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BizAv Intelligence - Market Indicators

Our monthly round up from the industry's leading analysts including JP Morgan, Wingx-Advance and Jet Support reflect on Sales in Business Aviation markets worldwide for the month of November 2014.

AvBuyer   |   7th January 2015
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US and Canada

In the US and Canada, November flight activity followed the usual trend and posted a decrease from October to finish the period down -9.3% overall, month-over-month.

All operational categories were down, with the Part 91 market posting the largest monthly decrease, down -12.3%. The Part 135 and Fractional markets posted decreases of -5.2% and -7.2% respectively.

Looking at the aircraft categories, all posted a monthly decrease with turboprop aircraft reporting the largest drop, down -10.6%. Small and mid-size cabin aircraft posted declines of -10.3% and -8.4% in that order. The large cabin market posted a decrease of -6.5% month-over-month. The largest month-over-month decrease, meanwhile, occurred in the Part 91 turboprop market which finished the month down -13.8%. 

Reviewing year-over-year flight activity (November 2014 vs. November 2013); TRAQPak data indicates that November 2014 posted a flight activity increase for the twelfth consecutive month, up 3.7%. The results by operational category were positive across the board with Part 135 reporting the largest growth, up 8.6%. The Part 91 and Fractional markets were up 0.8% and 3.3% respectively.

Flight activity by aircraft category finished positive for all aircraft, with large cabin leading the way, up 6.7%. Turboprops rose for the third month in a row with a 1.6% year-over-year gain. Small and mid-size cabin aircraft posted year-over-year increases of 2.8% and 5.4% in that order.

The small cabin, Fractional market was finally topped by the large cabin Part 135 market for the largest individual segment growth (a 19.8% year-over-year increase) ending a run of 10 consecutive months for small cabin, Fractional aircraft. Another individual market result worth noting: the turboprop, Fractional sector posted a significant year-over-year increase of 16.9%. 

November 2014 vs October 2014

Part 91 Part 135 Fract. All
Turboprop -13.8% -5.2% -7.1% -10.6%
Small Cabin Jet -12.0% -7.8% -10.3% -10.3%
Mid-Size Jet -12.6% -4.1% -6.3% -8.4%
Large Cabin Jet -8.9% -1.9% -5.8% -6.5%
All Combined -12.3% -5.2% -7.2% -9.3%


November 2014 vs November 2013

Part 91 Part 135 Fract. All
Turboprop -2.8% 8.4% 16.9% 1.6%
Small Cabin Jet 1.2% 2.0% 13.9% 2.8%
Mid-Size Jet 5.9% 11.1% -1.9% 5.4%
Large Cabin Jet 1.6% 19.8% 3.8% 6.7%
All Combined 0.8% 8.6% 3.3% 3.7%



In-Service Aircraft Technical Condition & Price

An Asset Insight Index analysis conducted on October 30, 2014 covering 76 fixed-wing models and 1,514 aircraft listed “For Sale” revealed the following Overall Market asset quality Ratings...

Maintenance Rating (ATC Score): Average Asset Technical Condition Score (an aircraft’s rating relative to its Optimal Maintenance Condition – achieved the day it came off the production line) worsened by 3.8 AI2 basis points, registering 5.387 compared to September’s 5.425. That’s a Rating still comfortably above the Mid-Time/Mid-Life 5.000 level – on the ATC Score scale of -5 to 10.

Financial Rating (ATFC Score): Average Asset Technical Financial Condition Score (evaluating scheduled maintenance event cost based on the aircraft Maintenance Rating) decreased by 6.3 AI2 basis points, but remained above the Mid-Time/Mid-Life 5.000 level – on the zero to 10 ATFC Score scale – by registering 5.012, versus September’s 5.075 (the best figure of the past twelve months).

Asset Exposure (ATFE Value): The average Asset Technical Financial Exposure Value (an aircraft’s accumulated maintenance financial exposure) improved by an additional $49k this month, further lowering the average aircraft’s accrued maintenance expense to $1.328m – slightly worse than the 12-month average figure of $1.319m.

Large Jets gave up more ground to Medium Jets this month (whose Ratings were excellent), but still captured first place relative to asset quality. Small Jet figures kept the group in third place, while trades of higher asset quality Turboprops led to an understandable drop in the group’s latest Ratings.

Exposure to ETP Ratio

Spread in the ratio of Asset Exposure to aircraft Ask Price (ETP Ratio) for the aircraft tracked widened by 15 percentage points this month, but the average continued to improve, falling from 46.8% to 44.7%. Anything over 40% is considered to represent excessive Asset Exposure in relation to Ask Price, so the average ETP Ratio remains high. A slight improvement is the average Asset Exposure figure, coupled with a 7.2% average Ask Price increase, led to this month’s ETP Ratio improvement.

Market Outlook

Average Ask Prices increased by approximately $425k this month, to $5.94m – the highest value since May.

Large Jets increased 5.5%, reaching $16.55m and rising above the group’s 12-month average of $16.29m;

Medium Jets increased 2.4% to $3.75m (just $20k shy of the group’s 12-month high);

Small Jets fell slightly (-0.2%) registering $1.78m (just above the group’s 12-month low of $1.77m);

Turboprops fell -4.2% resulting in the third consecutive monthly drop and 12-month low figure at just under $1.57m compared to last month’s $1.63m. Asset quality ratings for October revealed that quality assets are trading, as the number of aircraft listed for sale decreased by 28 compared to last month. While Medium Jet ratings were excellent, the relatively high Asset Exposure value is likely to be reflected in offer prices tendered by experienced buyers. Small Jet ratings are good, but offer prices from prospective buyers are less than likely to generate seller appeal.In view of recent Turboprop rating improvement and record low Ask Price, we have repeatedly advised prospective buyers of the opportunity to optimize their value by focusing on asset quality. It would appear that some buyers listened.



Modest Gains In 3Q BizAv Activity


On a regional basis, the results were mixed with positive activity in the developed markets, but an overall decline in less mature Business Aviation markets.

“What stands out is the large decline in African Business Aviation activity,” noted Book. “As the Ebola crisis persists in Western Africa, many business travelers have been reluctant to travel to the region, and that reluctance is coming across in our data.”

“The results we’re seeing are consistent with macro trends in the greater U.S. economy in that there continues to be steady growth, but at a lower rate than during the second quarter when the economy was bouncing back from a particularly harsh winter,” elaborated Neil Book, President & CEO, JSSI. “Fortunately for business jet operators, the cost of fuel has come down this year. With that said, the cost of maintenance continues to be quite volatile.”

Global Business Aviation activity saw modest gains in Q3 2014, according to JSSI’s most recent Business Aviation Index, with a two percent growth quarter-over-quarter (Q/Q) and 2.2 percent growth year-over-year (Y/Y)…


Africa -8.5% -28.2%
Asia-Pacific -5.4% -6.9%
Central America -11.9% -9.7%
Europe 11.2% 10.1%
Middle East 13.5% 15.5%
North America 0.0% 2.5%
South America 8.8% 14.4%


JSSI INDEX: Quarterly

Q2 2013 3% 1%
Q3 2013 1% 2%
Q4 2013 7% 6%
Q1 2014 -5% -2%
Q2 2014 8% 3%
Q3 2014 2% 2.2%



J.P. Morgan's Business Jet Monthly Highlights

Encouraging signs: Light jets are gaining momentum, according to the November 2014 edition of Business Jet Monthly.

The US accounts for ~60% of the global business jet fleet, and after 5+ difficult years, demand is improving. Light jets should benefit in particular since North America accounts for two-thirds of deliveries. Steady growth of ~4% in US flight ops underlies the recovery, and Light jet used pricing is approaching ‘flattish’ year-over-year - better than other categories.

Manufacturers, suppliers, and brokers have also offered positive comment on US demand recently. However, as JP Morgan noted previously, demand for larger aircraft is facing cross-currents even as demand at the low end improves. Large cabin jet demand looks ‘flattish’ overall since about two-thirds of demand is from outside North America (largely from Europe and Asia - especially China) in which demand is softer. Large cabin jet production already exceeds the 2008 peak due to strong EM demand in recent years that is now waning. Textron should benefit most from strong US light jet demand.

Deliveries are up 7% through first 3Q. 3Q 2014 business jet deliveries increased 1% year-over-year for the five major OEMs, bringing the YTD increase to 7%.

JP Morgan expects 682 deliveries in 2014, which would be 3% above 2013 and the first increase since 2008. Moreover, JP Morgan forecasts a 13% increase in 2015, driven by new aircraft including the Legacy 500/450, Citation Latitude and HondaJet.

Used jet inventory declined 20 bps in October. Aircraft for sale represented 7.8% of the fleet for in-production models, below the 8.0-8.4% range in prior months this year. Heavy and Light jets drove the decline, falling 20 bps each, with notable contributions from the Learjet 40/45, G500/550, and Falcon 900. Medium jets were flat.

JP Morgan estimates that inventory in the “toddler and pre-K fleet” (0-5 year old aircraft) edged down 10 bps to 5.5% in October, 110 bps below the long-term average and back to the late 2013/early 2014 level.

Average asking price was up 0.5% m/m in October. Avg=erage asking price is now $10.89m, down 7.5% year-over-year. Sequentially, Heavy jets improved 1.2% (although the G550 was down) and Light by 0.9%, partially offset by a 2.9% decline for Medium jets. Average asking price has been flat-to-up for three months and is 1% above the July level.

US flight ops increased 6.5% y/y in September. Flight ops growth accelerated after a slow August, and 3-month moving average growth remains ~4% year-over-year where it has been each of the past seven months.

The US is the healthiest major business jet market, and the current pace of flight ops growth seems sustainable with activity still 7% below the September 2007 level. European flight ops, meanwhile grew 1.6% year-over-year in October and are down 0.5% YTD.



Business Jet Market by Aircraft Type

The ‘Business Jet Market by Aircraft Type (Light Jet, Mid-size Jet, Large Jet), by Geography (North America, Asia-Pacific, Europe, the Middle East, Latin America, and Africa) - Global Forecasts, Trends & Analysis to 2014 – 2020’ report defines and segments the global business jet market...

The business jet market is estimated to register a CAGR of 6.86% to reach $33.8 billion by 2020.

Latin America, APAC, and Africa: These areas are expected to be the key growth regions in the business jet market. Latin America accounts for 11% of the global business jet market, but has the oldest aircraft fleet in the world. Hence, expected replacements will account for a significant number of deliveries in this region.

APAC constitutes about 12% of the global business jet market, with China and India being the key players. Underdeveloped infrastructure, high import taxes, and high user fees stunt the business jet fleet in these countries. Continued globalization and a burgeoning economy should increase the penetration level of business jets there.

North America (US and Canada): This region accounted for the largest share (52%) of the global business jet market in 2013. The already established infrastructural capacity and the highest number of older aircraft in the world are expected to be the cause of increased demand for new aircraft, thereby driving growth in the North American region.

The Air Charter Market: There were about 3,650 worldwide charter and air taxi fleet in 2013. The primary demand for chartered flights is due to consistent demand from North America and Europe, which constitutes 70% of total demand. In the recent past, the strongest fleet growth in the charter market has been observed from APAC, Latin America and Africa.

Fractional Aircraft Share Sales: These remained steady compared to the previous year. Moreover, the usage of fractional fleet and the number of aircraft deliveries has increased, indicating a substantial, but constant recovery in the market. In the coming years, there will be a demand for fleet replacement from the existing fractional operators, while the demand for new aircraft is expected to come mainly from the markets wherein fractional aircraft is being introduced. APAC, Latin America and Africa constitute the key potential regions that are expected to deliver high growth in this market.



 Insight from the Teal GroupThe Template for Success

Embraer proves a rule, notes aviation analyst Richard Aboulafia. The aerospace industry’s entrance barriers are among the highest in the world. How did Embraer not only manage to break into the top five Business Aviation OEMs, but do it with such excellence?

“For decades I’ve had my own ideas about Embraer,” Aboulafia outlines. “But until very recently, I’d never visited São José dos Campos. Having just done so, I was highly impressed by everything I saw and by the many people I met. Embraer is an exceptional company.

“It’s also the only company in the world that successfully entered the civil aircraft industry since 1960. All the other ‘emerging’ country producers who tried and failed sang the same chorus: ‘Embraer did it, so can we!’ They couldn’t. Here’s what Embraer did right…”

Product Launch Discipline.

Embraer’s history clearly shows that it doesn’t launch something until it has rigorously assessed the market for the new product; pricing in that product’s segment; and competitive dynamics in that segment. In short, Embraer has never launched a “Ready, Fire, Aim” program like the CSeries, or A380.


Emerging producers face a difficult paradox: to be successful, you need to privatize; to privatize, you need to be successful. Emerging producers can get stuck in a holding pattern with this. How did Embraer escape? Simple…

2. Incredible luck.

It’s better to be lucky than good. The EMB-110, -120, and -145 airliners were all in the right place at the right time. Embraer launched a line of small and mid-sized cabin business jets just before Hawker died and Cessna axed most of its talent. Nobody could forecast this; Embraer got very lucky.

3. Be willing to lose money for a long time.

It’s easy to forget that for its first 25 years Brazil was an inefficient, money-losing government hobby shop. If it weren’t for its amazing luck (followed by some very smart management), Embraer might have been yet another epic emerging OEM failure.

4.Global sourcing.

Embraer’s designers can shop anywhere for the best content at the best price. The company is one of Brazil’s biggest exporters, AND it’s one of its biggest importers, too. Compare Embraer’s open sourcing with China’s insistence on technology transfer for the entire supply chain, with no intellectual property protection.

5. Focus on management, people and education.

Building a factory and launching new planes is hard enough, but cultivating a steady supply of qualified people is harder still. Embraer has been doing that since its birth.

6. Open markets.

While Embraer is Brazil’s biggest national defense prime, it has no special status in the country’s civil aviation market. There are very few Embraer civil jets in Brazil. From the start, Embraer focused on competing in export markets.

There are undoubtedly others, but above are the key factors that Aboulafia believes turned Embraer into a great, global aerospace company. But no aerospace company can rest on its laurels for long, and next month Aboulafia will consider the different challenges facing a mature OEM than those faced by an emerging OEM.




 Avionics Market Report - 3Q 2014

According to the Aircraft Electronics Association (AEA), in the three-month period of July-September 2014 the total worldwide Business and General Aviation avionics sales amounted to more than $614 million.

The figure represented a 5 percent decrease in sales compared to the 3Q 2013 amount of over $646 million. This 3Q amount brings total worldwide sales for the first nine months of 2014 to over$1.9 billion. Despite the third quarter indicating a slowdown in sales compared to the first and second quarters of 2014, this year's sales are up 2.7 percent compared to the first nine months of 2013 of over $1.8 billion.

According to Paula Derks, AEA president, "The report is only in its second year of quarterly reporting, so it's difficult to draw any conclusions on seasonality of sales just yet; however, this will be worth watching in future years."

Of the $614 million in total sales in the third quarter, more than $323 million, came from forward-fit (avionics equipment installed by airframe manufacturers during original production) sales and comprised – or 52.7 percent of total sales. Retrofit (avionics equipment installed after original production) sales amounted to over $290 million (47.3 percent) of total sales. 63.4 per cent of the sales volume occurred in North America (U.S. and Canada), while 36.6 percent took place in other international markets.


Quarter Retrofit Forward-Fit Total Sales
1Q 2014 $321.33m $330.42m $651.75m
2Q 2014 $318.47m $333.66m $652.13m
3Q 2014 $290.72m $323.69m $614.41m
YTD 2014 $930.52m $987.76m $1.918bn



BizAv Activity - Europe

WINGX’s latest monthly Business Aviation Monitor reports a total of 57,730 Business Aviation flights in November, a -0.9% decline year-on-year (YOY). This breaks a two month recovery and keeps 2014 activity year-to-date (YTD) 0.6% below 2013; equivalent to 4,442 fewer flights so far this year compared to last.

Geographically, the decline can be blamed on Eastern Europe - with flights down 18% (Russia down 14%). However, leading EU countries France and Germany were up, together with a cluster of Western and Central European markets, including Netherlands, Switzerland, Portugal and Czech Republic. On the downside, YTD growth trends in the UK stalled this month, with a -1% drop (-4% for private flights). Italy and Spain also subsided. Flights also fell -5% in Turkey (-11% for the year, the equivalent of 250 fewer flights per month).

Jet flights took the brunt of November's decline, in particular AOC activity, which fell -5.4% YOY. For example, charter flights fell -10% in Netherlands and Belgium, -30% in Poland and -60% in Ukraine.

Turboprop & Piston gains

In contrast, turboprop and piston activity gained in November, with 2014 YTD trends indicating that demand for these aircraft has recovered to pre-recession levels. Private demand for business pistons was up 9%.Scandinavia had the most turboprop and piston activity. 31% of Business Aviation flights in France were piston. Turboprop activity in Spain was +11% YOY.

“In Western Europe, Business Aviation activity is still edging back up this year, though this month’s data indicates this owes more to turboprop and piston activity, with business jet activity still languishing,” Richard Koe, Managing Director of WINGX Advance, noted. “Where there is still YOY increase in jet activity, it’s in the familiar VLJ and ULR jet segments.”


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Read more about: Buying Jets | Aircraft Sales Trends | Used Aircraft Sales Trends | JP Morgan | Argus Aero | AEA

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