Honeywell executives have painted bleak outlook for business jet sales and aftermarket services for at least the next 15 months.
The maker of business jet engines and avionics announced a surprise guidance adjustment on 6 October, lowering the compnay’s earnings per share guidance to the bottom of the range.
The adjustment involved several moving pieces on Honeywell’s diverse balance sheet, but executives made it clear that continued weakness in the business jet sector deserves a large part of the blame.
Business jet demand has “softened considerably”, says Tom Szlosek, Honeywell’s senior vice-president and chief financial officer, addressing a call with market analysts on 7 October.
Honeywell chief executive Dan Cote noted that the company’s oil and gas business is expected to bottom out in the second half of 2016, but he could not say the same for business jets.
“On the business jet side, we’re going to assume that gets worse” in 2017, Cote says. He adds the same outlook applies to civil helicopter sales through next year.
Cote blamed the poor market conditions on a broad range of factors, including customers in the Middle East and Russia hit hard by low oil prices, as well as an anti-corruption probe in China reducing interesting in business jet acquisitions.
Even large fleet operators outside of those regions are not immune, he adds. Such operators are cutting back acquisition plans and reducing flight hours.
Honeywell is expected to release a revised, five-year market forecast for the business aviation industry later this month at the NBAA convention.
Although Honeywell expects conditions to worsen, the third quarter sets a low bar.
“We expected short-cycle orders that didn’t materialize,” Cote says. “They usually do, but this time they didn’t.”