Aerospace supplier Rockwell Collins Inc. (COL) believes it is hitting the bottom of a painful downturn in the business jet market, although its chief executive said questions remain on declines in the air transport market for large commercial jets.

The company Thursday backed an earlier forecast for fiscal 2009 earnings to fall in a range of $3.70 to $3.90 a share, after cutting its outlook in several previous quarters.

In an interview, Clay Jones, chairman and CEO, said Rockwell Collins customers Boeing Co. (BA) and Airbus may yet need to cut production on narrow-body aircraft, as airlines downsize and conserve cash to cope with weak global passenger traffic.

"Boeing and Airbus have bent over backwards to explain to us how they can maintain production rates," he said but added he's not so certain. So far, both plane makers have cut some production but largely maintained manufacturing plans by shifting orders among their customers.

"They know more about their customers than I do," Jones said. "It could be they expect to see strong demand for more fuel-efficient aircraft" even while in a weak market.

Additionally, he said, "The credit market for aircraft financing is much better than we expected it would be six months ago."

Jones added he remains "watchful" about production cuts: If production were cut, Rockwell Collins would have plenty of lead time to adjust its pipeline, he said.

He said any recovery in commercial aerospace will be seen first in the aftermarket, as aircraft operators perform needed maintenance to sustain increased rates of flying.

Rockwell Collins generates about half of its business from commercial aerospace and half from government contracts.

The Cedar Rapids, Iowa, company is a supplier of electronics to the much-delayed Boeing 787, business that's valued at $3.5 billion over time. It's the most content Rockwell has provided for a commercial aircraft.

Jones said his company, along with other suppliers, currently is working out payment issues with Boeing but "we're the least of their worries." So far, the delayed program has had no material impact on Rockwell Collins' earnings, and Jones said he doesn't expect a financial impact in fiscal 2010, even with a new program delay of unspecified length announced a month ago.

Early Thursday, the company reported that fiscal third-quarter profit fell 17% due to weakness in its commercial systems business, while government sales rose. Earnings beat analysts' views, but revenue came in below estimates.

Jones said defense sales continue to provide stability in the economic downturn. While Rockwell Collins will see a dip in sales as the U.S. Defense Department cancels its Future Combat Systems program for the Army, that business will come back, Jones said. Instead of waiting for an all-new ground vehicle program, the Army will upgrade existing equipment with sensor and communications technology, including from Rockwell Collins, that soldiers can use right away.

Jones said Defense Secretary Robert Gates' strategy to support current war efforts with more high-tech equipment will add contracting opportunities for his company.

The company will provide a financial outlook for fiscal 2010 when it reports fourth-quarter earnings.

For the period ended June 30, Rockwell Collins posted income of $145 million, or 91 cents a share, down from $174 million, or $1.07 a share, a year earlier.

Revenue decreased 9.1% to $1.08 billion. The company's acquisitions of DataPath and SEOS Group contributed $28 million to revenue.

Analysts surveyed by Thomson Reuters expected earnings of 90 cents and revenue of $1.13 billion.

Rockwell Collins' commercial systems revenue fell 26% as profit dropped 46% on continued lower sales volumes. Government systems sales grew 7.2%, boosted 4 percentage points by the acquisitions, as earnings rose 21%.

Shares traded recently at $42.49, up 5.5%.

-By Ann Keeton, Dow Jones Newswires; 312-750-4120; ann.keeton@dowjones.com