Analysts bet on lower taxes lifting biz jet sales in 2017

2017 could be a good year for business jets but not so good for commercial jetliners, especially of the widebody variety.

Waning demand for widebody passenger jets — such as the Boeing 777 and 787 — that began in 2016 is expected to continue in 2017 as record profits seen by the world’s airlines the past couple of years begin to normalize. The International Air Transport Association estimates airlines’ net profits will drop 16 percent in 2017.

Boeing has already reduced 777 production in 2017 and plans to cut 8 percent of its workforce.

“It varies region to region, but on a global basis airliner traffic has been slowing, and demand has generally lagged supply,” said Robert Stallard of Vertical Research Partners in a note to investors in late December.

Stallard also wrote that the rally of the U.S. dollar against major currencies has made fuel and aircraft more expensive.

“If the incoming US Administration starts stirring up trade issues, too, then this could jeopardise (sic) Boeing’s planned sales into China (its largest market) and Iran (its newest market),” Stallard wrote.

Spirit AeroSystems is Boeing Commercial Airplanes largest supplier and Wichita’s largest employer.

But the January inauguration of Donald Trump as the 45th president could benefit the business jet industry, and by extension Bombardier Learjet and Textron Aviation, analysts said.

Peter Arment of Baird Equity Research wrote in a late December investor note that he thinks business jet orders will improve in 2017 because of “improving economic growth and potentially major tax reform.”

“We believe the downturn in Bizjets will end in 2017 and TXT (Textron) remains best positioned with a refreshed portfolio,” Arment wrote, referring to the new Cessna Citation Latitude and Longitude jets.

Seth Seifman of J.P.Morgan also cited the potential for lower taxes and less regulation propping business jet demand starting next year.

“There are reasons for optimism, but it is still early for evidence of an uptick,” Seifman wrote.

This story was originally published December 28, 2016 at 1:26 PM with the headline "Analysts bet on lower taxes lifting biz jet sales in 2017."