Foley: Despite Booming Bizav Market, Stocks Remain Mixed Bag

 - January 4, 2022, 11:53 AM
While stock prices of business aviation stalwarts such as Embraer and NetJets parent Berkshire Hathaway have prospered along with the booming bizav market, those of Wheels Up and the companies involved in the nascent urban air mobility market have lagged. (Photo: NetJets)

The frenzied business aviation market would normally boost shareholders involved in the sector, but results overall have been mixed, said Brian Foley of Brian Foley Associates.

“Ever since pandemic lockdown restrictions were lifted and well-heeled travelers emerged from their bunkers, the private aircraft industry has been on a tear,” he said, citing North American business aircraft operators that have been up 21 percent over pre-pandemic levels, used inventory that has dipped to 3 percent to 4 percent, and book-to-bill ratios of 2:1.

“All of this flight and sales activity would normally benefit shareholders of stocks in the space. And while that’s largely true, there have been some exceptions,” he said. “Those investors who foresaw the potential for business jet sales to increase have been aptly rewarded. The stalwarts of building private aircraft have all done quite well in 2021.” Foley noted that Gulfstream parent General Dynamics stock is up by 40 percent, Embraer by 160 percent, and Bombardier by 250 percent.

However, not all have seen such boosts. “The stock market has not been as kind to younger, often special purpose acquisition company-linked companies.”

Despite record revenues and strong member growth, Wheels Up has posted losses, causing some investors to question whether the business is scalable, Foley said. The result: Wheels Up has “democratized investor paper losses with a [stock price] decline of over 50 percent for the year,” he maintained.

Also, the burgeoning urban air mobility industry “is off to a rough start,” he noted with Archer Aviation, Lilium, and Joby Aviation seeing shares tumble around 40 percent. In addition, public stocks in the business aviation sector are limited and many also involve organizations with larger footprints in other aspects of aviation, including the commercial side that is still 30 percent below pre-pandemic flight volumes.

“While the future is bright for the general aviation industry with the addressable market having permanently expanded, not all public companies will be able to execute and capitalize on it,” Foley concluded.