The sentiment expressed by the world’s two big airliner manufacturers seem increasingly out of line with the reality perceived by the financial community when it comes to airlines’ ability to fund aircraft deliveries this year, according to some of the industry’s most prominent analysts.
On Monday, JetDirect Aviation and JDA Acquisition Company (JDAAC) solidified an agreement for JDAAC’s purchase of JetDirect’s assets.
UBS Market Research’s latest snapshot of the business jet market shows continued incremental deterioration in market conditions last month, although at a slower pace than in the November-to-January time frame.
When Berkshire Hathaway CEO Warren Buffett bought a Bombardier Challenger 600 twenty years ago, he named the large-cabin business jet The Indefensible because of his past criticisms of such purchases by other CEOs. However, after the investment guru used the jet, he realized its value as a business tool and later renamed it The Indispensable.
UBS Investment Research’s January 6 business jet update indicates that flight activity, measured by takeoffs and landings, was 10 percent lower in November on
Business jet flight activity last month fell 19 percent from the same period a year earlier, although that was better than November’s 25-percent drop-off, according to a business jet market report issued this morning by UBS Investment Research. Flight activity for the entire year was off nearly 12 percent compared with 2007. About 86 percent of the flights UBS tracked last month were U.S. domestic flights and the remainder was international.
UBS Investment Research’s business jet survey released late last month shows a contracting market index that is “reflective of a market that continues to rapidly deteriorate.” According to UBS analyst David Strauss, “We believe this [is] a market with few serious buyers, too much supply and pricing that has fallen 25 percent or more over the past six to eight weeks.” A lack of financing is also endangering aircraft manufacturers’ backlogs, UBS
UBS Investment Research’s Business Jet Survey that was released today is a sobering account of the recession’s toll on the U.S. bizjet market. The firm’s “business jet market index” came in at 14 this month, slightly higher than last month’s all-time low of 13 but still well below 50, which is the dividing line between market growth (above 50) and contraction (below 50).
A recent J.P. Morgan report reassessed the effect of the acquisition of Jet Aviation by General Dynamics “in light of the tough business jet environment.” For 2009 and 2010, the report said, “We are now looking for sales [at Jet Aviation] of $1.4 billion in 2009, a bit below GD’s guidance for $1.5 billion, which had been our prior estimate.
According to a UBS Investment Research report issued yesterday, the business jet market “is deteriorating at an accelerating rate” as pre-owned inventory continued to rise, flight activity fell and sales slowed last month. Worse yet, business jet financing appears to be drying up, threatening backlogs.