There is no switch to flip when it comes to increasing business jet production for any OEM, according to Brian Foley, founder, Brian Foley Associates. Business jet inventory levels, both new and pre-owned, are reaching record lows and there is growing demand for manufacturers to up supply.
Foley told CJI OEMs are planning to up production, but it takes time, resources and qualified people – many of whom found new careers as a result of the pandemic.
“Procurement can be a multi-year process,” said Foley, “A lot of these contracts with tier one suppliers for engines and avionics those are signed for specific quantities potentially years in advance. It’s not a simple matter of turning up production volume on a switch.”
Gulfstream will struggle to add to production before 2023, it only expects to produce four more jets than last year. The Savannah-based OEM is also facing a temporary wing shortage.
Bombardier also is not a suitable position to take advantage of the upswing in demand, according to Foley. Despite a fourth-quarter book-to-bill ratio of 1.5:1 (1.5 new sales to each aircraft delivered) and backlogs swelling by $1.5bn last year, 2022 deliveries are only ramping up by a “little bit” compared with last year, according to CEO Eric Martel.
“I think OEMs are preparing to increase production incrementally. At the moment, they can hold a little bit and drive those list prices up. They can negotiate less, not give as many discounts and subsequently get their margins up,” said Foley.“Then once there is firm pricing and a firm backlog, then they will increase production.”
Foley suggest a reason for limited production is that Bombardier does not want to “bloat already high debt levels any further” by spending more funds on procurement and capacity expansion.
As with Gulfstream, Bombardier is signalling a larger, 15-20% production increase in 2023.
Textron also hinted in its fourth quarter 2021 results announcement that it planned to make more aircraft in the coming year. Foley noted Dassault also had a planned production increase in place.