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Business jet market may have hit bottom but recovery unlikely before 2012

falcon1May 25, 2009 – Montreal – Canadian aerospace giants Bombardier and CAE Inc. are seeing glimmers of hope that the business jet market is showing signs of stabilizing even though full recovery is unlikely before 2012.


May 25, 2009
By Melissa Damota
falcon1  

May 25, 2009 – Montreal – Canadian aerospace giants Bombardier and CAE
Inc. are seeing glimmers of hope that the business jet market is
showing signs of stabilizing even though a full recovery is unlikely
before 2012, aerospace analyst Cameron Doerksen says.

Business jet deliveries fell by 36 per cent during the first quarter,
falling to 191 deliveries from 297 a year earlier, according the
General Aviation Manufacturers Association.

But the Doerksen, an analyst at Versant Partners, said there are a few
"tentative'' signs that the market has stabilized since its collapse
that began last fall.

For example, U.S. business aircraft flying decreased 18.8 per cent in
April. But the drop wasn't as steep as the 31 per cent drop in the
January to March period.

"Signs of a bottom, particularly business jet usage, are clearly positive for CAE,'' he wrote in a report Friday.

"Bombardier, which is the market leader for business jet manufacturing,
would also welcome any encouraging signals in the segment.''

But Doerkesen cautioned a recovery will take time.

"Before one gets overly excited about a potential bottoming of the
business jet market, we highlight that a rebound in new orders and
deliveries could be years away,'' Doerksen wrote.

Bombardier declined to comment ahead of the release of its quarterly results.

The chief executive of Cessna parent Textron recently said a rebound in
the business jet market typically lags a recovery of corporate
profitability by six to eight quarters.

That would mean the next peak for new business jet deliveries would be
in 2015 following a significant pick up in new orders and deliveries in
2012-2103, said Doerksen.

Industry expert Brian Foley said the worst of the cataclysmic economic
events have passed, but the troubles will continue to ripple through
the industry for awhile.

"The business jet industry is no longer careening off a cliff, it's just bouncing off the rocks below,'' he said.

Foley said companies that first entered the slowdown will likely be the
first to see signs of recovery. For example, charter companies that
were hit by the onset of the U.S. recession in 2007 have stabilized and
are in some cases improving.

But new aircraft sales were hit later and a meaningful uptick is not expected before the middle of 2010, he wrote.

Cessna has said it expects its 2010 deliveries will fall again after dropping by 35 to 40 per cent in 2009.

Bombardier said it expects business jet deliveries to fall 25 per cent
in fiscal 2010. Based on run-rate production, he said deliveries "will
almost certainly be down against in fiscal 2011.''

The Montreal-based manufacturer last month announced 3,000 jobs would
be slashed around the world to cope with weaker demand for business
jets. That's on top of 1,360 jobs that were cut two months earlier.

Last week, CAE cut 10 per cent of its workforce, or 700 positions and
imposed cost-cutting measures on remaining workers because of an
anticipated order drop-off.