Business Aviation Market Overview - September 2021

Could the market indicators be pointing towards a moderation in pre-owned aircraft sales activity? Brian Foley sees evidence that the pre-owned jet transaction frenzy is tempering to more typical levels…

Brian Foley  |  03rd September 2021
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Brian Foley

Brian Foley formed Brian Foley Associates (BRiFO) in 2006 to assist aerospace firms and investors with...



While one point does not necessarily make a trend, it appears that the industry has passed the high water mark of record numbers of pre-owned transactions and has just begun a return to more typical and sustainable levels.

The first half of 2021 handily beat the same period in any recent year. Since then, a downward correction has taken shape, beginning in July and signaling what could be the start of more typical transaction levels. Not that July 2021 was bad, it’s just more on par with July in prior years.

This change should act to moderate activity through yearend, but 2021 should still net out as a good year given the outsized first half.

As shown in the chart (below), this July’s activity level was right around where things had been in previous years. The numbers at the time of writing showed there have been 167 pre-owned jet transactions in July 2021, which compares to 219 in 2020, 165 in 2019, 185 in 2018 and 162 in 2017.

A five-year record of pre-owned bizjet transaction levelsWhile there will inevitably be more July 2021 transactions as additional records are received and tallied, it is not believed that even a flurry of last-minute filings is going to change the picture that this July is beginning to look a lot like previous Julys.

In no way is this anything cataclysmic, but rather a gentle nudge back towards the relatively healthy pre-owned activity levels which preceded the pandemic. In short, the sales activity of the last couple of years was simply not sustainable, and excess demand seems to have at last been getting quenched.

What are the Probable Ramifications?

Assuming that transactions remain more tempered though the remainder of the year, one could logically assume that other industry metrics will eventually begin to change from extremes also, if they haven’t begun doing so already.

For example, while inventory is still hovering at, or near, all-time lows by historical standards, one would expect it to slowly replenish by virtue of fewer transactions. Thus, expect inventory levels to gradually creep back upwards from today’s levels, which are only half of what would be expected historically. And an improvement in the lack of inventory situation will aid both brokers and buyers.

Similarly, currently rising pre-owned prices across the board will at some point begin to moderate and stabilize, before eventually falling again to find yet another state of equilibrium that matches market conditions.

Pricing takes much longer to adjust supply and demand since buyer and seller behaviors, perceptions, and expectations take months or even years before adjusting to current market realities.

This sets up the perpetual broker’s dilemma of sellers expecting a high price even as conditions swing back to more of a buyer’s market. From that perspective the industry has always been a bit schizophrenic.

Dassault Falcon private jet comes in to land

A Final Word to Average Days-on-Market

Average days on market also tells the story of a white-hot market now moderating a bit. According to AMSTAT, this metric has marched steadily upwards over the past year, rising from 459 days last summer to 619 days this summer, a 35% increase in just one year.

While some of this may be explained by the very old and undesirable aircraft that are left in inventory (some of which may never move), it could also be indicative of aircraft taking longer to sell in general, which is supported by the reduction in transactions.

In summary, while indicators are, or will soon be, suggesting a moderation of pre-owned sales activity for the rest of the year, an explosive first half will offset that, making 2021 another extraordinary year.

MI www.brifo.com

Global Flight Activity Update

The recovery in Business Aviation continues to surprise, according to WingX Advance. July saw 13% more business jet and turboprop sectors flown worldwide than in July 2019, and after the first months of 2021, the Year-to-Date (YTD) activity was back in line with the comparable period in 2019.

The core characteristic of the rebound in activity has been the resurgent Light and Mid-size business jet activity since the spring. In the last three months these business jet segments have operated over 400,000 sectors globally, which is 14% more than in May to July, 2019.

US Flight Activity

In the United States, Business Aviation activity was up 12% compared to July 2019, and 46% more active than in July 2020. The US market has surged – business jet flights are up 25% compared to two years ago.

The only two segments still trailing 2019 levels were at either end of the scale – the Turboprops and Bizliners. Super Mid-size Jets appeared to offer the sweet spot for demand in the region, with July seeing a 30% bounce, compared to July 2019.

Light Jet activity ran 26% above July 2019, and Ultra Long Range Jet fleets, idle for so much of the pandemic, more-than-recovered in July 2021, with activity up 23% over July 2019.

  • The charter market was the hottest, with branded charter operators generating 35% more sectors overall compared with July 2021, easily an all-time record.
  • Fractional operations were also running close to maximum capacity (25% more sectors than in July 2019).
  • Part 91 flights equally rebounded in July (22% more sectors flown than in July 2020), and may suggest a comeback in corporate operations.

Overall, the busiest US States in July were Florida, Arizona, and South Carolina, respectively beating 2019 trends by 55%, 49%, and 46%. North Dakota, Maine and West Virginia were the only States still trailing.

Large Gulfstream private jet takes off - skyscraper backdrop

European Flight Activity

July saw a significant bounce in Business Aviation activity in the European region, with an uplift in sectors of 14%, compared to July 2019. The summer spike was coming from the Light Jet segment, where activity soared 30% above the high point in July 2019.

In contrast to the US, the recovery had yet to arrive in the Large Jet sector. More than ever, the clear signature of this summer’s demand has been leisure travel, with Ibiza, Mallorca, and Olbia all registering in the top 10 busiest destinations. And, the Greek islands saw particularly high activity; Zakynthos, for example, had 115% more business jet arrivals than in July 2019.

Rest of the World

Outside the US and Europe, there were mixed trends in recovery within the largest bizjet markets:

  • The situation in Canada was still very sluggish, consistent with ongoing restrictions;
  • Across Australia and New Zealand, despite international travel restrictions, domestic Business Aviation traffic was higher than ever;
  • In Africa and South America, where the pandemic is still very much at large, several countries have seen much higher business jet travel than before 2020;
  • In China, domestic Business Aviation travel beat records, but international traffic remained almost at a standstill; and
  • The Middle East, specifically the UAE, has seen very resilient business jet travel, especially from Dubai.

“The jury is ‘in’, regarding the likelihood of a repeat of last year’s strong rebound in leisure travel demand, as restrictions ended,” summarized Richard Koe, Managing Director, WingX Advance. “These have materialized in full, well above even pre-pandemic summertime highs.

“Barring the unlikely renewal of lockdown, the upswing should continue over the next few weeks, with the next question turning to the potential return of the corporate flyers.”

MI www.wingx-advance.com

In-Service Aircraft Values & Maintenance Condition

It has been 13 months since Asset Insight’s tracked ‘for sale’ fleet experienced an increase, and market analysis on July 30th revealed another 5.5% decline, with all four groups enthusiastically participating.

The pool of 134 tracked models totaled 1,345 aircraft as we closed out July, representing a year-to-date (YTD) decrease of 29.7% (567 units), as well as a 42.3% year-over-year (YoY) decline.

Aircraft Values

Average Ask Price for Asset Insight’s tracked fleet decreased another 0.8% in July to a figure about half-way between the 12-month low and average values. The decrease’s protagonists were Large and Light Jets, as young, low-time, higher priced inventory continues to decrease. Overall prices are down 0.1% YTD, while YoY prices remained 1.0% higher.

Asset Insight Inventory Fleet Maintenance Condition - July 2021

Inventory Fleet Maintenance Condition

Asset quality continues to decrease as buyers demonstrated a preference for higher-quality aircraft during July. Maintenance Exposure followed suit, with the specific figures being as follows…

  • Quality Rating: Decreased 0.3% to post a 12-month low (worst) figure at 5.265. The rating kept the fleet within the ‘Excellent’ range, on Asset Insight’s scale of -2.5 to 10, but signaled that inventory assets would require more near-term maintenance to be completed.
  • Maintenance Exposure: Defined as an aircraft’s accumulated/embedded maintenance expense, Maintenance Exposure worsened (increased) 0.4% to $1.492m in July. The figure was slightly higher (worse) than the 12-month average, signifying upcoming maintenance event completion cost for inventory units will be higher.

Maintenance Exposure to Ask Price (ETP) Ratio

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 2021, assets whose ETP Ratio was 40% or higher were listed for sale nearly 89% longer (on average) than aircraft whose Ratio was below 40% (281 versus 530 Days on Market). July’s market analysis also revealed that over 51% of our tracked models, and nearly 59% of our tracked fleet, posted an ETP Ratio greater than 40%.

The ETP Ratio decreased for the second consecutive month. It equated to 71.9% compared to June’s 73.5% and May’s record worst (highest) 76.3%. While not stellar, the figure is presently better (lower) than the 72.8% 12-month average.

Asset Insight July 2021 Fleet Maintenance Exposure to Price Ratio

Market Summary

As mentioned earlier, inventory continues to decrease, with 6.2% of the active fleet now available for our tracked models, compared to 10.7% during July 2020. With solid demand continuing, the lack of desirable aircraft, particularly younger, lower-time assets, is becoming quite alarming, and may well impact the number of transactions closing during H2 2021.

Buyers seeking to acquire an aircraft by year-end are strongly advised to start their acquisition process as soon as possible. Identifying their preferred aircraft will be less than half the battle, as supply chain issues are impacting where, and how quickly, they can complete a pre-purchase inspection, and whether sufficient components and personnel will be available to complete any required maintenance or desired upgrades.

Asset Insight Large Jets Fleet Maintenance Condition - July 2021

Large JetsAvailability for Asset Insight’s 43 tracked models is now down to 5.4% of the active fleet, equating to a YTD availability decrease of 27.8% (120 fewer units) and a YoY decrease of 37.2%. Absorption of higher quality assets led to the Quality Rating falling (worsening) 0.3% to a 12-month low figure, but, at 5.554, the fleet remained within the ‘Outstanding’ range. 

Maintenance Exposure worsened (increased) to post the group’s second consecutive 12-month high figure and accentuate the picked-over fleet’s higher near-term maintenance cost. Ask Price decreased an additional 4.0%, and is now down 0.8% YTD as well as YoY.

Primarily due to the mathematics of weighted averages, the ETP Ratio improved (decreased) for the second consecutive month. At 60.6%, July’s figure was slightly better than the group’s 12-month worst data-point.

More importantly, with supply chain issues unlikely to improve any time soon, starting your acquisition/disposition efforts now, rather than waiting for Q4 to arrive, may determine if you are able to close a transaction this year – and it matters not whether you’re a buyer or a seller.

Asset Insight Mid-size Jets Fleet Maintenance Condition - July 2021

Mid-Size JetsThe group has been experiencing strong sales activity, pushing the remaining inventory to a 2.2% lower Quality Rating, dropping Mid-Size Jets into ‘Very Good’ territory and posting a 12-month low (worst) 5.207.

Only 7.7% of Asset Insight’s 45-model tracked fleet was listed for sale, as opposed to 12.3% one year ago. By decreasing 158 units, availability was down 30.3% YTD and 45% YoY, while Maintenance Exposure rose 2.9% to a figure worse than the 12-month average.

Ask Prices increased 0.4% in July, but are below the 12-month average and down 5.3% YTD, and 7.9% YoY. The ETP Ratio rose to 69.4%, but remained halfway between the 12-month average and low (best) figures.

Asset Insight continues to advise buyers seeking value-based assets to work with an experienced consultant, and a very capable team, able to best shape what is likely to be a diamond in the rough.

Asset Insight Light Jets Fleet Maintenance Condition - July 2021

Light JetsWhile the ETP Ratio was able to post the group’s second consecutive monthly decrease, the figure was 110.0%, providing little reason for most sellers to celebrate. On the brighter side, fewer maintenance events are anticipated for the listed fleet, as noted by a 2.7% Quality Rating increase (maintaining the group’s ‘Very Good’ Rating).

Those events will cost 2.4% less to complete, as July’s Maintenance Exposure decreased (improved) to a 12-month low (best) figure. The problem with this group is aircraft age, which pushed the average Ask Price down 2.5% in July to a new record low figure, and below the average Ask Price posted by Turboprops.

What is most surprising is that Light Jets have been actively selling, posting the largest YTD decrease (34.5%), the largest unit availability decrease (191 units), and the largest YoY decrease (47%).

All this activity has left only 5.5% of Asset Insight’s tracked active fleet (totaling 29 models) listed for sale, compared to 9.9% one year ago. With the average Light Jet sporting an embedded maintenance figure that is higher than its Ask Price, Asset Insight believes many inventory assets are in the hands of their final owner.

Asset Insight Turboprop Fleet Maintenance Condition - July 2021

Turboprops: Inventory for the 17 Turboprop models tracked equated to 5.1% of the active fleet at the end of July, having decreased 24.1% YTD (98 units) and 37.3% YoY. While maintaining a figure within ‘Very Good’ territory, the listed fleet saw its Quality Rating worsen 1.4% to 5.115, while Maintenance Exposure increased to a 12-month worst figure through a 2.1% increase.

The Quality and Exposure figures may appear to be bad news, but they actually result from strong sales activity. Turboprops are experiencing strong demand, and Ask Prices reflected that in July, by increasing 1.9%. The group’s figure is now up 6.2% YTD, and 7.5% YoY.

With the ETP Ratio at 41.8%, just a hair above the 12-month average, most sellers are well-positioned to justify their Ask Price and extract good value for their aircraft. For buyers to negotiate value-based transactions, they need to closely evaluate, for their planned ownership period, the maintenance costs for each target serial number, and not simply rely on industry averages.

MI www.assetinsight.com

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Brian Foley

Brian Foley

Guest Post

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.


Read More About: Light Jets | Large Jets | Mid-Size Jets

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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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