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'Tis the season for corporate earnings, and with it, a final look at 2023 and our first insights into what's in store for 2024. This week, we got numbers from General Dynamics and Textron, as well as an early look at January flight data from WINGX and a view of the preowned market from Jim Donath of Donath Aircraft Services.
Let this be your one-stop shop to get a snapshot assessment of the business aviation industry as we are now nearly four weeks into this 366-day year.
A look at the General Dynamics company-wide backlogWhat the numbers from the aircraft OEMs say
The backlog of aircraft orders for the major private jet makers remained as the calendar changed. The top-line story remains that the FAA has yet to clear the Gulfstream G700 for delivery. As such, parent company General Dynamics reported that its backlog now sits at $20.5 billion, a nearly 5% gain from the end of 2022.
In aerospace, fourth-quarter orders totaled $3.2 billion and the book-to-bill ratio ended at 1.2:1 for the quarter and the year.
General Dynamics posted fourth-quarter net earnings of $1 billion and diluted earnings per share of $3.64 on revenue of $11.7 billion, both quarterly records. The company-wide backlog closed 2023 at $93.6 billion, of which aircraft make up nearly 22%.
"Our aerospace segment in particular saw solid execution and continued demand in the quarter and is well positioned for a surge in deliveries upon FAA certification of the G700," General Dynamics CEO Phebe Novakovic said.RELATED STORY: Major business jet makers post strong earnings with stable backlogs - Is it time to consider the 2024 aircraft market?
Deliveries and revenue were down in the fourth quarter of 2023 for Textron. However, the backlog grew and its Bell Helicopters division began working on a massive contract with the US Army.
The revenue of $1.5 billion for its aviation division was $58 million than in the fourth quarter of 2022. The company said this reflected lower volume, but higher pricing kept that from being a $158 million dip.
Textron Aviation delivered 50 Citation jets in the quarter, down from 52 last year, and 44 turboprops, down from 47. The aviation backlog of $7.2 billion at year-end was up $782 million from at the end of 2022.
Despite the slide in revenue, profits rose. The aviation sector profited $193 million in the quarter, a gain of $23 million or 13.5%.
The adjusted earnings per share for the quarter was $1.60, up 30% from a year ago. For the year, EPS rose 25.6% or $5.59 per share, up from $4.45 in 2022.
Revenue for Bell finished at $1.1 billion for the quarter, up $255 million from last year. That was due to increased deliveries hauling in an additional $171 million, year to year, and $84 million from the FLRAA contract with the Army.
Bell revenues were $1.1 billion, up $255 million from last year's fourth quarter, reflecting higher commercial revenues of $171 million largely driven by increased deliveries and higher military revenues of $84 million related to the Future Long-Range Assault Aircraft (FLRAA) program, featuring the Bell V-280 Valor tiltrotor helicopter to replace the aging Black Hawk fleet. Long term, the current contract is worth $1.1 billion.
Elsewhere, Bell delivered 91 commercial helicopters in the fourth quarter, up from 71 in 2022 and ended with a backlog of $4.8 billion.
2024 flight activity - so far
Global activity for business jet flights, through the first three weeks of the new year, were down 5%. That's according to WINGX, which noted that the number is still 18% ahead of the same span in 2019, before the pandemic. In North America, the difference was slightly larger, down 6% year to year.
In the small sample size, corporate flight departments have led the way in the number of flights, despite trending 19% below last year. Fractional fleets remain hot, growing by 6% from 2022.
Light jets for the first three weeks were down 8% behind last year; Super midsize dipped 6%; and ultra-long-range jets flying in the US contracted by a 9% margin.
WINGX Managing Director Richard Koe noted that numbers have improved as the new year has aged but, while the US is outpacing pre-pandemic levels, Europe has faced a steeper headwind.
"Business jet activity ticked up this week compared to last week, as the US market emerged from the winter storms," he said. "So far this year, US bizjet … is still tracking well up on pre-pandemic January 2019. Europe is a different case, with several countries seeing less traffic this January than … five years ago."
How the preowned jet sales market is faring as the calendar changes
Aircraft broker Jim Donath recently shared his market report for the end of 2023 and his forecast for 2024. He noted that the second half of last year enjoyed a surge of activity after a lull at the start of 2023.
The second 6 months saw a 46% increase in transactions for mid-size to large-cabin aircraft compared to January through June. Donath believes this was driven by buyers leveraging the bonus depreciation tax incentive, especially in the fourth quarter.
Inventory gradually climbed throughout the year, but that was less pronounced in Q4. Buyers in 2023 benefited from increased availability and a more balanced market environment.
Supply chain issues compounding the OEM backlog prevented some new aircraft buyers from releasing their existing planes to the market. That, coupled with labor supply challenges, also affected the pace of pre-buys and the return of aircraft to service from maintenance visits, according to Donath.
Aircraft values continued a measured descent from recent highs, with many now aligning with pre-COVID levels. As seen in flight activity reports, fractional operators experienced robust growth, contrasting with a decline in charter and a less-than-brisk Part 91 environment.RELATED STORY: Business aviation leaders provide their resolutions and predictions for 2024
Looking ahead to 2024, Donath expects the first quarter to follow the historical trend of a dip in demand from the previous quarter. He also says aircraft inventory on the market will grow at a measured pace. The current inventory, constituting just 6% of the active fleet among models in the index, suggests there is room for expansion before the market becomes over-supplied.
As the year unfolds, Donath expects buyers to remain highly focused on value, as prices tip into their favor a bit.
Donath emphasizes that these projections are contingent on current economic and geopolitical conditions. Despite potential challenges, he remains optimistic about the market's resilience, even in the face of a mild recession, which he says cannot be completely ruled out in the year ahead.