Editor’s note: An earlier version of this story contained an incorrect percent decrease of business jet shipments.
The first half of the year for business jet deliveries was disappointing.
Worldwide business jet shipments in the first six months of 2015 totaled 305, a 4 percent decrease from the same period a year ago, according to General Aviation Manufacturers Association data released in August.
Closer to home, the association’s shipment data was mixed for Wichita’s business jet manufacturers. Textron Aviation saw first-half shipments edge lower, from 71 Cessna Citation jets in the first half of 2014 to 69 in the January-through-June 2015 period.
But Canadian plane maker Bombardier’s Learjet division saw a healthy rise in Learjet 70/75 shipments, from eight to 14, in the same periods.
After a lengthy slump in orders and deliveries of small, midsize and super-midsize business jets – the sweet spot for Wichita’s plane makers – analysts and the industry were expecting a more robust recovery, one that would see yearly and even quarterly gains in deliveries once the national economy shook off the effects of the 2008 financial crisis and recession that followed.
“The indicators tell us we should be in better times,” Teal Group analyst Richard Aboulafia said. “But we’ve had those good indicators for some time now.”
Better second half
Aboulafia and other analysts, however, think the second half of 2015 could tell a different story. One that, at worst, will show deliveries flat and, at best, will show a much more robust six months with a flurry of deliveries in the year’s final quarter.
One of the indicators that Aboulafia said typically points to healthy demand for new business jets is the used business jet market. And in that regard, the glut of used business jets for sale just a few years ago has worked its way down to where values of used jets have mostly moved up and the number of them available for sale have narrowed.
Aboulafia said that at this point, “it’s hard to predict” where deliveries will be at the end of the year.
“That’s the unfortunate takeaway, it really is,” he said. “This market should be changing for the better. This market should be giving us better results.”
Still, Aboulafia said, “You’re starting to see some traction in the bottom half of the market.”
That traction from the bottom half – small to super-midsize jets made by Cessna, Learjet, Embraer and Gulfstream – shows in the latest numbers from GAMA.
In the first half of 2014, small to super-midsize jets made by those manufacturers accounted for 33 percent of the 477 business jets shipped in that period, according to an Eagle analysis.
In the first half of 2015, those jets accounted for 56 percent of the 305 business jets shipped, the analysis showed.
“What’s really dragging the numbers down is the big-cabin jets,” said Brian Foley, an independent aviation analyst in New Jersey. “I think there’s definitely weakness in the big-cabin market.”
Foley pointed to Bombardier’s announcement in May that it would pull back production of the Global 5000 and Global 6000 – which resulted in 1,750 workers being laid off in Canada and Northern Ireland – as one example.
Bombardier said in its second-quarter 2015 earnings that it continued to see softness in demand in China, Latin America and Russia for its Global and Challenger big-cabin jets.
Foley said big-cabin jets are favored in those countries in part because of their ability to travel longer distances, from continent to continent.
“All those countries that favored big-cabin jets … the floor kind of fell out of that.”
Aboulafia also thinks that the decline in energy prices dampened demand for big-cabin jets among energy firms and related companies that prefer the larger aircraft. That’s why small to super-midsize jets accounted for a bigger share of business jet shipments worldwide in the first half of 2015.
“I’m seeing more of the same trend continue,” Foley said.
But Foley also thinks that while demand, orders and deliveries of big-cabin jets dampen, the opposite will be true for small to midsize jets. Economic growth in the U.S. is benefiting the likes of Cessna and Learjet because it is in the U.S., where the preference for small to super-midsize jets is strongest, he said.
Aviation forecaster Rolland Vincent agreed that the appetite for business jet purchases in the U.S. appears on the way up.
“I think what you’re seeing is a resurgence in the U.S. marketplace,” Vincent said, and “if the U.S. market is picking up, it’s incrementally better news for Gulfstream and Textron.”
Vincent said the first half of the year also doesn’t offer a complete picture of how things are going to go. That’s because the first quarter can typically be the weakest and the fourth quarter can be the time when aircraft manufacturers “empty the pipeline” of unsold jets and “companies that want to do deals at the end of the year to take advantage of depreciation,” Vincent said.
Aboulafia concurred that the fourth quarter is historically the “strongest quarter” for business jet deliveries.
“I’m not worried,” Vincent said. “For the year, we’re on track to be pretty much on par with last year.”
He said he’s forecasting 720 business jet deliveries for all of 2015.
Foley said he sees a year of flat deliveries, too, with one exception.
“I think at the end of the year, when this all plays out, deliveries will be the same or a little bit up,” he said. “The overall value (of deliveries) will be down because … it will be more small and medium-sized (jets) that benefits Wichita.”