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?"

FMI: www.brifo.com