Business jet makers deepen discounts to fly out of turbulence
By Ankit Ajmera
Sept 9 (Reuters) - Business-jet makers such as Bombardier Inc and Textron Inc are offering more discounts and incentives to prevent buyers from canceling orders or delaying purchases amid sluggish global growth, analysts and dealers said.
Higher discounts on older models that are bloating inventories, as well as on some newer models, are expected to keep prices depressed and weigh on margins through the rest of the year and possibly in 2017 as well.
Planemakers have little choice.
Billionaires in key markets like China, Brazil and Russia have tightened their purse strings in response to weakening economies. Oil tycoons have retrenched in the face of low oil prices, while companies have slashed budgets.
"Business conditions in the executive jets industry have proven to be more difficult than expected thus far in 2016, with continued pressure on new jet sales coming from high levels of pre-owned jet inventories and a highly competitive environment," Marco Pellegrini, CEO of Embraer Executive Jets, told Reuters.
Business jet deliveries are expected to drop 11 percent in 2016, according to Jefferies analyst Howard Rubel. That would be the steepest percentage decline since 2009.
Prices are being further pressured with many aircraft owners putting planes on sale, partly to avoid high maintenance costs - typically $1 million-$4 million annually - adding to the glut in the market. These jets have long shelf lives and planes that are 5-10 years old are considered as good as new.
This has driven planemakers to cut prices by at least 5-15 percent on the list prices of mostly midsize and large business jet models, the most severe in the past four years, according to analysts and dealers. Continued...