Bashing banks and business jets


Dassault Aviation business jet results last week were upbeat. Orders up 25%, backlog up to 87 aircraft worth 4.7bn – up from 3.1bn in 2021. But Éric Trappier, CEO, Dassault Aviation warned about “aviation bashing” in the OEM’s full-year results published last week.

Trappier’s warning is significant, according to Rob Stallard, partner Global Aerospace and Defence, Vertical Research Partners. I’ve not seen any other aerospace company put a slide into their accounts about jet bashing,” he tells CJI. “I didn’t think it would be quite so blatant as Dassault accusing people of jet bashing. It’s reflective of the press coverage in France and Europe.”

This may reflect the company’s European roots. “Behind the scenes, companies in the US are well aware of the issue, which can be seen in the investment in Sustainable Aviation Fuel that is happening,” says Stallard. “But the US is lagging behind on ESG [Environmental, Social and Governance] issues. ESG is much lower on the agenda for them.”

Investment fundamentals are likely to win precedence in investors’ minds, according to Brian Foley founder of the consultancy Brian Foley Associates. There is already pushback from some fund managers who insist on investing in fundamentals, not the ideology du-jour,” he says. “Regardless, objective data suggests ESG investments aren’t performing as well as their peers, and some investors will bring their funds elsewhere if not given a choice. Thus, longer term I wouldn’t see any measurable impact on the aviation sector.”

Much of the current debacle arises from banks having underlying assets (bonds) and being forced to sell them at a loss before maturity to cover customer withdrawals, says Foley. “That said, there will be an ongoing rout in startup, early-stage and high-debt aviation companies as capital becomes harder to obtain as investors find higher return opportunities as interest rates rise.”

Brian Flynn, MD, venture capital firm DiamondStream Partners – which is typically an early stage investor – notes the inevitable (and desirable) greening of corporate agendas.Most or nearly all of the companies in which they’ve invested are articulating more clearly what they are doing to reduce their environmental footprint,” he tells us. “This is both the right course of action and one that will rightfully dampen some of the criticism. Some aviation investors feel more strongly than others, but I’ve not heard of any exiting their aviation investments because the companies in which they’ve invested are not working to reduce their carbon footprint.”

For Flynn, communicating facts and goals is the best way to combat environmental criticism of aviation and to educate those who are upset. “The environmental activists will surely hold the companies accountable for achieving their goals. And maybe, in some cases, encouraging those companies to set the bar higher.”

It was also a tough week for banks since the fall of Silicon Valley Bank. Stallard, at Vertical Research Partners, sees a connection with business aviation. I think what’s going on with the banks isn’t going to have much of an impact on the aerospace sector,” he says. “But it could be a symptom of what’s happening on a wider scale. I think the levelling off in demand that we’re seeing in business aviation is partly linked to the technology companies not doing as well as they had hoped.”

Returning to “aviation bashing”, Foley at Brian Foley Associates, ends on an ominous note: “There are certainly bigger fish to fry than business aviation’s 0.04% annual worldwide contribution to greenhouse emissions. But none are as sexy and attention-getting.”