New Report Claims: “Party Time for Bizjets”

Titled “Bizjet Party Time is Now”, a recent report compiled by analysts at investment bank Cowen bears good news for the future of private aviation. Overall, the analysis foresees a continuation of a thriving market for business jets. Boosters for industry success include a combination of factors: new concerns about Covid-19, a strong stock market, and stabilizing economy that is all working in conjunction to create “the strongest bizjet environment since 2007”.

Analysts predict demand surge from first-time buyers and fortune 500 customers

Analysts substantiate their claims from promising figures observed earlier this year. In May, inventory of used business jets for sale reached its lowest (4.55% of the fleet) while departures were at their optimal highest (an impressive total of 275,000). These departures were led by fractional and other charter operations; the astronomical number closely mirrors a peak of 278,000 departures seen in October 2019.

While the demand surge is attributed to the market participation of wealthy individuals and an increasing number of first-time buyers, the report also references the contribution from Fortune 500 customers. Moreover, the industry is still anticipating the return of foreign buyers to the market. When considering these changing factors, analysts validate their claim that the “demand surge likely still has runway”.

What does the report predict for aircraft companies?

Analysts explain that OEMs (original equipment manufacturers) may not experience noticeable demand on deliveries immediately. This delay owes to production lead times that reach 2022, and possibly 2023.

Future prosperity for Gulfstream and Textron Aviation

Gulfstream particularly is in the best position when compared to other market players. Not only is demand for pre-owned jets high for large-cabin aircraft, but increased delivery of the highly efficient G500, G600, and G700 (which is entering into service in 2022) lean towards favorable outcomes for the Savannah-based company.

Similar to Gulfstream, prosperity is also in Textron Aviation’s future. The report predicts a robust second quarter of 2021, a substantial rise in sales in 2022, and continued profitability into 2023. However, Textron Aviation has a less compelling product story than Gulfstream, and analysts do explain that the impermanence of increased demand for small jets could hamper Textron Aviation’s long-term profits.

Embraer and Bombardier may face challenges

The report further unpacks the strengths and weaknesses of Embraer and Bombardier as the companies navigate through the improving market. While Embraer is expected to improve its operations, the company will undergo restrained cash flow owing to the launch of a new turboprop as well as the subsidiary Eve Urban Mobility Solutions.

Profits accrued from Bombardier’s Global 7500 are expected to rise in the years to come. This being said, the Canadian manufacturer will also face some issues, specifically a prolonged backlog of the G7500, which makes balance sheet expansion a significant problem.

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For informational purposes only.