Weak market hits Falcon sales

 - November 26, 2007, 8:24 AM

The pace of orders and deliveries for Dassault Falcons slowed significantly during the first half of this year, company officials said at a press conference on October 1 at Dassault’s Saint-Cloud headquarters near Paris.

During the first half of this year Falcon orders reached a mere €670 million ($770 million), about one-third of the €1.93 billion ($2.22 billion) logged in just the first quarter of last year. These sales figures represent 16 and 57 aircraft, respectively.
The order intake from January 1 to October 1 this year was as low as 22 aircraft.
Dassault officials expect to finish this year with orders for more than 40 Falcon business jets, a far cry from the 72 ordered last year. The backlog remains close to 140 civil aircraft.

Charles Edelstenne, the French company’s chairman and CEO, said the French-American diplomatic blow over Iraq had little to do with the anemic sales figures. He estimated that this tiff had caused only “a few, maybe three to five” cancellations by American customers. “We were lucky this happened when the market was at its lowest,” he added.

As of October 1, the manufacturer held orders for 34 Falcon 7Xs. “I do not expect to increase this number in the short term,” Edelstenne said. These orders include a few recent ones. Edelstenne found them a pleasant surprise, as the next delivery slot for the 5,700-nm trijet is in mid-2008.

In the first half of this year, only 16 aircraft were delivered, according to GAMA, compared with 30 for the same period last year. As a consequence, Falcons accounted for only 39 percent of Dassault’s first-half revenues. This proportion has been close to 60 percent in recent years. It should be the reverse situation this year, with a 40/60 civil/military breakdown. This is due to the conjunction of a depressed civil market and healthy military deliveries, Edelstenne explained. Dassault military aircraft include the Mirage 2000 and Rafale fighters.

Civil revenues for the first half reached €590 million ($678 million). The influence of the euro/dollar exchange rate, with a weak dollar, had a negative effect on the turnover, Edelstenne noted. However, an exchange-rate hedge and the high level of purchases Dassault makes in dollars have limited this effect to a single-
digit percentage.

Asked about opportunities in the Chinese market, Edelstenne appeared prudent. “It will not be a true market immediately; we have to wait a few more years,” he said. But the country’s fast rate of development should eventually create a significant need for business aviation in China, he added.