Summing up the state of the business aviation industry in one word. Analyst, Brian Foley, said “unsettled”. He said Covid-19 is having a direct impact upon the industry, citing double digit decline in European business jet activity and the furlough of 7000 employees by Textron. There is no telling how long this pandemic will go on for, Foley said he seen some estimates of six to eight weeks for peak in the US but some as much as several months. Also he added, whether the pandemic turns out to be a short or longer term event could have massive sway on the overall impact.
Foley told Corporate Jet Investor: “The thing is, we just don’t know where the end is. You know, where things come back to some semblance of normalcy. I’ve seen estimates for at least in the US to wait six to eight weeks for the peak. And then I’ve seen things in the order of, you know, several months. Say depending if it’s a shorter-term event or a longer-term event, it will have a huge impact on where this thing could go in the more immediate term.”
“From what I’ve observed today, we’ve seen that Textron went ahead and, you know, furloughed seven thousand employees, I think, which would conceivably include the production. So, in a sense, if I read the tea leaves, that means they essentially halted production maybe for through May – if you read their press release. So minimum case, I suspect production is shut down there through May. Other than if there’s a principle program like for FedEx or something,” said Foley.
On the business jet side, Foley continued: “They’re just taking a wait and see attitude and assuming that some customers will cancel and defer and that they’ll be okay by the end of the year. You know, the situation they don’t want to get into is the one during the last financial crisis where not only Cessna, but others just had ramps full of unsold whitetail aircraft. So, they’re trying to be a little more aggressive in preventing this time. And they’re probably thinking that any kind of penalty fee for a late delivery is a lot less expensive than parking a $25m jet.”
Foley added: “They’re doing the conservative thing, I guess, and trying to stay in front of this. And you can bet if Cessna is doing it, the others are certainly looking. And if they haven’t already, you know, at least examining, pausing or slowing down their production right now, the serious period of uncertainty.”
The impact is industry wide, Foley concluded: “From WingX numbers in Europe we can see that there is double digit declines in business jet activity which has a direct impact on the industry. Because business jets are being used less, there’s less of a maintenance demand. So, MRO’s are feeling the pinch now. Really any deals that were in the works for pre-owned, or new aircraft, are certainly on hold for now until buyers better understand where this is going. And we just don’t have a direction yet. [Furthermore] the uncertainty just brings the industry a little bit to a screeching halt as far as new sales.”