Glimmers of Hope Exist, Despite Gloomy Skies

 - July 27, 2009, 11:52 AM

While the industry cheers small gains, on any given day the bits and pieces of good news (+) have typically been overwhelmed by the bad (-) as the economic crisis and credit crunch continues. Here’s a bit of both.
(+)Brazilian OEM Embraer began deliveries of its new Phenom 100 light jet in its home country, named Starlink Aviation of Montreal an authorized service center for executive jets and delivered its first Lineage 1000 to His Excellency Aamer Abdul Jalil al Fahim of Abu Dhabi.
(+) At Jet Works Air Center in Denton, Texas, where interiors for all the new Avanti IIs destined for fractional operators are done, the company has just delivered a Boeing 727 reconfiguration and opened a new 43,000-sq-ft facility to expand its narrow-body completion capability.
(+) In France, Dassault has finished the ramp-up of its technical center in Saint-Cloud to maximize technical communication with Falcon Jet customers. The facility further extends to the overall network, including two new maintenance centers opened in 2008 in Sorocaba, Brazil, and Reno, Nev.
(+-) Fractional provider NetJets has managed to avert pilot layoffs and furloughs through an agreement with its pilot union, the NetJets Association of Shared Aircraft Pilots. Under the program, union members could choose an early-out option or short- or long-term leaves of absence. According to the union, 165 pilots took the early-out option, which provides them with full benefits and two-thirds of their seven-and-seven schedule pay over the next 36 months. About 2,200 of the 2,934
NetJets pilots are participating in the time-off-in-lieu-of-pay plan. Six-hundred opted for voluntary reduced scheduling and 73 chose leaves of absence.
(+-) UBS Investment Research had some good news in its Business Jet Survey for July 14. The firm’s Business Jet Market Index came in at 37, “slightly higher than our prior survey in May and the fifth consecutive move higher, indicative of a continuing slowing in the rate of market deterioration.” However, UBS said the index, weighed down as it is by weak pricing and high inventories of used business jets, does not yet indicate stabilization. In fact, it concluded, “While our key indicators and contacts indicate a bottom is near, we think the likelihood for further production cuts, along with the risk of an extended downturn, limits upside for most of the stocks.”
(-) A forecast by Brian Foley Associates released on July 9 does not anticipate the industry topping 2008 levels within the next decade. “A confluence of factors came together to create last year’s record-breaking 1,213 aircraft deliveries,” according to president Brian Foley. “The probability of each major market driver of business jet sales simultaneously peaking again seems remote.” Discussing jet aircraft purchases, Foley noted, “The easy credit environment featuring low interest rates, zero down payments and extended terms just won’t exist any time soon, which will completely eliminate a stratum of buyers in the next upturn.” And this, he added, “will be compounded by negative Capitol Hill business jet rhetoric that will dampen enthusiasm in the world’s largest market [the United States] for the next few years.”
(-) J.P. Morgan’s Business Jet Monthly report noted that used business jet inventories remain at record levels and prices continue to drop. The report further noted that flight operations remain down, with “U.S. takeoffs and landings [at] 282,000 in May, the third consecutive month in the 280,000 range.” The report finally noted that more information regarding order deferrals, cancellations and order activity would be forthcoming in the second quarter earnings reports and concluded that these would represent another rough quarter for the OEMs.