Citi: Econ Uncertainty Could Extend Bizav’s Lost Decade

Sentiment for the business jet market has taken a step back from June “as perceived economic risks impact a market that benefits from certainty and stability,” Citi Research said yesterday based on its quarterly business jet broker panel held on Friday. From a broker’s perspective, Citi said, “It was always going to be tough to repeat a strong 2018…but summer 2019 was slower than normal.”

The financial firm also warned that preowned business jet supply/demand imbalances could re-emerge. Last year, Citi brokers were having trouble finding aircraft for buyers, but now “the pendulum appears to be swinging the other way, with the used market again offering attractive value versus new.” This could result in OEMs needing to cut prices to make sales, it noted.

“So it’s still tough to get confident about the business jet market through the second half even as we’re approaching the end of what we’ve called the ‘lost decade,’” Citi said. “Economic/trade concerns could tease it out a bit longer.”

Citi is also concerned about reports of layoffs at Gulfstream, which the OEM “has ascribed these to ‘regular changes’ while also acknowledging macro headwinds.” According to Citi Research aerospace analyst Jonathan Raviv, “These acknowledged macro headwinds give us pause around the business jet conversation about production rates, backlogs, and orders.”