Bizjets And Houses: There Are Just Too Many
Although there isn't usually a strong link between them, the business jet and housing markets appear to be on parallel courses to a long and slow recovery, according to a Wall Street analyst. David Strauss, of UBS, told The Wall Street Journal that the divergent industries suffer from the same boom-induced malady: too much inventory. The rush of construction and manufacturing in 2007 and 2008 has left a glut of high-quality, almost-new homes and airplanes that compete directly with new homes and airplanes. What's worse is that used prices are continuing to soften, meaning even tougher competition for new aircraft. The proverbial light at the end of the tunnel is no longer a train, however.
New aircraft sales are strongly linked to the stock market index and predictions call for the healthy increases on the Street to continue. In 2010, the S&P index jumped 33 percent and Strauss says the corresponding increase in bizjet sales is historically about 58 percent, following a one-year lag period. Wild cards in all this include emerging markets like Brazil, China, Asia and Russia and the political considerations of boards who may still be reluctant to approve jet purchases for fear of backlash from shareholders or consumers. For what it's worth, Strauss told the Journal that he's detecting a diminishing amount of that kind of concern.