As the heat of the Northern summer builds each day, customer optimism regarding the state of the business aviation industry continues to grow. Results from JetNet iQ’s ongoing surveys of business aircraft owners and operators suggest that optimism is now at its highest level since measurements began in early 2011.
Worldwide, optimists currently outnumber pessimists by an impressive 4.25:1, led by owners/operators in both Europe and the U.S. Continuing wealth creation and corporate profitability, declining unemployment, and robust consumer and business confidence are all contributing to an extended economic expansion, defying at least for the time being the age-held notion that what goes up will ultimately come back down.
While customer optimism and aircraft utilization levels are trending positively, it appears that the all-important indicators of preowned retail sales and new aircraft orders have leveled off, at least for the time being.
2017 was a banner year for preowned business jet sales, with more than 2,700 whole retail and full-sale lease transactions worldwide, up more than 9 percent year-over-year. There is little doubt that this level of sales activity helped to “clear the shelves” of most of the younger, higher-pedigree jets that had been on the market.
Inventory levels have thus steadily declined, and now stand at about 2,000 aircraft worldwide—similar to pre-crisis levels last experienced in mid-2008—or 9.2 percent of the fleet. Only 7 percent of for-sale jets—about 135 aircraft—are five years old or less, a much-welcome development for OEMs that have grown weary of competing with young inventory for available deals. More than 45 percent of for-sale jet inventory is more than 20 years old, and presumably with its ultimate owner.
Preowned business jet retail sales, including full-sale leases, were basically flat in the first four months compared with the same period last year, according to JetNet databases. This is no doubt influenced by the quality, age, and maintenance status of available jets for sale. Some operators told JetNet that they are still planning to sell some of their non-ADS-B Out-compliant aircraft as the Dec. 31, 2019 equipage deadline approaches, to avoid either the hassle or investment required to bring the old bird up to standard.
Excluding single-engine jets and bizliners, new business jet deliveries in the first quarter were up by just three units, or about 2 percent, year-over-year, according to GAMA shipment data. This is entirely in line with JetNet iQ’s forecasts as OEMs remain prudent about new aircraft production rates in face of relatively quiet demand, and as they prepare to transition their factories and completion centers to churn out newly certified models.
With most new development programs facing one headwind or another, including the Gulfstream G500/G600, Cessna Citation Longitude, Bombardier Global 7500, Dassault Falcon 6X, and Cessna Denali, or with order books temporarily closed while the manufacturer manages a production ramp-up—in the case of the Pilatus PC-24—customers are not rushing forward with their checkbooks in hand, at least not yet.
JetNet iQ’s forecast is for relatively flat new business jet deliveries in 2018, up about 2 percent on a unit basis over 2017. Certification and entry-in-service of a number of new jets in the second half will help to stimulate somewhat dormant sales campaigns and replenish preowned inventories with fresh trade-in aircraft. I anticipate that the industry will benefit from a year-end sales spike that will bolster OEM confidence going into 2019.
Barring an all-out international trade war between long-time Western allies (who woulda thunk?) or some other unfortunate or cataclysmic event, we are forecasting a steady improvement in new business jet delivery rates beginning in 2019, driven by a spectrum of key factors. These include customer optimism, the attractiveness of new aircraft and technologies, an ever-aging fleet, steady economic growth, accelerating corporate profitability and wealth creation, and the development of new business models to expand the reach of business aviation.
Over the 10-year period from 2018 through 2027, we forecast that the industry will deliver 7,900 new business jets with a list price value of $236 billion (2018 $). Despite all the enthusiasm for new and emerging markets, our expectation is that the U.S. will remain far and away the hottest market for new business jets, representing more than 60 percent of total unit production over the next 10 years.
Rolland “Rollie” Vincent is president of Rolland Vincent Associates, a Plano, Texas-based aviation consultancy with a focus on market research, strategy, and forecasting. Vincent is also managing director at JetNet iQ. He can be reached via email or by telephone at (972) 439-2069.
