As Sales Increase Across the Board, Why Don't Gulfstream and Bombardier Capitalize on the Boom? 

Brian Foley and associates have taken note of the business aviation market's resurgence as it approaches its pre-pandemic levels of manufacture and sales, but noted the slightly off-kilter stance of some of the biggest names in business jets. "But just as new business jet sales begin to take off after more than a decade in the doldrums, some plane makers are temporarily stuck on the sidelines unable to fully capitalize on the upswing." So what's happening? 

Brifo says that "While the business jet charter, fractional and preowned segments began flourishing in mid-2020, it took a while for new aircraft sales to pick up. Finally, by mid-2021 manufacturers unanimously began reporting new airplane unit sales that were nearly double the amounts that were being delivered, rapidly swelling backlogs." The pandemic, while a hard hit for commercial airlines, actually had an unexpected effect of pushing those capable of moving into more private, exclusive travel towards charter operators more than ever before. Faced with the hassles of pandemic travel, the costs of fractional ownership became less unattractive for many, leading to notable expansions for those poised to take in new members. Jet Edge was so inundated with new members it was forced to suspend new card sales as it focused on expanding its fleets. Brifo's analysis continues. 

"The timing of the long-awaited sales uptick couldn’t have come at a worse time for General Dynamics’ Gulfstream division, which reported fourth-quarter’s order activity beyond anything seen since 2008 and a sales backlog up 40% from the year before. At the same time the company is bringing wing production in-house and acquiring another set of tools and fixtures, all of which stifles adding any more production capacity much before 2023. Now saddled with a temporary wing shortage, they only expect to produce four more jets than last year at a time of increasing demand. Longer term the integration "appears to be at the expense of short-term sales," the firm notes. 

Rival manufacturer Bombardier "isn’t in much better shape to capture the market upswing right away," to their disappointment. Brifo says the firm has 1.5 new sales for each aircraft delivered, but 2022 deliveries are only slightly up over last year. The firm conjectures the possibility that it "does not want to bloat already high debt levels any further by spending even more" on expanding its capacity. Also, the shuttering of their Learjet division further cut off a dozen or so units from being shipped this year. 

What does Brifo see in its crystal ball overall? It believes that "worldwide jet shipments will get out of their 700 unit per year rut and approach 900 units as soon as 2024, but not later than 2025," the report concludes. While Bombardier seems to be signaling a 15 to 20% Production increase, and Gulfstream probably thinking the same, those looking to add a business jet to their collection may have to be ready to throw some elbows to get what they want in a competitive market. 

FMI: www.brifo.com