Key Points
BBD shares were down 6.7% yesterday (January 22) and are down 8.0% YTD. One of the headwinds facing the stock in recent days are concerns over fleet operator VistaJet – specifically concerns over its financial performance and its ability to cover its debt, which has been highlighted in recent media reports. The company has also taken on more debt in recent years to finance the purchase of aircraft. A VistaJet bond issued in May 2023 has been selling off on the back of these concerns, and there is a fear that the fleet operator may be forced into selling aircraft to cover its debt obligations. VistaJet has the largest BBD super-mid to large business-jet fleet in the industry, and the concern is that this could affect BBD’s ability to market its new aircraft if we see an increase in used aircraft enter the market. For reference, according to RadarBox, VistaJet owns 21 Challenger 350s, one Global 5000, 12 Global 7500s and 28 Global 6000s. Below are our thoughts on the situation:
1.
We are of the opinion that the risk of VistaJet aircraft potentially entering the used aircraft market and cannibalizing BBD new aircraft sales may not be as significant as feared. Using Radarbox data, we would note that VistaJet aircraft have high utilization rates. We looked at the BBD aircraft type owned by VistaJet and observed that the fleet operator’s utilization of these assets over the past 12 months is relatively high compared to its peer groups. For example, looking at flight activity for the Challenger 350, VistaJet fleet’s flight hours per aircraft is ranked amongst the top three while Globals is consistently ranked at the top. These are not “lightly used” jets, so it is not a foregone conclusion that it would cannibalize new jet sales if these aircraft were to enter the pre-owned market. In addition, we would point to the business aviation industry as still benefitting from good demand fundamentals today even if activity is plateauing. Looking at business aviation activity (number of flights), in 2023 it was ~30% above 2019 levels. Please refer to Exhibits 1 - 5 for a summary of the utilization rate of BBD aircraft over the past year.