Phebe Novakovic: So, our flying hours are not down. But I think, too, the way to think about our service business is we expect service to increase as the fleet of airplanes — new airplanes in the market increases. So, we expect steady growth in service. And we haven’t seen any impact so far on any change in flying hours. I said that mostly other people flying hours. With respect to Combat, the world has become a less safe place, and that’s reflected in the increased demand, both internationally and in the United States. So we expect the — this year to be considerably higher than last year. And we’ll give you clarity around 2024 in January. But as you may recall, we had anticipated flat to down growth in this business segment. Clearly, that trajectory has changed. We won’t be able to — we can’t quantify it right now, but we’ll give you more clarity on that.
Operator: Your next question comes from the line of David Strauss from Barclays.
David Strauss: So, back on the G700, would you expect to make up the missed deliveries this year? Would you expect them to make those up next year? So does the — I think, what was — 170 go higher in terms of what you’re expecting for deliveries next year?
Phebe Novakovic: Well, we’ll get into next year, next year. But the deliveries are lower, are — 5 to 6 deliveries that won’t deliver this year are not 700s. So, it’s other airplanes.
David Strauss: Okay. Got it. And then as a follow-up — quick follow-up. Combat Systems, you’ve mentioned this during the prepared remarks, the lower margins in the quarter, and then it looks like you’re forecasting a bit of a snapback in the second half of the year, but still a fair amount lower than what you were initially forecasting. Could you just give a little bit more detail on the mix and how that’s impacting? Thanks.
Phebe Novakovic: Yes. So mix in this instance is comprised of two elements. One is the capacity expansion, which I noted carries lower margin. And then it’s really the transition from more mature programs to newer programs, and those margins will improve as we come down our learning curves.
Operator: Your next question comes from the line of Cai von Rumohr from TD Cowen.
Cai von Rumohr: Terrific. Thanks so much. So — and Howard, let me say, you’ve been terrific to work with and a great friend, and I wish you all the best.
Howard Rubel: Thank you, Cai.
Cai von Rumohr: So, Phebe, how many 700s are you assuming to deliver in the fourth quarter? And what kind of margin for error is there in terms of timing in terms of…
Phebe Novakovic: We will deliver 19 G700s, and we’re not going to tell you margins will be accretive. Nice try. Well, have we ever given you margins by airplane?
Cai von Rumohr: No, no, no. I just — so — and next — I didn’t mean — I meant how much time-wise, a cushion you have in the schedule if the certification slips.
Phebe Novakovic: You mean the schedule for the 700 certification?
Cai von Rumohr: Yes. I mean, is your best guess that you certify in the middle of November, in middle of December, which could impact the amount number of planes you get out…
Phebe Novakovic: So, what we’ve told you is our best estimate right now of the certification process. Clearly, if it comes very late in the year, we’ll deliver airplanes, but we won’t necessarily be able to deliver all of them. That will bleed over into the best first quarter GD has ever had in its history. But we’re not anticipating that at the moment. So, I don’t have real good clarity because we don’t know yet with precision on when in the fourth quarter. But our best estimate, what we’re planning for right now is that we will be able to have sufficient time to deliver these airplanes. Remember, they’re built — the pilot training will start, and that will help significantly with deliveries.
