Business jet manufacturers beat Gates with box-to-bills

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Bombardier's Global 5500 and Global 6500 jets awarded EASA Certification

In May Bill Gates published his fifth book: How to prevent the next pandemic. This gives him a book-to-Bill ratio of one for the second quarter of 2022.

Business jet manufacturers did significantly better.

Textron Aviation achieved a book-to-bill of 1.55x (it booked 1.55 aircraft orders for every aircraft it delivered); Bombardier 1.8x; Gulfstream 1.96x and Embraer 2.5x.

These ratios mean that backlogs continue to rise. Gulfstream’s hit $18.786bn (up $5.3bn in 12 months), Bombardier $14.7bn (up $1.2bn), Textron’s hit $5.8bn (up $2.7bn).

These are fantastic results showing two things: first, increasing production is still hard and second, demand is still strong.

It is hard to see OEMs speeding up production significantly. “We do face, what I would call a crosswind on supply chain,” said Éric Martel, chief executive, Bombardier on his analyst call.

Jefferies says that Bombardier, Textron Aviation, Gulfstream, Embraer and Dassault Aviation delivered 126 jets in the second quarter. This is up from 117 jets last year. But this is still down 14% compared to the 147 jets they delivered in the second quarter of 2019.

“We are seeing all the OEMs practicing commendable restraint on supply, and even if they did try to make more aircraft than currently planned, we doubt if the supply chain could accommodate anything before 2024,” said Robert Stallard, partner, Vertical Research Partners.

Whether demand stays is the biggest question. The number of pre-owned aircraft for sale is slowly rising (see dashboard below), but there are still few recently delivered jets available.

“There’s a lot of talk out in the market about interest rates, inflation, the stock market recession potential and so on,” said Jason Aiken, CFO of General Dynamics (and former CFO of Gulfstream) during an earning call.  “But to be completely frank, we have not yet seen any impact of that in terms of our order pipeline and the resulting order activity that we’ve seen. There continues to be a very strong customer demand.”

Scott Donnelly, CEO, Textron, had a similar view on the Textron analyst call. The market feels about the same. Demand is strong and there continues to be a strong business jet market in North America. In the quarter we saw a significant pickup in international activity, particularly in our turboprop business. We see some more of the corporates, coming back in as corporate flight activity picks up, but still seeing a lot of new entrants into the market as well. The beginning of Q3 is indicative of really strong demand across the entire portfolio of products.”

Bears may say that OEMs were saying the same thing in 2008. But the market was very different. In the second quarter of 2008, OEMs delivered 270 jets – more than twice this quarter’s 126 aircraft. In 2008 Cessna alone delivered an astonishing 117 business jets. Hawker Beechcraft built 38.

With a global downturn now expected, it would be no surprise to see some drop in orders. OEMs, however, stress that backlogs are much stronger now than they were in 2008. Some of this is true as manufacturers have worked hard to stop speculators. But you only discover how strong backlogs are after a downturn.

Gates, a keen business jet user and a major investor in Signature Aviation, is also warning of a global slowdown. Last week in an interview with CNN (to publicise his book) he said: “You can only be optimistic in the long term if you are pessimistic enough to survive in the short term.”

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