Aviationtoday.com: Business Jets: Boom or Bubble?

There’s an old adage on Wall Street: Don’t confuse a bull market with brains. The steep ascendancy of the business jet comes to mind.

When a market is prospering, most players do well and everyone looks like a genius. The rising tide lifts all boats. However, when cyclical forces inevitably kick in and the market declines, the inherent weaknesses of companies, products and individuals come to the fore. Flaws become apparent, weak competitors fall behind and the fittest stay afloat. In a bear market, as black ink turns to red, all of those "geniuses" who got a free ride suddenly don’t look so smart.

Take business jets, which are about as hot now as — well, as hot as high-tech IPOs right before the crash of 2000. Growth of business jet deliveries currently surpasses the pace of narrow body commercial airliner deliveries. The most optimistic analysts predict the next 20 years will witness demand for 23,000 new corporate jet aircraft, from Very Light Jets through business jetliners. Demand is propelled by the business community’s increasing embrace of business jets as a productivity tool. What’s more, increasingly popular fractional programs are lowering the cost of entry and ownership.

The popularity of business jets is fueling demand for new and innovative technologies, especially in avionics. Not surprisingly, amenities for well-heeled passengers are taking precedence.

Case in point: Rockwell Collins recently announced its eXchange broadband connectivity would be available for business jets. Under a new deal forged by Rockwell Collins and ARINC, the former will provide airborne broadband hardware and after-sales support; the latter will provide its SKYLink broadband network service. ARINC will continue supplying SKYLink system sales and support until completion of the transfer to Rockwell Collins’ eXchange hardware.

As readers of Avionics know, eXchange provides two-way, in-flight connectivity in real time at broadband speeds of up to 3.5 Mbps. Coupled with ARINC’S SKYLink satellite system, eXchange’s clients will have access to a wide range of integrated services, including the Internet and corporate intranet, e-mail, Voice over IP telephone service, and video conferencing capability — the sort of high-end conveniences that multi-tasking bizjet habitués crave.

And yet, there’s already trouble in bizjet paradise. An emerging shortage of cabin-completion capacity is causing anxiety among manufacturers and customers alike. With OEMs and suppliers hard-pressed by record orders, customers are encountering longer waits for their aircraft. Completion centers and system integrators are taking remedial steps by adding capacity, but backlogs continue to worsen. Sure, if you’re in the bizjet market, it’s a nice problem to have. But can the sector continue its torrid pace without sufficient infrastructure in place?

This question was examined during a June 28 Aviation Today Webinar, "The Bizjet Boom: An Inside Look." The speakers were Raymond Jaworowski, senior aerospace analyst, Forecast International, and Kathryn Creedy, editor-in-chief, Regional Aviation News. I was the moderator. The Webinar discussed what the business jet phenomenon means for the bottom lines of all aviation sectors, including avionics. The speakers examined the hot bizjet models right now, from Bombardier, Embraer and other manufacturers. They also discussed factors that could put a brake on the bizjet market, such as new regulations, crowded skies and nagging safety concerns.

Notably, healthy scepticism was expressed by both speakers as to whether airports and air traffic control are ready for a sky full of bizjets.

"The Bizjet Boom: An Inside Look" is archived on Aviation Today and still accessible. You can register at www.aviationtoday.com.

There’s another Wall Street adage: When shoe shine boys and taxi cab drivers start recommending stocks, it’s time to bail out of the market. Likewise, there seems to be plenty of "froth" in the bizjet sector these days. By accessing our Webinar on the topic, you can decide for yourself whether to buy bizjet-related stock — or short it.