It is too early to talk about business jet recovery
No one likes a pessimist. Bears like Paulson (John not Hank) and Michael Burry who successfully predicted the collapse of sub-prime were criticised by their own investors before the meltdown. After the worst depression in almost 80 years it is natural to look for good news – especially if you live in a country that is effectively bankrupt like Iceland, Ireland, Spain, Greece or the UK. But just because things have been bad does not mean they will bounce back straight away.
In business aviation we are used to cycles. The market has clearly fallen and people are busy looking for signs of recovery. Many were optimistic about Bombardier’s third quarter results and remarks made by Jay Johnson, chair of General Dynamics, at a Morgan Stanley conference. It is hard to see how you can really be upbeat about them. Bombardier’s chairman says that “signs of recovery are seen in the significant reduction in business aircraft cancellations.” While he was relatively bullish about large cabin jets (and while this market is looking better, it is still too early to get excited here) Johnson’s remarks about signs of increased activity in the mid-market ended with: “It is not back. It is not where it needs to be. It is not where it will be.” He even stressed that the increased activity could not be described as robust.
We should be careful. While we all are right to believe in the long-term prospects for the business jet market we should not get excited yet. This may be the point where the market bottomed-out but it definitely won’t be the year that the up-turn starts.
The year when the market starts climbing back properly is probably not even 2011 but 2012. By then the industry should have eaten up all of the unsold inventory. We will have avoided, or at least survived, any double-dip so corporates will be profitable, HNWIs even wealthier and GDP growing.
Let’s temper expectations and be pleasantly surprised rather than over-hyping any recovery when there is a way to go yet.