By Mehr Bedi
(Reuters) - Planemakers are betting on steady demand for business jets as the world's largest corporate aircraft show kicks off on Tuesday, but analysts are turning cautious about the appetite for private flying due to growing macroeconomic risks and a fading pandemic-induced boom.
The National Business Aviation Association's (NBAA) annual corporate aircraft show kicks off in Las Vegas against a backdrop of persistent supply-chain snags, high interest rates, an uncertain economic picture and escalating geopolitical tensions amid the military conflict in the Middle East.
Private aviation witnessed a surge during the pandemic, both in users and buyers, as the wealthy took control of their travel due to public health concerns.
Although those concerns have faded and commercial air service on key routes has resumed, industry executives have said they don't see demand slowing.
But Wall Street is turning cautious.
"If the Israel-Hamas situation worsens, oil prices spike up and the economy slows down. That could be a factor affecting demand," TD Cowen analyst Cai von Rumohr said. "It is a cyclical business after all."
Marquee names such as Bombardier (OTC:BDRBF), Textron (NYSE:TXT), Embraer and Boeing (NYSE:BA) are expected to showcase their latest models at the show, according to the NBAA.
Textron took the wraps off its newest Cessna Citation CJ3 Gen2 business jet on Monday, while Embraer unveiled its Phenom 100EX business jet, its latest aircraft in the Phenom 100 series, last week.
"We're happy with the conversations we're having with our customers and are looking forward to a great show," a Textron Aviation spokesperson said in an emailed statement.
Bombardier also said on Monday it will detail flight testing progress for its Global 8000 aircraft, which it says will be the world's fastest business jet.
"We continue to see growing demand globally for our BBJ (Boeing Business Jets) family of airplanes," Boeing said.
On Sunday, engine maker Honeywell (NASDAQ:HON) estimated a 10% growth in new business jet deliveries in 2024 and joined several planemakers in emphasizing the strength of global demand for new business jets.
As a pure-play business jet provider with financial leverage, Bombardier is most exposed to any weakness in demand, followed by Textron, J.P.Morgan analyst Seth Seifman said in a note.
Manufacturers are expected to continue reporting robust backlogs and book-to-bill ratios above 1.00, though likely not as strong as those seen 12 to 18 months ago, said Adam Cowburn, managing director at Alton Aviation Consultancy.
The book-to-bill ratio is an indication of future demand and a ratio of over 1 is considered healthy.
Cowburn said he expects the market will eventually settle at levels that are structurally around 15% higher than pre-COVID levels.
Meanwhile, industry watchers expect new jet orders to be announced at the NBAA event. Private jet company Flexjet is expected to place a large order and analysts expect Bombardier will be the likely winner.
"Textron, Dassault Falcon and Bombardier are most likely to announce fleet orders given their relatively strong positions with fractional program customers," said Rolland Vincent, a consultant and founder of business aviation forecasting service JetNet.
Fractional ownership is an arrangement in which multiple owners share the use and costs of purchasing and operating a private aircraft.
However, General Dynamics (NYSE:GD)' Gulfstream Aerospace, a major business jet manufacturer, said on Monday that it is not participating in the event.