Fri, Aug 07, 2009
More Cancellations Than Orders a Possibility, Foley Says
At least one industry analyst sees 2009 as shaping up to be one
of the most challenging years on record for new business jet
orders. "We could easily end the year with the industry as a
whole having more order cancellations than new ones" according to
Brian Foley Associates President Brian Foley. "Some companies will
buck that trend but taken as a whole the industry could see
net-negative orders for the year."
Brian Foley
While cancellations have subsided, additional fallout can still
be expected as more aircraft progress payments can't be met.
"Whereas some buyers had the financial wherewithal to pay for their
jets back when they ordered them, they're now scrambling to find
financing to make their next progress payment as their airplane
nears final delivery. They'll find credit markets stubbornly
tight and more restrictive with a bias towards only the of best
credit risks and aircraft. The easy credit culture is gone,
and with 50% of all business jet purchases involving some form of
funding that really impacts the industry."
"In our view, some but not all manufacturers may be playing
"backlog roulette" by being overly-accommodating and giving weak
customers the option to defer their order in lieu of
cancelling. These buyers gladly accept deferrals rather than
hefty cancellations fees. Some of these buyers were
irreparably damaged in the downturn and will likely never take
delivery. This creates a weak, artificially high apparent
backlog which does a disservice to both investors and
suppliers."
From the industry's backlog peak in third quarter 2008 a full
26% is at risk of cancellation with some manufacturer's backlogs
significantly more vulnerable than others. "In early
September, 2008 we took a lot of criticism for publicly warning
that manufacturers' backlogs weren't as sticky as they'd like to
think. Unfortunately for the industry we were spot on."
More News
Aero Linx: International Business Aviation Council Ltd IBAC promotes the growth of business aviation, benefiting all sectors of the industry and all regions of the world. As a non->[...]
"During the annual inspection of the B-24 “Diamond Lil” this off-season, we made the determination that 'Lil' needs some new feathers. Due to weathering, the cloth-cove>[...]
Also: Bushcat Woes, Hummingbird 300 SL 4-Seat Heli Kit, Carbon Cub UL The newest Junkers is a faithful recreation that mates a 7-cylinder Verner radial engine to the airframe offer>[...]
Also: Seaplane Pilots Association, Rotax 916’s First Year, Gene Conrad After a decade and a half of struggling with the FAA and other aero-politics, G100UL is in production a>[...]
Also: Martha King Scholarship, Montaer Grows, Textron Updates Pistons, FlySto The FAA is hiring thousands of air traffic controllers, but the window to apply will only be open for >[...]