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WRAPUP-Sluggish economies weaken business jet sales

Published 2015-11-18, 06:31 p/m
© Reuters.  WRAPUP-Sluggish economies weaken business jet sales
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By Alwyn Scott and Allison Lampert
LAS VEGAS, Nov 18 (Reuters) - Weakening or sluggish
economies around the globe are taking a toll on business
aircraft sales and prices, forestalling an incipient recovery
that had raised the hopes of plane makers and suppliers.
Manufacturers attending the industry's largest jamboree this
week predicted flat or lower sales next year, and possibly in
2017, before the arrival of new models stirs interest and buying
later in the decade to restart industry growth.
Prices also are falling. When buying last peaked in 2008, a
new Bombardier BBDb.TO Global 5000 aircraft, a so-called
"super large" jet, cost about $52 million. "Now you can get the
same aircraft with a better cockpit for $43 million, almost $10
million less," said Chad Anderson, president of Jetcraft, a
major aircraft broker.
Such discounts are distorting the market and even affecting
used aircraft prices, said Richard Aboulafia, an analyst at the
Teal Group.
Amid the weakness, Bombardier scaled back production of
Global 5000 and long-range Global 6000 planes. Buyers are more
cautions about big plane purchases and more used planes are on
the market, industry experts said.
Anderson said he expects Gulfstream GD.N will have to slow
production of some of its G450 and G550 planes, also considered
"super large" jets. Gulfstream said it is "evaluating 2016
production rates right now" and will announce them in late
January.
Even companies positioned with better-selling light and
mid-sized jets have concerns. "2016 will be a challenge," said
Marco Tulio Pellegrini, chief executive of Embraer EMBR3.SA
Executive Jets, which has seven models mostly in the small and
mid-size categories. "It will be as tough as 2015."
The shifts suggest a continued slow recovery from a 2011
nadir. But the activity at the National Business Aviation
Association convention shows aircraft makers are not betting on
weakness for long, and that a strong recovery is due by the end
of the decade.
"Some countries, where we have good hopes in terms of
selling our (Falcon) 7x and 8x long-range planes, like Brazil,
like India like China, are getting slow a little bit," said
Dassault Aviation AVMD.PA Chief Executive Eric Trappier.
He and others see stronger sales in the United States and
northern Europe. "So we cannot imagine China staying at this
level of growth. It will be back to a better growth. They need
to travel because they need to meet their customers," he said.
Similarly, Anderson and others said corporations are
renewing their jet fleets after the downturn in recent years,
and are also taking advantage of lower prices. But there are
fewer emotional buyers and more focus on value, he said.
Manufacturers also are investing in new models in
anticipation. Textron (N:TXT) TXT.N announced plans for a new large
business jet, the Cessna Citation Hemisphere, due out in 2019.
Fractional aircraft firm Flexjet placed a $2.4 billion order for
20 sleek supersonic AS2 jets from Aerion, with deliveries
starting in 2023.
"Deals will be hard," said Anderson, whose business jet
sales forecast predicts 7.4 percent annual growth over the next
10 years. "But with the North American demand that exists, deals
can be had. They have to be done at the right price."

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