Flat earth


Gulfstream G600 production

Gulfstream, Bombardier, Embraer and Textron have all reported this week and the overriding message is that it was a flat first quarter compared to the first three months of 2015.

Gulfstream booked orders worth $1.3 billion giving it a book-to-build ratio of 0.7 aircraft. Its average first quarter over the last five years, including 2016, is $1.35 billion, with a book-to-bill of 0.5 aircraft. Half of Gulfstream’s orders were in the US, 30% in Europe and 20% Asia.

On pricing, Phebe Novakovic, president of General Dynamics, said that the OEM has: “Adjusted our prices for the G450, G550 commensurate with where they are in their life cycle. We have not, and do not, intend to adjust for G650 prices.”

Scott Donnelly at Textron has a similar message: “Aviation has been fairly flattish on a year-over-year basis. There are a couple of models that have seen a little bit of an uptick in price, a couple have been a little been down in price but overall not a big impact in pricing really across the whole company, pricing has been relatively flat.”

He added: “I think part of it is just we had to be a little bit patient her as we went through a couple pretty tough months and hanging in there but the demand environment which is really kind of in the end what drives it picked up in March and felt pretty good.”

Some 80% of Cessna jet deliveries were to the US, with King Air and Caravans split more equally. “I would say we were starting to see some momentum pick up a little bit in Europe through the balance of the year,” said Donnelly.

Bombardier’s biggest announcement was an order by Delta Air Lines for 75 C-Series aircraft. But it also had net orders for 40 business jets – giving it a book-to-build ratio of 1.3. This included a fleet order for 20 Challenger 350s.

Embraer has only just released its results but it delivered 12 light jets and 11 large jets in the first quarter, compared to just 10 light jets and two large jets in the same quarter of 2016.

As always, you can choose to take these figures in any way you wish.

If you are an optimist, you actually can be happy the year has started flat. This is better than you might expect after stock markets dipped in January. OEMs are hopeful for the next quarter and aircraft are being sold.

Pessimists can argue that last year was not a great one and now 2016 is looking to be as bad. There is a shortage of buyers and prices are still under pressure.

Everyone thinks they are realists.

NOTE: The below originally appeared as the editorial in our Corporate Jet Investor One Minute Week newsletter. To find out more, and sign up for free, please click here.