Analyst Brian Foles Finds Pockets Of Strength And Weakness In Latest Data

A double-digit 14.5% year-over-year increase in airplane shipments in the first quarter and a 10.5% rise in their combined values makes it appear the general aviation industry is on fire. However, a more detailed view reveals pockets of strength and weakness.

Each quarter, the General Aviation Manufacturers Association (GAMA) publishes worldwide shipment data for general aviation aircraft. This includes non-commercial civil aircraft comprised of fixed-wing piston, turboprop and business jets, as well as helicopters. This review focuses on fixed-wing aircraft.

Beginning with the smallest, least expensive piston airplanes, deliveries rose a remarkable 24% from 200 units to 248. Half, or 24 units of this increase, came from Piper Aircraft primarily from trainer sales while another 13 came from Textron Aviation's piston offerings. It will be interesting to see Textron's resolve in keeping the expensive, legacy Beechcraft Bonanza and Baron piston line in production which only saw 2 units delivered in Q1 2018 and just 1 in 2019.

Other players in the piston segment either made or lost a few more sales. ICON Aircraft, maker of the A5 light-sport amphibian, reported 14 deliveries so far this year compared to just 3 this time last year - surprising given the recent executive changes at the top and layoffs. Piston aircraft leader Cirrus Aircraft saw a double-digit decline in piston sales suggesting that the industry's quarterly improvement is not systemic.

For turboprop airplanes deliveries rose a modest 7% from 115 to 123 units, with a lot having to do with a pop in Textron Aviation's King Air and Caravan sales. Turboprops will soon become an interesting and high-growth segment to watch over the next couple of years as Textron introduces the single-engine Denali turboprop and the purpose-built SkyCourier for package delivery. While the latter will displace some Caravan sales, the effects of the two new aircraft will still be additive to this market.

In the business jet arena, deliveries increased 9 units from 132 to 141 for a gain of 6.8% over the same period last year, proving that a large percentage increase of a small number is still a small number. Textron Aviation's Cessna unit saw a respectable 22% bump in jet deliveries across the board of its product offerings. This will help to take the edge off of its new Citation Longitude flagship which has had continuous certification delays and may now be caught up in a period of even more FAA scrutiny following the Boeing 737 MAX fallout.

Dassault only reports its deliveries in Q2 and Q4 but is surely still dealing with the consequences of its new Falcon 5X program cancellation. Embraer stayed even with 11 deliveries now and a year ago.

General Dynamics' Gulfstream division saw improved deliveries primarily driven by its all-new G500, which replaces the G450, beginning to be shipped. This will soon be followed by the G600, which replaces the G550, and when combined with the G500 will significantly increase the overall value of the industry's total aircraft billings for years to come. The same can be said of Bombardier's new Global 7500, although its Learjet division, with just 3 deliveries in Q1 2018 and 2 this year, puts into question the company's long-term commitment to the unit.

Outliers from the core business jet makers include Honda Aircraft and Cirrus. The former's HondaJet suffered a 41.7% drop in deliveries year-over-year from 12 to 7. This coincides with the firm's recent announcement of building a $15.5M addition to its North Carolina facility bringing its total capital investment in the location to over $245M. While ever breaking even on the program would seem remote, Honda's quest to break into the aviation business has been accomplished. Cirrus's tiny SF50 single-engine Vision Jet saw a 40% bump in deliveries from 10 to 14. Time will tell whether this niche market has the depth to continue delivering at these levels.

In summary, GAMA's news that airplane shipments increased by 14.5% and billings 10.5% in the first quarter isn't necessarily an indicator of overall industry health. The improvement in piston activity was largely driven by trainer sales and does not mean that individual buyers are back in the market yet. It's not clear if the turboprop increase is noise at this point, although the introduction of new products will inevitably grow the niche. Business jets are still relatively flat for the moment but should gain momentum as new products continue to hit the market such as the G500/600, Global 7500, Falcon 6X and Citation Longitude. Incremental improvement should continue over time and until it is again tested during the next US economic downturn.

(Source: Brian Foley news release. Images from file)

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