Citi on Tax Law: No Immediate Bump for New Bizjet Sales

 - February 1, 2018, 12:23 PM
Sales of new business jets, such as this Cessna Citation M2, aren't likely to see an increase this year from the recently passed U.S. tax law, according to Citi Research U.S. aerospace and defense senior equity analyst Jonathan Raviv. He believes the tax benefits will help clear out preowned business jet inventory this year, which could then lead to a resurgence in new aircraft sales in 2019. (Photo: Textron Aviation)

Citi Research U.S. aerospace and defense senior equity analyst Jonathan Raviv believes that the new U.S. tax law, which allows for “full expensing” of both new and preowned business jet purchases, won’t provide an “immediate boost” for new aircraft sales. He also does not see “much change in the price delta, which has pressured new aircraft demand.”

Raviv, however, expects the new rules to help clear the used inventory faster, thus improving “residual values, pricing and then eventually new aircraft demand.” But, he noted, “This takes time, so we think 2019 is the earliest we’d see a material benefit for OEM production rates.”

He also believes that the new tax law is more likely to benefit the more “economically sensitive” customers who opt for light and midsize jets, rather than those purchasing a large-cabin jet. “But, overall we think tax reform is another sentiment boost for business as it approaches the end of the ‘lost decade,’” he concluded.