Cessna’s sales — and backlogs — are surging as the world wakes up to the advantages of private aviation. Sometimes, it seems, less product really can equal more growth.

Cessna Aircraft’s Jack Pelton has the problem CEOs dream about: He has so much demand for his products that he can’t manufacture fast enough. His company, a subsidiary of Textron, will build 380 aircraft this year for a nice round $5 billion in revenue, up 19 percent from 2006. More critically, Cessna has a record backlog — some $11 billion of orders, or more than twice as much as current annual revenues.

The backlog at Cessna’s main Wichita, Kansas, factory stems from a surge in all of Pelton’s key markets: corporations seeking efficiency and convenience (80 percent of orders), thriving charter and jet-card firms (15 percent) and individuals (5 percent). International sales are also soaring, to 50 percent of Cessna’s total sales, driven in part by a secretive source of incremental demand: newly minted Russian tycoons, who see planes as an attractive store of wealth. (“It allows you to make a quick getaway,” says Richard Aboulafia, an aviation analyst with the Teal Group.)

With no demand shortage on the horizon — for reasons anyone who flew commercially this summer can tell you — the obvious solution is to increase capacity. But Pelton, 49, an avid pilot who flies Citations regularly and owns a Citabria, applies the lesson learned by myriad manufacturing firms that built during boom times and busted during downturns. “We look at our order-intake rate,” he says. “We look at our supply chain, our human resources and our internal capabilities and ask ourselves, ‘What can we produce to?’ Then we ask: Is that a sustainable production level?”

Cessna’s two-year waiting period appears to be intentional. Pelton is protecting the downside long-term, while polishing his company’s performance short-term. Facility expansion for Cessna, which does most of its manufacturing in Kansas, is inherently inefficient, both diluting profits and, paradoxically, reducing capacity during the overhaul. The alternative: operate at the highest possible sustainable level, and focus instead on ensuring that suppliers and employees maintain the pace. “Any one of them can disrupt your best production plans,” Pelton says.

The biggest risk surrounding Pelton’s strategy: that customers will find someone else to deliver a new plane more quickly. The key, as Pelton puts it, is “keeping customers in the fold.” In other words, take the delay and make it fun by involving customers in planning: What color, interior and electronic gadgetry should the jets possess?

Sometimes the feedback affects a new model’s specifications as the plane goes from concept to production. For the SkyCatcher, a light sports plane, customers demanded a Lycoming engine, and Cessna added it as an option. This deepens customers’ connection with Cessna and offers the additional benefit of providing insight into the ways the market may be shifting.

When done right, Pelton says, involving customers in product planning creates a virtuous cycle, because the products that result fuel still greater demand. One example: the new twin-engine CJ4, which won’t be certified as sky-worthy until 2009 and won’t begin delivery until 2010. The plane is an extension of the current Citation Jet (CJ) line and is priced around $8 million. Cessna currently has 130 orders for the CJ4, many from customers moving up from smaller, older CJs.

Pelton’s strategy may seem overly conservative when viewed against a recent Honeywell survey of aviation-industry sources, which forecast $233 billion worth of new aircraft sales worldwide over the next decade (Cessna currently has a roughly 29 percent market share globally). But it remains consistent with what he terms “a healthy dose of paranoia” in his management ranks, which constantly forces executives to evaluate technological and strategic threats, focusing on emerging ones.

“It’s like being the manager of the New York Yankees after they’ve won the World Series a few times,” he says. “You can sustain your number-one position, or you can fall from the top.”

Executive Summary
• As general aviation continues to thrive, Cessna follows suit — which is creating a surge in orders.
• Cessna would rather live with a backlog than risk overbuilding its capacity.
• Cessna integrated the customer into the planes’ production process, which transformed the waiting period into a brand- building strength.

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