Business Aviation Market Overview - September 2022

Everyone deserves a summer break, so this month Brian Foley takes time off from market dynamics to focus on the more leisurely topic of July’s EAA AirVenture Oshkosh...

Brian Foley  |  08th September 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...

EAA AirVenture Oshkosh Night Show, by Nate Hammond


For others seeking an informal, laid-back dose of aviation immersion during the vacation season, the answer may be attending the Experimental Aircraft Association’s (EAA) annual AirVenture airshow in Oshkosh, Wisconsin during the last week of July.

Those who normally attend Business Aviation’s typical haute events must start by hanging up their suits and ties and digging out the cargo shorts, T-shirts, sneakers and baseball caps.

The event draws roughly 600,000 attendees to a town with a population of just one tenth of that (it’s only the ninth-largest town in the state). Couple that with grass fields for parking and camping which quickly turn to mud when it rains, AirVenture very much becomes the Woodstock of the airplane world.

The people population isn’t the only thing that soars. Some 10,000 General Aviation aircraft, typically the small, propeller-driven “bug bashers”, descend on the airport during the week with pilots and passengers often camping in tents next to their parked flying machines. And airplanes and campers alike are often rocked in the middle of the night by violent thunderstorms that frequent the US Midwest during the summer season.

Contrary to most of our industry’s trade show venues, you won’t find a Four Seasons or Ritz Carlton nearby. Instead, the few and far between hotels include such brands as Motel 6, AmericInn and La Quinta Inn – the kind with the outdoor marquis signs that tantalize travelers with “Color TV”.

Despite this, local hotels fill up a year in advance, causing some last-minute fans to drive 90 minutes or more to the next-closest vacancy.

Having been in the latter category in previous years, I opted for the past two years to be one of the thousands of hoi polloi in the grass campgrounds adjacent to the show.

Once through the entry gates of the show, the atmosphere is more that of a fair or theme park than the formal and tidy ambiance of a hoity-toity Business Aviation function. A Disney-like map is provided along with farm tractor-pulled trolleys to get to what EAA refers to as a ‘neighborhood’. 

This includes special areas to view different categories of aircraft such as homebuilts, warbirds, vintage, ultralights and more. A directory of literally hundreds of seminars conducted during the week is provided with topics covering everything from correct hand propping to tips for flying the backcountry.

Each day features a different afternoon airshow featuring just about anything that flies including warbirds, military jets, helicopters, aerobatic planes and even eVTOLs. There’s an outdoor aviation- themed movie shown each night, and a very popular nighttime airshow twice during the week.

Meeting Top-Tier Manufacturers in a Relaxed Atmosphere

There are around 800 exhibitors at the show. Granted, a good portion of the booths are along the lines of souvenirs and doggy airplane ear muffs, but there are also some top-tier manufacturers where one can touch and feel their new products in a more relaxed atmosphere.

These include the likes of Cirrus, Continental, Garmin, HondaJet, Pilatus, Piper, Textron, and many others. Often their top corporate leadership is in attendance and easily approachable, at least if they’re identifiable behind their floppy Crocodile Dundee hat and aviator sunglasses.

Some of the larger exhibitors host invitation-only hospitality functions in their display areas. Being AirVenture, beer and bratwurst-themed cookouts with cheese curd appetizers replace the canapés and champagne typical of the BizAv world. One is more likely to run into a Red Bull stunt person at these affairs than an industry titan, which makes the experience all the more unique.

This isn’t the show for those expecting the creature comforts of limo service, high-end hotels, world class restaurants and cultural activities. But for aviation mavericks with a wild hair for something different and insensitivity to crowds, hot temperatures and soaking rains, AirVenture is the aviation event that won’t disappoint.

MI www.brifo.com

Global Flight Activity

Record-breaking Business Aviation flight activity was recorded by WingX Advance during July, though there were signs of inflexion as North American activity dipped...

July 2022 proved to be the busiest July on record for business jet flights operated globally, and the sixth busiest month overall. But it was only the fifth busiest month so far this year, and just 2.5% busier in terms of sectors operated compared to July last year (up 1.7% if turboprop activity is included).

For the year so far, business jet demand looks very strong, up 22% on same period in 2021, and up 21% on pre-pandemic January-July 2019.

North America

In North America, business jets and turboprops flew 1% fewer sectors in July 2022 compared to July 2021, even if they sustained a sizeable 7% increase over July 2019.

The slowdown is only slight, and is similar for the ‘still-recovering’ Canadian and Mexican markets. However, it was more pronounced for the Bahamas, Dominican Republic, Puerto Rico and Turks and Caicos, all of which saw record-breaking business jet activity during the pandemic.

The slight decline in traffic in the US was most obvious in the Part 135 and Part 91K markets. The trend is more severe for the dedicated branded-charter operations, where sectors were down by 13% in July 2022 compared to July 2021.

Fractional ownership flights were flat in July, year-on-year, while aircraft management operators flew 6% fewer missions. 

By comparison, private flight departments were 9% busier than they were last July. Corporate flight department activity edged up by 2% year-on-year, but was flat compared to July 2019.

Europe

Business jet flights in Europe were up 10% in July 2022 compared to July 2021, marking the busiest July on record for the continent (fully 23% busier than in July 2019).

Whilst France was the busiest departure country for business jets in July, the biggest year-on-year increase came from the UK, which more than doubled the number of flights in July 2021.

Both Italy and Spain continue to attract record-breaking activity, while the downward trend in Russia softened with a 49% drop in business jet departures, versus July 2021. Charter operators in Europe flew 2% more than in July 2021, and were 16% ahead of their July 2019 activity levels.

Rest of the World

Outside Europe and North America, bizjet activity was up 21% compared with July 2021, and up 52% vs July 2019. There were some signs of slowing demand, with Brazil being the busiest market but registering 2% fewer flights than in July 2021. Flight activity in Morocco, Colombia and China was also down on July last year.

Business jet activity in China was down by 41% year-on-year, and by 23% compared to July 2019. However, across all of Asia, business jet flights were up 15% compared to July last year, and up 24% in terms of hours flown.

Meanwhile, the Middle East region may be seeing some slowdown, with business jet departures down by 5% towards the end of July.

“The record market for business jet demand has obviously peaked, with the quickly softening charter market the lead indicator of lower utilisation to come,” said Richard Koe, Managing Director, WingX Advance. “The trends are clear in the US market, and are also starting to show in parts of the European market, although the UK saw record-breaking business jet activity in July 2022.”

MI www.wingx-advance.com

In-Service Aircraft Maintenance Condition & Marketability

Inventory for Asset Insight’s tracked 134-model fleet increased for the fourth consecutive month in July, with all four groups benefiting.

Aircraft availability expanded by 3% (24 units) and, while still less than half the number of assets are listed compared to the June 2020 peak, they number only 7.8% below the December 2021 total.

Aircraft Values

Average Ask Price for the tracked fleet increased 9% in July to register a 12-month high figure. The rise equated to a 39% increase Year-over-Year (YoY), and more than 71% Year-to-Date (YTD).

While transaction values for young, low-time units are still demonstrating the average buyer’s preference, Ask Prices being sought by ‘motivated’ sellers are beginning to reflect lower expectations and, quite possibly, the slow, steady pace toward market equilibrium.

Inventory Fleet Maintenance Condition

The Quality Rating and Maintenance Exposure figures appear to differ in terms of their market view. Both decreased during July.

Quality Rating: The listed fleet’s Quality Rating decreased to 5.251 in July (1.1%), following June’s 5.310 and April’s 12-month best 5.347, on Asset Insight’s scale of -2.5 (low) to 10 (high). The fleet just managed to remain within the ‘Excellent’ range, while the decrease evidenced an increase to the number of upcoming maintenance events. The figure was also 0.3% worse/lower YoY.

Maintenance Exposure: At the same time, the cost of embedded/accrued maintenance (what Asset Insight refers to as Maintenance Exposure) also decreased, but in this case that meant a 0.7% improvement (although last July’s figure was 2.6% better). The reduction points to a decrease in the average cost of completing the events embedded in current inventory assets.

Maintenance Exposure to Ask Price (ETP) Ratio

Higher Ask Prices and a reduction in Maintenance Exposure cannot help but improve asset marketability, and the ETP Ratio reflected that fact by setting a 12-month best/low for the second consecutive month, this time at 54.9%.

As those who follow these reports know, 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 Q2, assets whose ETP Ratio was 40% or higher were listed for sale nearly 156% longer (on average) than aircraft whose Ratio was below 40% (183 versus 469 Days on Market). For the month of July, nearly 39% of Asset Insights tracked models posted an ETP Ratio above the 40% excessive mark.

Market Summary

Even though availability increased for the fourth straight month, that does not necessarily equate to desirable assets becoming available. In fact, the Quality Rating’s decrease suggests that lower-quality assets entered the inventory pool in July.

Ask Prices not only averaged higher during July, but three of the four groups set all-time high figures. However, ‘priced to sell’ and ‘motivated seller’ advertisements also began to appear, suggesting that some sellers have been unable to achieve their desired price.

Numerous signs are pointing to a market moving toward supply/demand equilibrium. The one potential concern is whether the pendulum will shift from the current seller’s market back to what we experienced only two years ago – neither extreme being positive for the industry as a whole.

Large Jets:  Availability for Asset Insight’s 43-model tracked fleet of Large Jets increased 2.9% (five units) during July, and is now up 4.8% YTD, although it remains 53.1% below the June 2020 peak).

The group’s Quality Rating improved 1.2%, and that figure was also 1% better/higher YoY. July’s 5.612 was better than the 12-month average, and well within ‘Outstanding’ territory. Maintenance Exposure improved/decreased a very respectable 4%, which also bettered last July’s figure by 2.9%.

The surprise was the Ask Price figure, which decreased 2.6%. While still above the 12-month average, the figure was also 25.1% higher YTD, and 40.6% higher YoY. However, the figure negatively impacted the ETP Ratio, increasing it to 35.5%, compared to June’s 12-month low 34.1%. On a positive note, the Ratio kept the group below the 40% ‘excessive exposure’ point for the fifth consecutive month – quite an achievement.

Mid-Size Jets:  Availability rose by 5.4% (11 units) for the 45-model tracked Mid-Size Jet fleet, placing inventory only 6.5% below the figure generated at the end of 2021. Though statistically this represented an improvement for buyers, there are still 56.8% fewer aircraft available compared to the June 2020 peak.

At 5.067, the Quality Rating reflected a 2.7% decrease for the month (and YoY), but kept the group within ‘Very Good’ territory. Maintenance Exposure rose/worsened a substantive 8.8% for July, and that figure was also 13.1% worse YoY.

Ask Price figures continue to be impressive, with Mid-Size Jets posting a third consecutive monthly increase, this one equating to 4.2%, and setting an all-time high value. YoY the group’s increase now totals 72.3%, and YTD an astounding 134.8%. The effect on the ETP Ratio was a reduction to 54.4%, the group’s second consecutive 12-month low/best figure.

As we stated in June’s analysis, the group’s ETP Ratio may not be low, but the increase in availability with assets that are more marketable should help both buyers and sellers.

Light Jets: Inventory for the 29-model tracked Light Jet fleet increased 1.2% (three units), equating to a reduction of 4.1% YTD. By way of comparison, the number of Light Jets listed for sale was 52.9% lower than the June 2020 peak.

The Quality Rating saw only a nominal 0.1% improvement to 5.269 from June’s 5.264, keeping the group within the ‘Excellent’ range, and also reflecting a 1.3% improvement YoY. The Maintenance Exposure figure was more impressive, decreasing 4.2% to near the 12-month average, but the figure was 0.4% worse/higher YoY.

Ask Price set an all-time high figure through a 4.5% increase that was also 59.2% higher YoY and 79.2% higher YTD. The ETP Ratio took advantage of the Maintenance Exposure and Ask Price improvements to post a 12-month low figure of 83.1%.

Whether or not the Ask Price figures can actually generate equivalent Transaction Value numbers remains to be determined. For now, many Light Jets ‘appear’ to be more marketable.

TurbopropsThe group’s availability increased 3.1% (five units), bringing Turboprop inventory 23.4% lower YTD and 36.3% below the peak availability posted in June 2020. The changes to the ‘for sale’ mix were not positive, as the Quality Rating dropped 3.2% to a lower-than-average figure that, at 5.055, just managed to keep the group within ‘Very Good’ territory. The figure was also 1.2% worse YoY.

Maintenance Exposure worsened through a 3.1% increase that was, surprisingly, 2.5% better YoY. And Ask Price rose 7.6% to an all-time high figure, and that equated to an increase of 20.4% YoY, and 28.3% YTD. The figure lowered the group’s ETP Ratio, enabling it to achieve its second consecutive 12-month best figure at 35.2%.

If you’re keeping track, this was not only the group’s third consecutive month below the 40% ‘excessive’ ETP Ratio level, but July’s lowest ETP Ratio among the four groups. At the same time, the group’s selection rose from 9.1 to 9.5 units per model, based on Asset Insight’s 17-model tracked fleet, representing the widest asset selection available to buyers.

MI www.assetinsight.com

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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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