“The business aviation market is just starting to recover,” Teal Group vice president for aerospace analysis Richard Aboulafia said this morning during an aerospace and defense outlook teleconference hosted by Desjardins Capital Markets. “Companies are making record profits and are literally stuffing about 7 percent of this cash under their mattresses,” meaning many have available capital that could be readily deployed to purchase business jets. He is also encouraged by the declining inventories of pre-owned business aircraft.
While Aboulafia is confident that recovery is under way, the problem is that the business aviation market is “torn in half.” Companies building business jets that cost more than $25 million each have seen deliveries rise slightly since 2008, he said, while those making aircraft below this threshold have seen shipments drop by 56.4 percent in the same period. This shift has benefitted Gulfstream and Bombardier, but penalized Cessna and Hawker Beechcraft.
Aboulafia is forecasting a 12-percent compound annual growth rate for business aircraft through 2017. Though he expects that the top and bottom market segments will expand at this same rate, Aboulafia said the bottom half will still be depressed in historic terms and thus “there will be too many players in this segment.”