Wed, Oct 12, 2011
To Avoid Business Jet Delivery Purgatory, Economic Growth,
Confidence Are Musts
What if general aviation unit deliveries were to stay flat into
an extended future? Aviation Analyst Bryan Foley sees things this
way: "Deliveries will trend modestly upward; we still believe
that. But that projection assumes that the economy and buyer
confidence in general will gradually strengthen. Both are
necessary catalysts for sales. If they don't improve -- and
it probably will take both of them -- an alternative scenario must
be considered in which deliveries could stay flat into the
foreseeable future."
Foley's concern is not without precedent. He noted that
for the ten-year period 1986-1995, business jet deliveries stayed
in a very tight range which could also be called flat. This
is anomalous in that one would normally expect deliveries to follow
a classical sine-wave business cycle -- typically five years
trending up followed by five years trending down, and with the ups
and downs smooth as opposed to sharp.
"We are standing by our published outlook," Foley said.
"We've predicted around 700 business jet deliveries in 2011,
growing to a peak of over 1100 in 2016, then diminishing a bit in
typical, cyclical fashion. That's our basic growth
model, and we see no cause to walk away from it. At the same
time, since it's based on assumptions that might conceivably go
another way (like the economy), we've added a contingency
prediction that's more pessimistic. In this model, deliveries could
stay basically flat-lined for the foreseeable future at around 850
units per year. But that would happen only if the economic
doldrums continue, exacerbated by confidence-sapping threats of
tax-law changes, restrictive aircraft financing, user fees,
anti-bizjet rhetoric and such. It would probably take a confluence
of all these dire things acting simultaneously. Otherwise,
the odds still favor the growth model."
But 2011 should be the low-water mark for deliveries in any
event, whether there's a healthy burst of recovery or a double-dip
recession with GDP growth. "The biggest risk may well be
psychological uncertainty; that general-aviation deliveries will
languish stubbornly for years -- a kind of delivery purgatory,"
Foley says, adding "Who wants that?"
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