Flight Activity Declining; Backlogs May Be Next

 - November 25, 2008, 11:21 AM

Business aviation consultancy Brian Foley Associates believes the peak for business jet backlogs likely occurred in the third quarter and will now begin shrinking. The world economic crisis, declining corporate profits, tight credit and the strengthening dollar are conspiring to put the brakes on business aircraft buying activity at a time when manufacturers are delivering more than 1,000 new airplanes per year, noted company president Brian Foley. “This in and of itself will work to deplete the backlog at a meaningful clip,” he said. Exacerbating the falloff, Foley also predicted, buyers will begin canceling airplane orders as their progress payments to manufacturers come due, with double-digit-percentage order cancellations likely. Meanwhile, UBS Investment Research’s latest Business Jet Update noted that domestic and international business jet takeoffs and landings dropped 19 percent in October compared with the previous October, for a year-to-date drop of 10 percent. Dried-up financing, an increase in available aircraft for sale and the drop in flight activity, UBS said, “presage what we think will be a significant slowing in new aircraft demand.”