Wed, Aug 17, 2011
Sees Stronger Order Books, Positive Net Sales
With equity markets whipsawing, sovereign debt issues and
overall economic uncertainty, some in the general aviation sector
wonder if it’s a precursor to another 2008-like industry
free-fall. Industry analyst Brian Foley (pictured) doesn't
think so. “I wasn’t shy in publicly proclaiming the sky
was falling back then," he said, "and I’m now categorically
insisting that same scenario just isn’t plausible
today.”
Foley points out that today’s aircraft order books are of
an entirely different customer makeup than before. Gone are the
speculators and those that qualified for aircraft financing simply
because they were “breathing”. Today’s order
books are of a much higher caliber, made up of those with the
financial wherewithal to buy their own aircraft or by borrowers who
have been heavily scrutinized by lenders and made meaningful
down-payments.
The possibility of large scale fleet cancellations is also greatly
diminished in the present environment. In the previous downturn,
widespread fractional and start-up air taxi order cancellations
exacerbated an already dire situation. Industry fleet
backlogs today are much smaller and made up of mainstream clients.
Delivery dates are typically well into the future –
presumably after these choppy seas have passed.
Foley concedes the recent market volatility may result in a
short period of slower sales for some manufacturers, but net orders
(sales less cancellations) will remain positive. There’s also
the likelihood of temporarily lower aircraft utilization which
negatively affects service providers such as those in the
maintenance, fuel, charter and fractional business. But these
aviation companies have already adapted to the slower environment
and are in a better position than they were before to deal with the
occasional pullback. Those who were unable have largely
disappeared.
Private aircraft consumers who scale back or delay based on
current market volatility are only adding to a growing pent-up
demand, which will provide even more momentum to the inevitable
upswing. “For the time being, volatility is the new norm. But
those companies left in general aviation are the leaner, tougher
survivors. Bring it on.”
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