Business jet industry may emerge stronger than ever
Business jet industry may emerge stronger than ever
Last week's wild swings in the stock market and the overall economic uncertainty is a short-term blip to the business jet industry and not a precursor to another industry free fall, aviation analysts say.
Last week, the stock market whipsawed as it responded to the political debate about the nation's debt and the country's credit downgrade. The Dow Jones industrial average had four 400-point swings in a row for the first time in its 115-year history. That volatility may result in a short period of slower sales for some business jet manufacturers, said Brian Foley, aviation consultant with Brian Foley Associates. But it also could lead to stronger demand down the road, he said.
"That means when the true recovery does take hold, it will have much more momentum," Foley said. "There's just so much pent-up demand out there from aircraft sales to maintenance services that people have been putting off."
Manufacturers and their order books are stronger today than they were three years ago when the market plunged during the recession and buyers canceled droves of orders. Their order books are of a higher caliber than they were before the downturn, Foley said.
"Gone are the speculators and those that qualified for aircraft financing simply because they were breathing," Foley said.
Orders on the books are from buyers who have the balance sheets to support them, who have been heavily scrutinized by lenders and have made meaningful down payments on aircraft, Foley said.
"The weak players canceled their orders long ago," he said.
Aircraft manufacturers have also changed in the past three years, Foley said. They've been driving out costs, reducing waste and adding productivity and efficiencies.
"They're basically cocked and loaded so when the market does recover, those airplanes are going to be built for a whole lot less," Foley said. "They're going to be stronger companies than they were in the past."
Teal Group analyst Richard Aboulafia said he still predicts a conservative recovery in the business jet market next year. Despite the violent market swings, "corporate profits haven't been impacted," Aboulafia said. And nothing has disrupted two key indicators of business jet demand — availability of the business jet fleet that's up for sale and fleet utilization, he said.
Wayne Plucker, senior industry analyst with Frost & Sullivan's Aerospace and Defense Group, called the market reaction an annoyance rather than a long-term problem — as long as it doesn't become a tipping point for the economy.
"The truth is that all the folks who would buy business jets were starting to return to decent profitability," Plucker said. "Now their profitability hasn't changed... but they're probably going to hold their shekels closer to their vest just because they don't know what's going to happen."
That will likely turn around in six to 12 months, he said. Still, Washington isn't doing business aviation any favors with the lack of funding for the Federal Aviation Administration and talk of taxing corporations more on their business jets, he said.
"There's just so many loose balls rolling around the deck," Plucker said. "At this point, we're trying to find out which ones are going to find pockets and which ones aren't."
Wichita's business jet manufacturers have been watching the recent developments closely. It's challenging, Hawker Beechcraft executive vice president Shawn Vick said of Wall Street's turbulence. But experienced businesspeople recognize it for what it is.
"This latest noise is manufactured out of political issues, not relevant economic business issues," Vick said. "This noise in the marketplace will fade."
In the meantime, customers are taking a step back to determine whether the recent developments are relevant. Those who say they're not are buying and ordering airplanes, Vick said. Those who are uncertain are taking longer to make a decision.
"Provided there's no significant sovereign default... that throws the banking industry into disarray, we'll get into what will be a busier time as we go into the third and the fourth quarter," Vick said.
"You get through that summer quiet period, and people start planning for the following year, making decisions (and) executing on their business plans."
In the meantime, the stock market fluctuations have not changed Hawker Beechcraft's plan to transform itself and improve costs and efficiencies, Vick said.
"We're executing against the plan and are making progress," Vick said.
A new private business aviation company has launched today, as a reaction to dissatisfaction with fractional ownership and its perceived high costs. Charterers can sell surplus seats on their outbound or returning empty flights to other Victor members. This allows members to buy individual seats for a fraction of the cost of a whole jet charter
Не дожидаясь ужесточения правил регулярных авиаперевозок, авиакомпании уже приступили к укрупнению своих авиапарков. Как ожидается, на авиационном салоне МАКС «Базэл» объявит о реорганизации своего авиационного бизнеса