Foley: Downturn Will Be 'Softer Blow' for Bizjet OEMs

 - March 26, 2020, 11:25 AM

This story is part of AIN's continuing coverage of the impact of the coronavirus on aviation.

Business aviation analyst Brian Foley argues that, despite the sharp downturn in aviation activity because of the Covid-19 pandemic, business aviation is poised to better weather this setback than the 2008 financial crisis. The U.S. economy is healthier this time around, with a GDP of 2.1 percent, higher corporate profits, and a stock market that is up 67 percent compared with the financial crisis, Foley wrote today.

Financial system reforms since then have also strengthened banks’ reserves and led to tighter lending standards that have increased their liquidity and reduced the risk in their loan portfolios. While business jet OEMs have smaller backlogs, “they aren’t stacked with as many speculators” and “some manufacturers have put added teeth in their contracts since the last downturn, aimed to keep airplane flippers out of their books.”

Foley acknowledges, however, that now—unlike in 2008—there are too many new business jet models chasing a finite buyer’s market. International markets were weak before the pandemic and no additional interest rate cuts are in the offing because the Fed already has cut them to zero. “It’s said that the second half of 2020 may be more forgiving, but the wait will admittedly be excruciating,” Foley noted. “While there’s always a worst-case scenario, it’s possible that the positives going into this downturn will at least help to soften the inevitable blow.”