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New & Used Aircraft Market Report

Business jet flight activity is down.

In this month’s >> KNOW MORE article- we will review the JETNET numbers for Business Jets ‘FOR SALE’ and ‘FULL RETAIL SALE TRANSACTIONS’ compared to the previous year to provide a full assessment of the current market environment - including fuel price changes and flight activity.

While the recession is in the process of ending- a word of caution is necessary in that we believe we are facing a sub-par recovery period as activity remains in the red.

First- though- we will discuss the GAMA (General Aviation Manufacturers Association) shipment reports to provide a breakdown of the new aircraft shipment picture. This is necessary because NEW aircraft deliveries are based on the successful sale of existing aircraft in the pre-owned market - so a market change (increase or decrease) by either one will have an impact on the other.

THE NEW BUSINESS JET MARKET
As depicted in Table A (top right)- General Aviation Aircraft Shipments of New Aircraft in the first half of 2009 indicates that the overall market is down 46% in total shipments and 23.1% in total billings in a comparison to the same period for 2008. All ‘New’ shipments by group are showing large double digit percentage declines.

When the VLJ aircraft shipment numbers are subtracted from the business jet shipments- as shown in Table B (center- right)- the percentage decline drops only 0.6% from -37.9% to -37.3%. As most readers are aware Eclipse Aviation stopped production of the Eclipse 500 aircraft and filed for Bankruptcy. During August 2009 in a bankruptcy report though- Eclipse came under new ownership with a longer-term goal of renewed production targeted for the first half of 2011.

While VLJ shipments have declined due to Eclipse Aviation’s closure- the Cessna Mustang nearly doubled in shipments from 34 to 67 aircraft in the first six months of 2009 over the same timeframe in 2008. Further- Embraer reported the delivery of two newly introduced Phenom 100 aircraft in the last quarter of 2008 and 21 deliveries in the first six months of 2009. These two VLJ models are keeping the new VLJ Market segment alive.

Table C (previous page) is a comparison of the “Big Five” OEM shipments in the first six months of 2009 versus 2008. As a group the “Big Five” shipments are down by -25.4% for these comparative periods.

US VS. NON-US
Table D (top left) shows the worldwide shipment comparison of the first six months of 2009 versus the first six months of 2008 split between U.S. and Non-U.S. regions. The United States’ new shipments have declined by -45.5% which accounts for 88% of the total change. Also- the percentage of the U.S. versus worldwide shipments declined from 73% to 64%- indicating the worldwide share of deliveries for the US decreased by 9% compared to 2008.

PRE-OWNED BUSINESS JET MARKET
After four months of a steady 17.4% of Business Jets “For Sale”- the month of July saw a slight increase to 17.7%- but August was back down to 17.4% as reported by JETNET (see Chart A- left).

The largest amount of change in the Preowned aircraft “FOR SALE” in August 2009 compared to August 2008 came from newer aircraft- with an average age of less than five years - as illustrated in Table E (left)- (sourced from JETNET).

Unsurprisingly though- the percentage “FOR SALE” progressively increases with each advancing age group. Business Jets that were built in 1989 or before (21+ years old) have the highest percentage for sale. As a group they average 25.1% or one quarter of the fleet For Sale. As mentioned- the greatest change is from the 0-5 age group with 219 more for sale.

Table F (left) breaks out the ‘Original Owners’ from the combined total to show that 624 aircraft For Sale in August 2009 were from original owners out of the 2-937 - or 21.2%. Compared to August 2008- the total number for sale has nearly “doubled” for this group of owners from 347 to 624 as reported by JETNET.

Not surprisingly- the 0-5 year old aircraft group has the largest share of original owners (62% - or 3-982 of a total 6-373). This is important as these owners have owned their aircraft for less than five years- and have now listed them for sale. The next group - the 5–10 year old aircraft - also saw a significant increase in the number put up for sale compared to last year.

FULL SALE TRANSACTIONS
In this section we report the full sale transactions for pre-owned business jets over the past 10 years from January to August- to determine how 2009 stacks up in a broader spectrum. As depicted in Table G (right)- 2009 YTD full retail sales provide the lowest numbers recorded at 613- according to JETNET. Previous to this low was the year 2001 at 718 - that was just prior to the 9/11 attacks.

Another indicator shown in Table G is the Average Days on the Market (DOM) that shows 2009 at 253 days or 8.4 months before an aircraft is sold. This is the shortest amount of time since the years 2000 and 2001 when it took around seven months for a full sale transaction on average.

Our conclusion is that the Business Jet inventory for sale remains at peak levels. Full sales transactions are at their lowest levels in nearly 10 years. However- when buyers are found- the length of time to sell is occurring in less time than historical averages.

JET-A FUEL PRICES
Since January 2009- Jet-A fuel prices have been lower than last year by an average of $1.77 per gallon. For example- in August 2009 Jet-A fuel prices as reported by a Conklin & de Decker survey of 30 major U.S. General Aviation airports was at $5.04 per gallon- compared to $6.94 per gallon in August 2008 - a decrease of almost $2.00 or 28% per gallon.

Naturally one wonders whether there has there been more flight activity (operations) as a result of the reduction in fuel prices compared to the fuel pricing bubble from last year? To answer this question- we have analyzed the month-over-month business jet flight activity data from February 2008 to June 2009 in Chart B (right).

In a comparison of the month over month percentage change of business jet flight activity Feb-Mar 2008 (-0.9%) the flight activity has steadily declined until February 2009 (-30.5%)- and over the past four months has slowly improved- showing less decline for June 2009 at -22.2% - and that is something we haven’t seen since late last year.

It is our belief that the first signs of recovery should be seen from an improvement in business jet flight activity. While the past four-month improvement is a positive sign of a slow and steady recovery- it may be too soon to predict when a full recovery may be back in place. We will continue to track and report these market changes in future articles.

It is noteworthy to comment that multiple factors coalesce to influence business success. JETNET is a company that can provide timely market information to help you succeed - at this year’s NBAA Event- it will be worth your time to stop by Booth #2950 to learn more.


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