Phebe N. Novakovic
Chairman & Chief Executive Officer at General Dynamics
Thanks, Jason. First, Aerospace. The story in Aerospace is found in sequential and year-over-year improvement, continuing strong demand for Gulfstream aircraft, the overall strength of Gulfstream service business and the continuing growth of Jet Aviation. In the quarter, Aerospace had revenue of $2.74 billion and earnings of $449 million. This represents a 12% increase in revenue and a 33% increase in earnings on a quarter-over quarter basis. The sequential numbers are even stronger with a 35% increase in revenue, coupled with a staggering 68% increase in operating earnings.
The important point here is the dramatic increase in the delivery of in-service airplanes in the quarter 39 versus 27 in the third quarter of 2023. A strong mix favoring large aircrafts, strong pricing in the backlog, better overhead absorption and improved supply chain response, leading to less out of station work all contributed to a 16.4% margin in the quarter.
For the full year, revenue of $8.62 billion is up only $54 million from the prior year. And operating earnings of $1.18 billion improved by $52 million on a 50 basis point improvement in operating margin. Nevertheless, Aerospace revenue and earnings are less than we anticipated for the quarter and year because as I mentioned earlier, we did not receive the certifications of G700 in the fourth quarter and did not deliver 15 aircraft we had ready to go. That deprived us of slightly over $1 billion of revenue and close to $250 million in earning. These, of course, are orders of magnitude figures.
We were also unable during the course of the year to increase production of in-service aircraft as planned because of well-known supply chain issues that began to resolve in the fourth quarter.
So where are we in our journey towards G700 certification? We are almost complete with the final technical inspection authorization. FAA function and reliability flight testing is almost done. And almost all of the paperwork associated with the process has been submitted. In the meantime, we are asking customers to schedule their pre-delivery inspections contemplating delivery this quarter.
All that having been said, let me turn to the demand environment. The book-to-bill was 1.2 times in the quarter and 1.2 times for the year. Backlog increased $395 million sequentially and $938 million for the year. So, Aerospace demand remained strong for both aircraft and services at Gulfstream and Jet Aviation.
I should add that strong order intake was interrupted for two-week to three-week period twice during the year, once for a macroeconomic event and the second for a geopolitical event. I refer to the regional bank failures earlier in the year and the conflict initiated by the Hamas attack on Israel and the resulted conflict in Gaza. In each case, order intake resumed after a brief pause. As we go into the new year, the sales pipeline remains strong and sales activity is at a solid pace. Aerospace backlog is up 72% since the first quarter of 2021, when we first detected a measurable uptake in order activity.
In summary, Aerospace results are in line with our original forecast, excluding the G700 certification delay. We look forward to a significant increase in deliveries in 2024 and improved operating margin, but I'll say more about this as we get to guidance. We also expect continued growth and margin improvement at Jet Aviation who performed well in the year.
Next, Combat Systems. Revenue in the quarter of $2.36 billion is up 8.5% from the year ago quarter. Operating earnings of $351 million, are up 5.7% on a 40 basis point decrease in operating margin, but still a very good 14.8%. The majority of the growth in the quarter was at Ordnance and Tactical Systems and European Land Systems. It was largely driven by higher artillery and propellant volume, including programs to expand production volume, higher volume of Piranhas, Bridges and Eagles in Europe, and new international tank programs.
Not surprisingly, the sequential comparisons are even better. Revenue was up $140 million or 6.3% and earnings are up $51 million or 17% on the strength of a 130 basis point improvement in margins.
From an order perspective, Combat had a very good year with a 1.1 times book-to-bill, driven by very strong international demand for the Abrams main battle tank, growing demand on the munition side of the business and particular strength in Europe. By the way, Combat's performance for the year significantly outperformed our expectations. 2023 revenue was up 13% against a flat forecast provided earlier in the year. Operating earnings are up $72 million, or 6.7%, with operating margin at 13.9% for the year. In short, this group had a wonderful quarter and a year with strong revenue growth, strong margin performance, good order activity and a strong pipeline of opportunity as we go forward.
Turning to Marine, the powerful Marine Systems growth story continues. Fourth quarter revenue of $3,408 million is up 14.8% over the year ago quarter. Revenue was also up 13.5% sequentially and 12.9% for the year. This was driven by Columbia-class construction and engineering volume, [Indecipherable] volume and service contracts of that. Operating earnings are down 8.4% over the year ago quarter on a 160 basis point reduction in operating margin attributable to EAC rate decreases at Electric Boat. These rate decreases similarly impact the sequential and annual comparisons with respect to operating earnings. The EAC decreases were primarily driven by two factors, later than promised material to EB which drove additional out-of-station work at EB and quality problems from several vendors.
On the positive side, we are continuing to work with the Navy and the Congress to help further stabilize the supply chain with additional funding for work. We are also working with certain suppliers to set-up process improvements where we can. EB also needs to continue to improve its productivity to help offset some of the financial impacts from the supply chain. Marine Systems had a one times book-to-bill for the year, a good result for a group of shipyards that began the year with a total backlog of nearly $46 billion.
Jason will now give you some color on the Technologies group for which he has responsibility and then I'll return for our outlook for 2024.
