BizBlog: A Collective Holding of Breath
That's the way I would describe the overall mood here at the National Business Aviation Association convention in Orlando, as the event officially opens this morning. My colleague Russ Niles and I spent the day rushing around to press conferences and conducting interviews on what has become the main press day at NBAA. Every conversation I had turned almost immediately to the financial crisis and worries about how it will impact the business aircraft segment.
I wouldn't describe the mood as gloomy, but rather tense or perhaps perplexed. It's easy to understand why. Anyone who has been in the aviation business for a decade or more-and believe me, the collective experience at NBAA is vastly deeper than that-knows the cycles wax and wane. The last downturn was in 2001 and actually pre-dated the 9/11 attacks. But it was relatively mild and the outlines of it-slowed durable goods orders, softening in consumer confidence and a lukewarm stock market-had been seen before.
But, as Jack Pelton told me in a podcast interview you can find our podcast section, this time, it's different. The market is chaotic, spiky and spooked because few in the financial industry seem capable of grasping the dimensions of the financial crisis, much less of explaining it. That was reflected in Friday's market reaction to the House's passage vote of the bailout package. The market hardly showed a pulse and then tumbled, closing down again. I'm writing this three hours before the opening bell on Monday and it's anyone's guess what today will bring.
And therein lies the nut of this mess: Investment is fundamentally about confidence and it has always been and shall always remain so. In times of uncertainty, investors tend to sit on their money, awaiting that impossible-to-describe-and-less-possible to predict feeling when it's safe to go back into the water. Consumers do the same and since they buy the things that companies make and who need airplanes to make those things more efficiently, more cheaply or, in some cases at all, economic softness is a pervasive, self-feeding circle.
Against this backdrop, I'm not sure what to make of Honeywell's generally well-respected forecast released over the weekend that business aircraft sales will continue to enjoy a slight rise perhaps through 2010, followed by a peak and a soft landing. This assumes that companies with healthy backlogs such as Gulfstream, Cessna, Dassault and others won't suddenly see massive cancellations and deferrals. Honeywell couldn't have factored the gathering financial storm into its forecasts because it couldn't have known about the depth or the dimensions of the problem. It's becoming increasingly clear that virtually no one did.
Complicating the crisis is the national presidential election. The mainstream press continues to publish stories that delineate Wall Street and Main Street, ignoring the fundamental truth that for all Americans, Wall Street is Main Street. Neither the McCain nor the Obama camp has offered anything particularly illuminating in the way of even-handed leadership or the barest inking that either candidate understands the underlying causes and solutions. Whether that's political non-posturing or a profound inability to point to a path out of the woods (or both) is immaterial. In the best of years, the market doesn't like that uncertain period leading up to an election and if anything is certain this year, it's that we are a long way away from the best of years.