Business Aviation Market Overview – January 2022

As 2022 rolls in, Brian Foley, Editor of Market Intelligence for AvBuyer, sets out how he sees the Business Aviation market shaping up this year…

Brian Foley  |  07th January 2022
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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 Jet on runway


During the depths of the pandemic in March 2020, it would have been hard to predict that the Business Aviation market would prove so resilient. After a short, but precipitous drop, pre-owned unit sales later went on to set all-time records.

While there was some lag time, new aircraft manufacturers have now begun benefiting from the same upswell, reporting brisk business and breaking the decade-old trend of flat, uninspiring sales.

Once figures are finalized, 2021 will undoubtedly go down as a truly outstanding year from both a new and used aircraft sales perspective.

As a tough act to follow, the next logical question is whether 2022 will be able to deliver similar results.

External Market Factors in 2022

As a place to start to attempt to answer this, external market factors going into the New Year must be considered, several of which will undoubtedly continue to stimulate both new and pre-owned aircraft transactions.

The most obvious driver will be ongoing concerns about the pandemic, which will extend the strong interest to travel privately by those with the means. Manufacturers, brokers and charter/fractional providers have reported that new users of Business Aviation have accounted for upwards of 25% of their recent business volume, whereas previously it had been less than 10%.

In addition, the virus has proven that there will continue to be new variants which will keep this interest alive, and will undoubtedly buoy sales throughout 2022.

Unless there’s some catastrophic, unforeseen event, financial markets and economies are expected to continue recovering throughout 2022, giving buyers the confidence to travel privately.

Private aviation is a discretionary spend, with the airlines always being the cheaper alternative. But as long as great earnings reports keep coming from corporations and the financial portfolios of individuals keep thriving, customers will continue to pay.

High inflation, a term normally associated with negative effects, can actually have a positive effect on our industry. During periods of rising prices, it’s beneficial to own hard assets that will also appreciate, and nothing’s better than a high-value business aircraft which can help retain wealth as its price goes up.

Think of it as a hedge against inflation, with prices of both new and used aircraft rising in lockstep as we have been seeing.

The More Subtle Changes with an Impact

Aside from these factors, there are more subtle changes expected that will affect new and pre-owned aircraft sales differently in 2022.

As an example, the pre-owned inventory will inevitably continue to be constrained throughout the year, compared to historical averages. However, it’s believed that the pendulum will begin to swing the other way towards the last half of the year, and inventory will finally begin to increase, as:

  1. High pre-owned prices motivate more owners to sell;
  2. Marginal buyers are slowly priced out of the market; and
  3. More of the recent, unprecedented market demand is met.

All of this points to pre-owned aircraft sales not setting another record in 2022, but rather having a more traditional year.

Pre-owned aircraft sales have been improving over the past several years, whereas new aircraft sales stubbornly remained stagnant. It’s believed that this cycle will finally shift in the OEM’s favour with higher sales volumes throughout 2022 and beyond.

The same inventory shortage that is challenging the pre-owned aircraft market will next be seen in the new market as demand outstrips supply. As new aircraft delivery dates extend beyond 18 months we could again see delivery slots being sold at multi-million-dollar premiums, a phenomenon not seen since 2008.

2022: Continuing the New Paradigm 

Barring any unpleasant surprises, 2022 is anticipated to be another decent year for pre-owned aircraft sales, and an exceptional, long overdue period for new aircraft sales.

Overall, Business Aviation has entered a new paradigm in the size of its addressable market that will continue to benefit all players throughout the year.

MI www.brifo.com

Global Flight Activity Update

November 2021 was comfortably the busiest November on record for global business jet activity, says WingX Advance. A total 447,000 sectors were operated, which was 15% busier than November 2019, and only 30,000 sectors shy of October’s activity (the busiest month on record)...

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.

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).

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 Midsize Jets accounted for over 20% of all the US traffic in October, with the number of sectors 26% higher than 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

Jetcraft: 12,261 Pre-Owned Transactions By 2025

Jetcraft released its 5-Year Pre-Owned Business Aviation Market Forecast predicting pre-owned aircraft transaction volume and value will maintain their current healthy growth rates...

According to Jetcraft’s forecast, the market is projected to reach 2,647 transactions, valued at $12.4bn annually, by 2025.

“Since the pandemic, the true benefits of Business Aviation have been realized, particularly by new entrants who have had the means to fly privately but never previously had the inclination, and we have seen our industry thrive,” said Jahid Fazal-Karim, Owner and Chairman of the Board at Jetcraft.

“The combination of limited commercial airline services, plus expanding offerings within Business Aviation, presents the sector with a real opportunity to further broaden its customer base and secure longterm prosperity, and we have highlighted some of these areas in our forecast,” he added.

Factors Behind the Growth

Jetcraft is predicting the industry will maintain its post-pandemic momentum and expects to see 12,261 pre-owned transactions worth $57.2bn in value over the next five years.

“Manufacturer backlogs and wait times for new aircraft are rising,” Fazal-Karim continued. “This factor, paired with a growing buyer pool, means many will be compelled to turn to pre-owned aircraft to meet their needs.

“Our forecast finds that regional drivers, such as Wealth Levels and Flying Hours, represent the main reasons behind ownership in North America, Asia-Pacific and Europe, and these continents also retain the highest UHNWI populations.

“So, with the projected growth in wealth converging with increased use in business jet solutions, we expect to see the road to ownership accelerate among many users, which is an exciting prospect.”

The current market strength is predicted to last until late 2022, with average transaction value set to grow marginally until 2024, partly due to an increase in Large Jet sales which command higher prices. Depreciation rates are expected to return to normal by 2025.

“The evolution of Business Aviation post-pandemic is a demonstration of the industry’s resilience and growing appeal,” Fazal-Karim concluded.

MI www.jetcraft.com/marketforecast-2021, and read AvBuyer’s interview with Chad Anderson, President of Jetcraft.

In-Service Aircraft Maintenance Condition & Marketability

November’s pre-owned business jet and turboprop sales evidenced the second highest number of monthly trades for the 134 models tracked by Asset Insight…

Inventory assets decreased 5.6% (107 units) during the month, representing a 47% reduction Year-to-Date (YTD), or 902 fewer units. The 1,010 assets listed for sale also represent a 52.2% decrease, year-over-year (YoY). A lack of young, low-time aircraft has certainly not dampened buyer enthusiasm.

Indeed, aging aircraft sellers hope to benefit from the market’s activity – however unlikely that might actually be.

Aircraft Values

The average Ask Price for our tracked, listed fleet rose 0.6% during the month, but was still 0.3% lower YTD and 4.9% below last year’s figure. The minimal increase might appear to be counter-intuitive, until you consider the average age of the limited assets listed for sale.

What are often termed “off-market aircraft” (aircraft not listed for sale but whose owners are willing to part with the asset at some price) are actively selling, and many are generating prices above their Ask Price, as buyers compete for the few opportunities to purchase a higher-quality aircraft before year-end.

Bonus depreciation is also fueling US-based buyers’ interest, although that is mostly a secondary motivator.

Inventory Fleet Maintenance Condition

Considering how much the listed fleet has been picked over, November’s Quality Rating decrease was not surprising, while the Maintenance Exposure decrease was unexpected.

• Quality Rating decreased 0.2% from October’s 5.200 to 5.187. The latest Rating represents the second consecutive 12-month low, along with a YoY decrease of 3.4%. The Rating remained within ‘Very Good’ territory, but buyers should take note that most listed aircraft are approaching more near-term maintenance events.

• On the heels of last month’s 1.5% improvement, the listed fleet’s Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) decreased (improved) an additional 2.6%, signifying maintenance events for the current inventory mix will cost less to complete. Additionally, that expense will be 1.6% lower than one year ago.

Maintenance Exposure to Ask Price (ETP) Ratio

November’s ETP Ratio recorded a second consecutive monthly improvement (decrease) at 75.8%, following September’s record high (worst) 78%. While this development likely pleased some sellers, the Ratio was worse (higher) than average.

The market analysis also revealed that nearly 55% of November’s tracked models, and nearly 60% of Asset Insight’s tracked fleet, posted an ETP Ratio greater than 40%.

The ETP Ratio is a useful indicator of an aircraft’s marketability. It 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

At 4.6%, availability for Asset Insight’s tracked fleet has never been lower, and inventory units decreased for all four aircraft groups during November. By way of comparison, inventory rested at 10.1% of the active fleet at the same time in 2020.

With new aircraft delivery slots not available for up to 24 months on certain models, many prospective buyers will continue to utilize charter services while awaiting delivery of their asset, maintaining charter’s strong demand for some time to come.

While this represents revenue for aircraft owners, it also increases their aircraft’s utilization and is likely to negatively reflect on their asset’s value at time of sale.

Large Jets: With listings dropping 11.8% during November (another 30 units), availability for Asset Insight’s tracked 43 Large Jet models has now decreased 48% YTD (207 units) and 54.7% YoY, and the group’s availability now equates to just 4% of the active fleet. 

The Quality Rating improved (rose) 2% to 5.553, as buyers opted for lower-rated assets (presumably in exchange for lower pricing), raising the group’s Rating into ‘Outstanding’ territory, although the figure was 3.9% lower (worse) than this time last year.

While fewer in number, Maintenance Exposure identified a 9.3% increase in the cost to complete upcoming maintenance events (the highest cost posted during the past 12 months), a figure that is also 18.2% higher YoY.

Ask Prices reflected the listed fleet’s highly limited availability, increasing 17.2% (a 12-month high figure), and were up 19.2% YTD, and 20.2% YoY. Lastly, the large Ask Price increase positively impacted the group’s ETP Ratio, reducing it to a 12-month low 58.9%.

Lowering the price paid for an asset is important, but equally important is completing a thorough pre-purchase inspection, a crucial event that a surprising number of buyers are currently willing to forego in an effort to secure some aircraft.

Mid-Size Jets: A decrease of 41 units to our tracked 45-model grouping lowered availability to 5.6% of the active fleet and equated to a 7.9% inventory decrease for the month, 50.5%, YTD, and 55.8% YoY. With buyers focusing on higher quality assets, the group’s Quality Rating tumbled 3.5% to a 12-month low 5.108 (4.4% lower, YoY), but still managed to maintain Mid-Size Jets within the ‘Very Good’ range. 

Maintenance Exposure worsened/increased by 2.1% (0.5% higher YoY) to a figure worse/higher than the 12-month average.

Ask Price followed suit, decreasing a substantive 16.1%, lowering the group’s prices 12.9% YTD, and 20.3% YoY. Unsurprisingly, the ETP Ratio increased to 79.3%, a 12-month worst figure. Even though demand is quite apparent for Mid-Size Jets, we continue to be surprised by the high number of transactions in view of the limited availability.

Light Jets: Ample transactions during November reduced the inventory of 29 tracked Light Jet models to 4.3% of the active fleet. Availability decreased by an additional 14 assets, equating to 3.8% for the month, 48.6% YTD, and 52% YoY.

Buyers apparently preferred lower-priced units carrying more upcoming maintenance events, helping worsen the Quality Rating by 0.3% for the month, and 2% YoY. On the plus-side, maintenance events are also going to be less expensive, as the remaining inventory’s Maintenance Exposure decreased 0.4% for November (a second consecutive 12-month low figure) and 7.4%, YoY.

Lastly, Ask Price rose 7.3% as we closed November, leaving pricing down 12.4% YTD, and 13.8% YoY. The net effect on the ETP Ratio was a reduction to 112.7% that, while justifiably concerning for sellers, represented an improvement from October’s record-high 121.7%.

Whether the current group of sellers can realize the prices they are seeking is questionable, considering the high number of Days on the Market many Light Jets have accumulated.

Turboprops: Sporting the second-best rating in terms of asset quality, Asset Insight’s 17-model tracked Turboprop fleet’s inventory was 5.4% lower (22 units), and is now down 40% YTD, and 44.5% YoY. 

The last time Turboprops posted such a high Quality Rating was back in July 2021, and, although November’s figure was lower than the group’s 12-month average, 5.112 was an improvement of 2.7% over October’s 12-month low figure (albeit also 1.9% lower than this time in 2020).

It was also sufficient to elevate the group back into the ‘Very Good’ range. Maintenance Exposure improved 5.5% for the month, but that was still 5.3% worse (higher) YoY. Ask Price decreased 1.9% (leaving it up 0.3% YTD, and 0.3% lower YoY), and higher than the average Ask Price for Light Jets during eight of the last nine months.

The best news is the group’s ETP Ratio. It has floated above and below the 40% ‘excessive exposure’ demarcation point during the past twelve months, improving to 42.1% in November – not that October’s 44.1% Ratio was concerning for most sellers.

Translation: Sellers of the tracked Turboprop models have ample opportunities to negotiate value-based transactions, especially when you consider that only 4.3% of the active fleet is listed for sale.

MI www.assetinsight.com


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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