand is strong across the entire customer base, in both jets and turboprops. There's no significant shift in the mix of orders between fleet customers and individual customers; the strength is widespread across all segments.

SkyCourier Market Potential
Q: How large can the SkyCourier market become?
A: The SkyCourier has significant market potential, with strong demand across cargo, passenger, and combi versions. Acceptance is high domestically and internationally, and across various segments. The main issue is ramping up production to meet demand.