In this JETNET >>KNOW MORE analysis Mike Chase and Marj Rose assess the current US Flight Operations trends for business jets along with methods for buying new and used jets for sale…What will their research reveal of today’s market?
As we continue to be optimistic about the slow but steady recovery of the Business Aviation industry, we analyze the total US business jet flight operations to establish perspective on where the market is today, compared with before and immediately after the Great Recession.
Chart A illustrates the total US Flight Operations in 2016 and shows these increased by 58,000 (+1.4%) to 4.349m compared with the 4.291m business jet flights recorded in 2015.
As shown, there was a drop of 1.376m flights (28.5%) over the two-year period between 2007 and 2009. Since hitting the 2009 low point (3.449m flights), however, there has been a steady increase in US operations leading up to 2016. Nevertheless, the 4.349m flights recorded in 2016 were still 9.9% below the peak level set in 2007.
Number of US Business Jet Flights by Make
The number of business jets in-operation in the US at year-end 2016 was 12,686 (see Chart B). That number has increased steadily since 2005 from 9,464. Meanwhile the percentage split between US and Non-US business jets in 2016 stood at 60% vs. 40%, down from 71% vs. 29% in 2005. As depicted in the Chart, the current US/Non-US fleet percentage split has held steady since 2012.
Chart B also shows that the compounded annual percentage growth (CAGR) for US Flight Operations from 2009 to 2016 has increased at 6% CAGR (4.349/3.449) compared to the fleet growth of 4.1% CAGR rate.
Interestingly, Non-US fleet CAGR rates have exceeded the US in comparable periods by very significant amounts both in the pre-recession period (2.7% vs 10.0%) and the post-recession period (4.1% vs 7.5%).
Cash vs. Financed Transactions (New and Used)
Table A (new jet transactions) and Table B (used jet transactions) show the number of financed vs. cash transactions from 2006-2016, and show that cash is still king in the US jet sales marketplace.
The percentage of cash purchases for new jets has remained in the 69-77% range from 2006 to 2016, although the number of all transactions has ranged wildly between a low of 360 units (2013) to a high of 926 (2008). In 2016, the percentage is 75% cash transactions across a total of 404 transactions.
The percentage of cash transactions in the used jets sales marketplace has risen from 54% in 2006, peaking at 77% in 2011, and stood at 75% in 2016.
Note: The number of used financed and cash transactions are four times the number of new transactions (101 vs. 425 financed; 303 vs. 1,248 cash; and 404 vs. 1,673 overall) in 2016. Interestingly, in 2016 the New and Used jet transactions were both at 75% in favor of Cash transactions.
As our industry evolves and the events of the Great Recession become more of a distant memory, the story of the market recovery continues. Flight operations are improving and are now within 10% of the 2007 record level. The share of business jets in operation in the US are back to 60% of the world fleet, but the CAGR growth rates before and after the recession remain higher outside the US.
It may be a surprise to some that US business jet transactions continue with cash as the dominant method of payment, but we know many businesses today are cash rich and continue to record solid profits. We hope that corporate success leads to more business jet transactions in the near future.