As most of my friends know, I’m a hockey fanatic. Even my cell phone ring tone is the old Hockey Night in Canada theme song. But every year when we come to NBAA, we see hockey stick forecasts showing that the industry will soon recover, and that the recession is over. Is it finally time to break the hockey stick mentality? The time for a reality check is here – and when you look at this market rationally, those forecasts for recovery are simply not going to happen.
The good news is that some forecasts are finally becoming a bit more realistic. Honeywell reduced its forecast for the next 10 years to 8,600 jets worth $255 billion, down from the 9,200 jets worth $270 billion they forecast in 2015. But even that has a hockey stick, given current production levels. In 2015, the industry delivered 689 jets, and we see fewer than 660 being delivered in 2016 given what we see from the first three quarters and the current outlook. Getting to an average of 860 seems a real stretch to us.
After a great run-up of business jets in the period from 1995-2001, a post 9-11 fall occurred, and another run-up from 2003-2008 occurred, when the “great recession” began. We’re still in that recession, that someday may be called the extended stagnation. We believe we are unlikely to emerge, given that high levels of sovereign debt from the US and other governments are now so large they have overwhelmed the levers the Federal Reserve and other central banks have to stimulate the economy. With negative interest rates in Japan and Europe not working to stimulate their economies, a extended recessionary environment is likely for the foreseeable future. That does not bode well for business aviation.
