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A Silver Lining In The Industry Cloud... Businessliners shine through.

New Business Jet shipment numbers were recently reported for 2010 and for the second year in a row the numbers have decreased from 870 in 2009 to763. Business Turboprop shipments decreased to 363 shipments in 2010 (from 441 in 2009). So as the decline in new shipments continues- we are in search of the silver lining in the industry cloud.

In the course of writing this article- we discovered one segment of the industry that surprised us all: the Large Executive (Businessliner) class - however- we will also seek to update our readership on the pre-owned market that is on the move.

As shown in Chart A- pre-owned Business Jet ‘Full Sales Transactions’ rose by 16 percent from 2009- and also exceeded 2008 by 4.8 percent. The gains in the pre-owned market numbers in 2010 may well have been the result of an 18.5 percent decline in the average asking prices – an economic correction forced by high ‘For Sale’ inventory levels and the lag in aircraft demand.

Historically- we have found a one-year lag in the recovery of New Business Jet deliveries versus pre-owned Full Sale Transactions. The pre-owned market started declining in 2000 and 2007. The pre-owned market grew from 2001 at 1-479 Full Sale Transactions to 2-232 in 2007.

New business jet sales are driven by strong economic activity- corporate profitability- wealth creation and business investment. As we have mentioned in previous articles- new aircraft orders are based on the health of the pre-owned aircraft market. Existing operators that want to buy a new aircraft usually need to sell their existing one in order to purchase a new one.

Unfortunately- the ‘For Sale’ business aircraft inventory continued to remain stubbornly high for most of 2010- but slowly decreased as shown in Chart B for both Business Jets and Business Turboprop aircraft for sale.

The percentage for sale at the end of January 2011 was 14.6% for Business Jets and 10.7% for Business Turboprops. These percentages are much higher than seen in late 2007 (pre-Great Recession). We currently remain in a ‘Buyer’s Market’- which is defined when the number of business aircraft for sale is greater than 10% of the number of aircraft in operation.

One of the market segments exposing the silver lining is the Businessliner aircraft segment. This group has done much better than the light and medium-sized business aircraft market and looks to have a solid future. There were 41 New Deliveries of Businessliners in 2010 with an estimated value of USD $2.2 billion. New Deliveries and Market Value both reached a peak in 2010 compared to any year in the past five years as demonstrated in Table A. Two of the ‘Businessliner’ aircraft models - the Bombardier Challenger 890 and the Dornier Envoy3 - had no deliveries in the past two years.

Table B outlines that (according to JETNET records) the installed Businessliner fleet totals 341 aircraft. Boeing leads the field with 140 aircraft or 41% and the BBJ (116 aircraft) leads all the Businessliner aircraft models in the aggregated fleet.

PRE-OWNED ‘BUSINESSLINER’ MARKET

As shown in Table C- there are 42 Businessliners for sale (or 12% of the total active fleet). Discounting aircraft with small fleet sizes- the Dornier Envoy3 has the largest number of pre-owned aircraft for sale at 20 (or 38%)- followed by Bombardier’s Challenger 850 at 11 (20%).

The 12 percent average ‘For Sale’ number is well below the mid-size business jets’ For Sale percentage (16.5%) and the light business jets (17.2%).

TO SUMMARIZE

Surprisingly- the Businessliner Market seems to have weathered the storm from the Great Recession with record number of new and pre-owned aircraft deliveries in 2010. We see every indication that the market demand for new and pre-owned Businessliner aircraft will continue to grow to fill the need of governments- sports teams- and various global corporations worldwide for spacious jets.

 

Read more about: JetNet

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