Business Aviation Market Overview - December 2021

Brian Foley shares insights on why the industry could see 900 new business jet deliveries annually as soon as 2024…

Brian Foley  |  03rd December 2021
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Brian Foley
Brian Foley

Brian Foley formed Brian Foley Associates (BRiFO) in 2006 to assist aerospace firms and investors with...

Dassault Falcon Private Jet in Hangar


Sometimes Brian Foley is met with scepticism when sharing his new business jet shipment forecast, which predicts deliveries will soon reach 900 units per year (rising from what has routinely been around 700 units for more than a decade now). Here, he explains the logic behind his bold prediction…

I anticipate the industry will come close to 900 shipments in 2024, with 2025 being a shoo-in. I’ve had large aerospace corporations and fellow prognosticators alike contact me seeking justification for the large increase. Neither their internal outlooks nor other public sources are currently as optimistic.

They are equally perplexed because I have traditionally been one of the most conservative forecasters, often challenging the flowery ‘hockey stick’ projections that are made by business jet manufacturers and their Tier 1 suppliers.

What Others May Not Fully Appreciate (Yet)…

We have nearly a generation of industry observers today who have seen nothing but mediocrity. The 1,300 units delivered in 2008 have evaporated from memory and have been replaced by repetitive year-after-year levels of approximately half that.

Having been conditioned to this predictable performance for the past 13 years, it’s not surprising that some observers have difficulty envisioning a leap of 39% from 2020’s dismal 646 deliveries to 900.

First, the 20% drop in deliveries for 2020 compared to 2019 wasn’t from a lack of continued demand. Rather, manufacturers closed or altered factory schedules, decreasing what they could deliver. These ‘lost’ deliveries will manifest into additional shipments this year as OEMs simply pushed them into 2021 – and that action alone should move us close to the usual 700-unit mark by the end of this year, and to within 29% of 900 units.

Even before the pandemic, 2019 deliveries temporarily broke with the long tradition of 700 shipments per year and hit 809 units. With manufacturers across the board currently reporting brisk business, it is not unreasonable to think we can get back to this level in 2022, which takes us to within 11% of the 900-unit projection.

To ramp up to 900 units over the course of 2023-2024 does not seem like much of a stretch. Given the current lack of pre-owned inventory, the expansion of the Business Aviation market (due to the new ‘Covid-avoidance crowd’), and key economies making a comeback, it would seem this projection is within easy reach.

Its likelihood is further strengthened by a bevy of new aircraft models coming to market which helps stimulate sales. There are seven recent or upcoming entrants from Gulfstream and Dassault Falcon Jet alone, with others sure to follow. 

Epilog

Despite a lot of industry blowback, I maintain a deep conviction that 900 deliveries are in sight within the next two to three years. Frankly, the only impediment to this happening sooner is the reluctance of manufacturers to increase production too soon.

Having been financially burned with unsold whitetails in the past, they’ll instead wait to see whether increased sales volume maintains its momentum for a couple of more quarters before making any commitments. Even then, production doesn’t increase with the flip of a switch. It will take time to ramp up once a decision is made, and manufacturers are already mentioning supply chain challenges at their current levels of production.

Compounding this will be a lack of skilled employees to support an increase. Most OEMs dismissed employees early in the pandemic to match their limited production to headcount. Many of those workers left for other, more predictable industries, never to return.

Finally, a guaranteed follow-up question after sharing these thoughts with others relates to whether the industry will return to the lofty 1,300-unit level of 2008. While that’s not currently envisioned in my ten-year forecast, due to an inevitable economic dip somewhere along the way, I would advise others to never say never.

MI www.brifo.com

Global Flying Trends – October 2021

Global business jet activity posted a new record for all sectors flown in October, as expected, notes WingX Advance. Compared to the previous record, posted in October 2019, business jet sectors were up 19% worldwide, and eclipsed activity recorded in October 2020 by 45%...

Demand for Business Aviation continues to be boosted by the erosion in commercial aviation flying, with airline traffic still trailing 28% behind October 2019 levels. Business jet flight hours were up 19% compared to October 2019, which ultimately highlights a rebound in larger cabin aircraft and longer trip sectors.

Flight Activity in Europe

October saw an extraordinary growth in Business Aviation activity compared with previous years. With over 75,000 sectors flown on business jets and turboprops, flight activity in Europe was 28% higher than in October 2019.

Until September, UK business jet traffic was well behind 2019 levels, but in October flight departures were up 18% on October 2019, elevating it as the second busiest market in Europe for the month. France was the busiest, with business jet sectors rocketing 23% above normal.

The most eye-catching growth in October came in Italy, Spain, Switzerland (42%, 52% and 39%, respectively, more active than in October 2019).

Flight Activity in the United States 

October Business Aviation activity in the US, including turboprops, was up 2% on the same month in 2019. For just business jets, it was up 5%. That trend will surely extend to ensure a record total for 2021.

Charter and Fractional operators are driving much of the growth in the US, with fleet activity 30% up on October 2019. Meanwhile, Super Mid-size Jets accounted for over 20% of all the US traffic in October, with sectors 26% higher than those recorded in October 2019.

Teterboro, Boston and Dulles were three of the only airports which did not have more traffic in October 2021 than in October 2019. Much of the deficit was in international flights, with transatlantic business jet connections from the US running 32% behind 2019 Year-to-Date.

Rest of the World

Outside the US and Europe, business jet demand stuttered as Q4 began. Having been well ahead of 2019 trends in the Spring and Summer, sectors flown were up just 4% in October.

• Recoveries in Canada and Mexico appeared to stall, with sectors still 20% below normal.

• Business jet sectors in China were slightly up on 2019, though down on October 2020 (flight hours were well below two years ago.

• Business jet activity in Australia fell below 2019 levels.

• Flight activity in Saudi Arabia had yet to fully recover since 2020. (By contrast, business jet activity in Qatar and the UAE was well above that recorded in October 2019.)

• Several countries in Africa have been seeing strong growth in business jet activity throughout 2021, and this trend continued in October; notably so in South Africa and Nigeria.

“Business jet activity continues to grow well into the winter period in the US and Europe, which is a strong endorsement of sustained demand,” summarized Richard Koe, Managing Director, WingX. “The opening up of transatlantic connections should boost activity further.”

MI www.wingx-advance.com

AEA Q3 2021 Avionics Market Report

In the first nine months of 2021, total worldwide Business and General Aviation avionics sales amounted to just over $1.76 billion, representing a 5.4% increase in total sales compared to January-September 2020.

Additionally, the report reveals a 1.8% increase in sales sequentially from Q2 2021 and marked the fifth consecutive quarter of increasing sales. During Q3 2021, sales increased 15.8% compared with the same time frame one year ago.

Of the more-than $1.7bn in sales during the first nine months of 2021, 53.7% came from the retrofit market (avionics equipment installed after original production), while forward-fit sales (avionics equipment installed by airframe manufacturers during original production) amounted to 46.3% of sales.

According to the companies that separated their total sales figures between North America (US and Canada) and other international markets, 74.8% of the Year-to-Date sales volume occurred in North America, while 25.2% took place in other international markets.

“We are encouraged that this report indicates industry sales are continuing an upward trend, despite the lingering pandemic and changing market forces,” summarized AEA President and CEO Mike Adamson. “Although industry has seen robust sales during some unprecedented times, there are still challenges with the supply chain and workforce to work through as we close out the year and look ahead to 2022.”

MI www.aea.net

In-Service Aircraft Maintenance Condition & Marketability

Another month of aircraft sales has led to another reduction in available inventory, according to Asset Insight’s latest analysis. As of October 29, the analysis covering 134 models showed a 3.8% contraction, leaving 1,117 aircraft listed for sale (73 fewer units)…

Year-to-Date (YTD) availability decreased 41.6% (795 fewer listed assets), while Year-over-Year (YoY) the reduction equates to 48.6%. Sellers of young, low-time aircraft are clearly in the driving seat relative to price and terms, while many older aircraft marketers are unable to locate, let alone ride, the younger asset sellers’ coattails. 

The average Ask Price rose 0.9% during the first month of what is traditionally the industry’s strongest sales quarter. Posted Ask Prices are still 0.9% lower YTD, and down 6.3% YoY, but that makes sense considering that most listings currently are for older aircraft with lower price points, many of which have occupied inventory for an extended period.

Based on the lack of available young, low-time aircraft, and the supply chain hurdles affecting both buyers and sellers, one wonders how many aircraft are likely to transact as we close out the year.

Inventory Fleet Maintenance Condition

Last month’s sales (and limited new listings) negatively impacted the tracked fleet’s Maintenance Rating, but Maintenance Exposure did improve a little. Specifically:

The Quality Rating deteriorated 0.9% during October to post a 12-month low figure, along with a YoY decrease of 2.9%. The Rating remained within ‘Very Good’ territory at 5.200 but highlights that more near-term maintenance events are due for the listed fleet. On the other hand, the listed fleet’s Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) decreased/improved 1.5% signifying the listed fleet’s maintenance events will cost less to complete – although that expense will average 2.5% more than it did one year ago.

Maintenance Exposure to Ask Price (ETP) Ratio

Improving somewhat from the 78% record high (worst) figure the listed fleet posted in September, October’s ETP Ratio equated to 77.2%. Asset Insight’s market analysis also revealed that nearly half of the tracked models, and over 59% of the tracked fleet, posted an ETP Ratio greater than 40%.

The ETP Ratio is a useful indicator of an aircraft’s marketability and is computed by dividing the asset's Maintenance Exposure (the financial liability accrued with respect to future scheduled maintenance events) by its Ask Price.

‘Days on Market’ (DoM) analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s time on the market increases, usually by more than 30%. During Q3 2021, assets whose ETP Ratio was 40% or higher were listed for sale more than 84% longer (on average) than aircraft whose Ratio was below 40% (296 versus 545 Days on Market).

Market Summary

Overall availability for the tracked fleet continues to hover in the 5.6% range, with all groups losing units except for Mid-Size Jets (although that group’s availability only increased by one unit).

This time last year, 10.1% of the active fleet was listed for sale, creating equilibrium in the market between buyers and sellers. Presently, sellers of young, low-time aircraft may be able to dictate price and terms, but neither buyers nor sellers can overcome the supply chain hurdles affecting routine elements required to complete a transaction, such as a pre-purchase inspection.

Recent comments by airframe OEMs point to an increase in production figures, which would place many currently owned aircraft on the pre-owned market. But here, again, supply chain issues are affecting the OEMs’ abilities to raise production that, under normal circumstances, requires pre-planning and advance orders for many components (such as for engines and avionics) to accomplish.

Large Jets: A decrease of 30 units to the tracked fleet of 43 models equated to a 10.6% inventory decrease for October, 41.1% YTD, and 48.5% YoY. With buyers opting for assets anticipated to require less maintenance during their planned ownership period, Large Jet group’s Quality Rating dropped 0.1% to 5.445, posting a 12-month low figure for the third consecutive month. While keeping the group within ‘Excellent’ territory, the latest Rating was 5.1% lower YoY.

On the bright side, Maintenance Exposure decreased (improved) 0.1%, but the good news ends there for buyers. Upcoming maintenance events are expected to cost 8.1% more than they did this time last year.

Ask Price displayed a substantive 4.4% increase for the month, and while 0.9% lower YoY, the figure was 1.7% higher YTD. Leveraged by a higher average Ask Price, the group’s ETP Ratio fell (improved) to 61.6% following September’s 12-month high (worst) figure of 70.6%.

With limited availability and lower aircraft Quality, Asset Insight is urging buyers to exercise patience.

Mid-Size Jets: Following September’s dramatic 25.4% increase, the Mid-Size Jet group’s Ask Price receded slightly, falling 0.6%. While down 6.4% YoY, prices are up 3.8% YTD. Maintenance Exposure improved (fell) 1.5% to a figure 3% better (lower) YoY, but that was not sufficient to improve the ETP Ratio, which increased (worsened) to 73.6%, the group’s second consecutive 12-month high (worst) figure.

Our 45-model tracked fleet saw its Quality Rating improve 0.7% to 5.293, keeping it within the ‘Excellent’ range and virtually unchanged YoY.

Mid-Size Jet inventory increased by one unit during October, but selection is still 42.6% smaller YTD (222 units) and 50.8% fewer YoY. Demand is very strong for Mid-Size Jets, but limited selection will likely curtail the number of transactions for some time to come.

Light Jets: Ask Price dropped 5.7% in October to post a record low figure, and Light Jet prices are now down 18.3% YTD and 21.9% YoY. Additionally, the average Ask Price for Light Jets has been lower than that for Turboprops during seven of the last eight months. Availability for our 29 tracked models decreased 3.8% (21 fewer units), and selection has narrowed 46.1% YTD (255 units) and 51.3% YoY.

The group’s Maintenance Exposure improved (decreased) 1.8% during October (and 4.1% YoY) to post a 12-month low (best) figure, but the improvement fell far short from an ETP Ratio standpoint, raising (worsening) the Ratio to 121.7%, a new record high (worst) figure. The Quality Rating also reflected the available fleet’s sad maintenance status by falling (worsening) 2.6% for the month (2.8% YoY), barely leaving the group within ‘Very Good’ territory with a score of 5.091.

While Light Jet sales are anything but weak, the average Days on Market for listings was nearly 14% longer for this group compared to the figure for Asset Insight’s entire tracked turbine fleet.

Turboprops: With listings dropping 5.7% during October (23 units), availability for the tracked 17 models has now decreased 34.6% YTD (141 units) and 42.3% YoY. Higher quality assets were the ones preferred by buyers, pushing the Quality Rating for remaining listings down 1.5% for October, and 3.6% YoY.

Decrease in the Quality Rating to 4.977 (a 12-month low) also dropped the group into ‘Good’ territory, from the previous month’s ‘Very Good’ 5.051 Rating. Maintenance Exposure followed the same path, albeit through an inverse trajectory, worsening (increasing) 5.9% to a 12-month high figure (and 10.2% YoY).

While Ask Price increased 2.4% (2.2% YTD and 0.4% YoY), it was not sufficient to overcome the rise in Maintenance Exposure, and the group’s ETP Ratio rose to 44.1%, the worst (highest) figure Turboprops have posted during the past six months. Having said that, most Jet aircraft sellers today would love to have that problem.

MI www.assetinsight.com

GAMA Q3 2021 Shipment Analysis

The General Aviation Manufacturers Association released its Q3 shipment and billings report in November, and the news was good. The recovery that we saw beginning to develop in Q2 is continuing and, in fact, accelerating. Mike Potts reviews the numbers…

Total aircraft shipments reached 1,690 units, up 10.2% from a year ago when they reached 1,533. Meanwhile, billings were up 13.0%, at $13.4 billion, up from $11.9 billion in Q3 2020.

Looking at the market by segments, business jet deliveries totaled 438 units for the first nine months of 2021 (up from 378 in the same period a year ago) – a 15.9% gain. At the halfway mark of this year, jet deliveries were up by 8.2%, so the market is accelerating strongly.

In the turboprop category the recovery is even stronger, with GAMA showing deliveries of 357 units, a gain of 40.6% compared to the 254 reported for the same period last year. The piston market is not performing as well as turboprops and jets, however, with sales slightly lagging 2020 levels. Piston deliveries totaled 895 Year-to-Date (YTD), compared with 901 last year.

“The General Aviation manufacturing industry has shown perseverance with continued growth, while still navigating pandemic-related setbacks,” said GAMA President and CEO Pete Bunce. “Despite the constraints imposed by shortages of parts and people, our manufacturers are working hard to meet growing demand.”

The Business Jet Market

Turning to the specifics of the jet segment, of nine OEMs reporting in Q3, six were ahead of their 2020 nine-month totals, while three are lagging. However, of those lagging, just one was behind more than two units.

Textron’s Cessna unit led the jet market by a wide margin as Q3 2021 came to a close, with 121 units, up from 71 a year ago; a gain of 70.42%. For Q3 alone, Cessna reported 49 deliveries, up from 25 last year – a remarkable 96% improvement.

At the end of Q1, Cessna had been tied with Gulfstream for the jet market lead, but has since accelerated while Gulfstream’s performance lagged. It appears that growth in the jet segment is coming from the lower-to-middle portion of the market, a phenomenon not seen for a while.

The second position in jet deliveries was hotly contested, with Bombardier edging out Gulfstream by just two units. Bombardier made 82 deliveries, up from 70 a year ago. That’s a gain of 17.14%. For Q3 alone, Bombardier was up 12.5% (27 units, up from 24 in 2020).

Gulfstream was relegated to third place with 80 shipments YTD, down from 87 in 2020. Gulfstream also lagged 2020 in its Q3 performance, delivering 31 units, down from 32 last year. Gulfstream was the only jet OEM that didn’t enjoy improved results in either Q3 or YTD.

Nevertheless, the business jet billings race for the first nine months of 2021 went to Gulfstream, at $4.134bn. Bombardier ran Gulfstream close, reporting billings of $4.033bn

Embraer captured the fourth-place in jet deliveries, with 54 units YTD, and 21 for Q3 alone. That represented a 12.66% improvement over the 43 deliveries it reported for the same period in 2020. Embraer’s Q3 shipments were the same for both years.

Cirrus came fifth with 46 deliveries for the year so far, down a single unit from the 47 reported for the same period in 2020. For just Q3, Cirrus made 23 deliveries, up from 16 in 2020 – an increase of 43.75%.

Pilatus came next in the jet race with 27 deliveries, up 12.5% from a year ago when it shipped 24. For Q3 alone, Pilatus reported 12 units, up from eight the year before. Pilatus was followed by Honda, which reported 15 units, down from 17 last year. For just Q3, however, Honda had a gain, seeing deliveries rise from eight to nine.

Dassault does not report in Q1 or Q3, but carried forward a total of six units from H1 2021, putting it in eighth place, and bringing up the rear in the jet market were the usual suspects, Airbus and Boeing.

Airbus reported five units (including one in Q3), while Boeing had two (one in Q3). Both were ahead of their 2021 totals. Based on current conditions continuing it is reasonable to expect the jet market to finish within the 725- to 750-unit range this year.

The Turboprop Market

Looking at the turboprop segment we again see evidence of an improving market, with seven of the nine turboprop builders reporting improved results for the year to date, and another one level. The one OEM lagging its 2020 shipments only did so by two units.

More significantly, the companies that enjoyed gains were the major players, and those gains were strong. GAMA shows the turboprop market performing 40.6% ahead of last year, with 357 deliveries compared with 254 a year ago. These numbers include a significant number of single-seat agricultural airplanes.

Removing the agricultural airplanes from the total offers a true business turboprop picture, with 217 aircraft shipped, up from 156 a year ago, or a gain of 39.10%, making business turboprops by far the strongest performing segment in Business Aviation today.

The leader is Pilatus, with 57 deliveries YTD, up from 48 last year. That’s a gain of 18.75%. In Q3 alone, Pilatus reported 24 deliveries, up from 19 in 2020.

Second place was hotly contested, with Textron’s Beechcraft unit narrowly edging out Textron’s Cessna unit by two deliveries (42 to 40). For Beechcraft, the 42 deliveries represented a 27.27% gain over the 33 reported for the same period in 2020. For just Q3, Beechcraft also saw a strong gain, with 19 deliveries, up from 13 in Q3 2020.

Cessna, meanwhile, enjoyed substantial gains over 2020’s numbers. The 40 shipments YTD more than doubled the 19 reported last year, while for Q3 alone, Cessna precisely double its Q3 2020 output with 16 units versus eight.

Piper captured fourth place in turboprop deliveries with 31 deliveries, YTD, up from 23 in 2020 (a gain of more than 38.78%). For Q3, Piper shipped 19 units, compared with 13 in 2020. For those with long memories, the current Turboprop picture harkens back to decades ago when Piper, Beech and Cessna were all at the top of the market.

Daher was only a single unit off the pace set by Piper, however, delivering 30 units in the first nine months of 2021. That was up 30.43% from the 23 it reported in the same period last year. In Q3 alone, however, Daher was down by a single unit from 10 to nine.

Daher continues to report separate totals for its Kodiak unit (11 deliveries YTD), putting it in sixth place in turboprop deliveries. This was up sharply from the five units reported in the same period of 2020. For Q3 alone, Daher’s Kodiak unit shipped three deliveries in 2020 and 2021.

The last turboprop OEM with deliveries in Q3 was Epic (five units, up from one a year ago). This brings Epic’s total for the year to date to six, up from four last year, or a gain of 50%. Neither Pacific Aerospace nor Piaggio have reported any deliveries so far in 2021.

With the business turboprop market so volatile this year, it seems a bit dangerous to make predictions – but I expect the market will finish 2021 in the 315- to 330-unit range.

In Summary…

It is very encouraging to see the business jet and business turboprop markets springing back from the lows they suffered during the Covid crisis of 2020. We can certainly hope this trend will continue in coming years.

MI www.gama.aero


Read More About: Light Jets | Large Jets | Mid-Size Jets

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Brian Foley

Brian Foley

Editor, Market Intelligence

Brian Foley formed Brian Foley Associates (BRiFO) in 2006 to assist aerospace firms and investors with strategic research. In addition to his work as Market Intelligence Editor, AvBuyer, he is a regular contributor for Forbes.com and his views are published in the media worldwide.

Currently, Brian serves the Transportation Research Board as a member of the Business Aviation, helicopter, commercial airline and UAV system subcommittees, and he previously served on the Wall Street financial firm Board.

Before starting his consultancy business, Brian was marketing director at Dassault Falcon Jet for 20 years, and started his career at Boeing. He is an instrument-rated private pilot.


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