Corporate jets might be ready for takeoff, but more and more of them are being left unused in the hangars – yet another sign that the global economy is gearing down and a potentially troubling development for plane manufacturers. According to a report by David Strauss, an analyst at UBS, flight activity among the business crowd has plummeted 11 per cent over the past year (to the end of July).
As an economic indicator, this is troubling, since fewer flights could mean less business activity and spending cutbacks. But Mr. Strauss also see it as a leading indicator for manufacturers – among them, Canada's Bombardier Inc.
“Still strong order activity would appear to indicate a business jet market that is holding up well,” Mr. Strauss said. “However, as evidenced by our proprietary business jet survey and building used inventory levels, we believe the market has come off from its peak and is likely to fall further, although deliveries and earnings could continue to grow given unprecedented backlogs.”
Among manufacturers, he found that Dassault and Bombardier have suffered the biggest downturns, with flight activity down 10 per cent this year alone. Hawker Beechcraft activity is down 7 per cent, Cessna is down 5 per cent and Gulfstream is down 2 per cent.
Mr. Strauss has a “neutral” recommendation on Textron Inc. – owner of the Cessna brand – because of its greater exposure to the business market. The shares are down 47 per cent this year and touched a 52-week low on Tuesday. He has a “buy” recommendation on General Dynamics Corp., which owns the Gulfstream brand; its shares are up 2.5 per cent this year.
Meanwhile, Bombardier's shares have been dominating the skies: They are still up 24.7 per cent this year, even after dipping 16.5 per cent from their high point in June.
