Business jet deliveries are expected to peak this year or next, before falling into a four-year decline, according to Richard Aboulafia, vice president of analysis for the Teal Group Corp., who addressed the initial meeting of The Wichita Aero Club last week.
Aboulafia presented two scenarios of the current economic situation as it affects the aviation industry, the most likely of which states that the current economic decline "is much worse than the usual down cycle, the worst popped bubble yet. The credit crisis was just the start of a major economic slowdown. We´re looking at a few grim years, but nothing fundamental has changed and deliveries growth will resume in 2013/2014," he said in his presentation. "This is almost certainly where we are," he added.
The other scenario is much grimmer, suggesting that the U.S. and much of the world are "massively overleveraged, indebted and overextended. This is the start of an extended period of painful restructuring"...which could result in a decade of lost growth. Aboulafia labeled that scenario as "merely a risk."
According to his forecast of annual business jet deliveries, Aboulafia says shipments will start down next year, although billings will increase slightly. Then shipments and billings will continue to drop for the next four years, before beginning to rebound in 2013-2014. See charts on Pages 268.
The Teal Group analyst told the Wichita audience that there are "five great aviation clusters in the world today," of which Wichita is one. Those clusters "cannot be created," he said, "only destroyed." Of the existing clusters, "Wichita has the highest exposure to the business jet market, the fastest growth segment, but with very high cyclicality." He also warned that business jets are "well behind the other aviation segments in outsourcing, a possible threat to manufacturing jobs in Wichita."