New Jet Deliveries to Fractional Programs Increases

There has been a gradual migration away from private jet ownership into fractional ownership programs lately. The individuals and corporations stepping back from whole aircraft ownership into fractional programs aren’t flying any less. As a matter of fact, they are flying more, meaning the program providers are taking delivery of more new jets.

Possible reasons for this change include the large number of newcomers to private aviation who would prefer to do so without the myriad of costs and details associated will full aircraft ownership.

Another reason could be an attempt to remain more anonymous amid the climate change hysteria since there is no way to identify individuals or companies who are passengers aboard charter or fractional flights.

Ratio of New Jet Shipments to Fractional Providers Grows

According to a spot-check of AMSTAT business jet delivery figures, the number of new aircraft being delivered into fractional programs has been on a steady increase.

Winding back the clock 10 years to 2013, 5.1% of new aircraft shipments went to the fractional providers. By 2019 (pre-pandemic), that figure had doubled to 10.7%. 2022 saw 15.8% of all new private jets being delivered into fractional ownership programs, and so far in 2023 it’s already risen to 16.8%.

In short, we went from a rate a decade ago of one in 20 new jet deliveries going into fractional programs to one in six today.

To meet this increased demand, fractional orders have been on a steady rise. NetJets recently placed a record order for 1,500 Cessna Citation business jets spread out over the next 15 years. And although Flexjet postponed its NBAA-BACE announcement of another fleet order, it is expected to have similar news to share shortly.

Possible Impacts of Big Fractional Jet Orders

While these orders will potentially provide steady work for the OEMs for years to come, the news is not all lollipops and rainbows: First, the Netjets order was for options, not firm orders – so it’s not a certainty. There will always be some uncertainty as to if-and-when the options become firm orders (although history generally shows that they will be – eventually).

Also, what the OEMs lose in fleet discounts needs to be made up in volume and process improvements. While economies of scale allow an economical cookie-cutter approach to paint and interiors, manufacturers will still have to dig deep to find additional cost savings to avoid subsidizing the fractional industry.

Options also give fractional operators the flexibility to jump in front of the delivery line when times are good, which can postpone deliveries to higher-margin customers that don’t command the same steep fleet discounts.

Conversely when times aren’t so great, the fractional providers can delay or cancel orders just as the airlines do, with the potential of leaving the OEMs with unsold inventory known as ‘white tails’.

The trend away from aircraft ownership could also result in fewer new and existing flight departments, leaving employees to scramble should there ever be a downsizing or closing. 

And there could potentially also be less meat on the bone for service providers such as FBOs, MROs and catering outfits, who are obliged to capitulate to these ‘mini airlines’ if they want the business.

Aircraft brokers may have slightly fewer listings because the fractional program providers often have their own captive pre-owned sales group to market older aircraft coming off fleet.

This will be a trend worth watching, to see whether a confluence of market factors is gradually moving private aviation away from its traditional full aircraft ownership roots towards a high-end, mass transportation model...

More information from www.brifo.com

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