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Business Aviation Market Summary - November

Does a white-hot charter segment equate to growing business aircraft sales? Rollie Vincent, Editor, Market Indicators reflects on the marketplace as we draw nearer to year-end…

Rolland Vincent   |   1st November 2017
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Rolland Vincent Rolland Vincent

With 35+ years in the aviation industry, Rolland Vincent, president, Rolland Vincent Associates...
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Does a white-hot charter segment equate to growing business aircraft sales? Rollie Vincent, Editor, Market Indicators reflects on the marketplace as we draw nearer to year-end…


Charter may not always be smarter, but it is sure looking that way based on the on-going performance of the on-demand segment, particularly in the key US and European marketplaces.


By many indications, charter demand has become white-hot, a positive industry indicator that should bring solace - if not a little bit of delight - to industry leaders wondering when the ‘flat-is-the-new-up’ market was ever going to recover.


No doubt fuelled by recognition that business aircraft charter service providers offer a superb product with high value for the dollar – and some of the most competitive pricing we have seen in years - customers for Business Aviation come in many different stripes and colours.


Hope remains that today’s charter customers may one day migrate up to fractional and/or whole-airplane ownership, but service providers are wise to not hold their breath (or build their business models) on the assumption that these transitions will occur within a short timeframe. It’s better yet to make hay when the sun shines, and serve the customers whose needs are apparent today.


Robust Used Aircraft Markets

Despite what was almost certainly the most news-less NBAA-BACE in recent memory, used business aircraft markets continue to be robust – and are perhaps better described as being historically robust.


Fuelled by aircraft valuations that make many want to save up and buy their first business jet, more and more prospective buyers are being teased by the notion that maybe, just maybe, they can make all of the numbers work to be able to finally afford one.


Truth be told, the Rolls-Royce powered beauty in their gaze might be a Gulfstream GII with 20,000 flight hours, but who’s counting? A jet is a jet, n’est-ce pas?


Although it may never actually fly again, that GII is surely an impressive statement, parked in its hangar and exuding an ultra-quiet cabin and miniscule fuel burn (just so long as it doesn’t get pulled out of the hangar, started up and taxied to the runway anytime soon).


With eye-wateringly attractive used business jet valuations the current order of the day, used aircraft offer impressive value for the dollar, and an opportunity to expand the customer base of owners and operators, some of whom have aspired to get into Business Aviation but could not previously justify (let alone gather the down payment) to get into the market.


With wise counsel (a trusted professional broker/dealer), companies and individuals new to business aircraft ownership can today get into – and, if necessary, later exit – a used aircraft without much financial penalty.


Assuming that they purchase it wisely, and have a realistic view as to the costs of operation, what’s not to like?


Regulatory Mandates & Aircraft Ownership

One thing that buyers and sellers have in common is an interest in ensuring that their business aircraft is compliant with regulatory mandates, one of which in particular is looming ever larger on the industry’s radar screen.


The deadline for aircraft to be compliant with ADS-B Out (to enable continuing flight operations in US-controlled airspace above 10,000 feet) is December 31, 2019, just a little over two years away.


Results from the recently completed Q3 2017 JETNET iQ Survey of 500+ business aircraft owners/operators suggest that there is much work remaining to be done to bring the business aircraft fleet into compliance (see Charts A & B). In what is looking like a building bow-wave, existing and prospective owners and lessors would be wise to schedule time at a MRO shop or OEM service center to get this upgrade accomplished.


ADS-B Upgrade Plans

ADS-B Business Aviation Fleet Compliency


Like many other leading business aircraft broker/dealers, Colibri Aircraft (below) is participating in a hyper-active marketplace, fuelled by customer enthusiasm for what Business Aviation can deliver, and by historically attractive aircraft valuations that are broadening the industry’s customer base.


In this marketplace, the rising tide of demand bodes well for the future, as prospective customers engage with the industry for the first time.


These engagements – whether with an owned aircraft or more likely through an on-demand charter or air taxi experience – are in many ways the lifeblood of an industry that needs more customers – and certainly more advocates – going forward.


MI www.rollandvincent.com


Flight Activity – North America

September flight activity showed double digit growth in the Part 135 segment, and recorded a very strong 5.2% yearly increase in total operations, reports ARGUS TRAQPak…


Reviewing Year-over-Year (YoY) flight activity (September 2017 vs. September 2016), data confirmed a second straight month of significant YoY growth.


The results by operational category were all positive with Part 135 recording another substantial yearly change.


Similarly, the aircraft categories were all positive with Large and Mid-size jets posting the largest gains, though Light jet and Turboprop gains were not insubstantial.


US Business Aviation Flight Operations - August 2017


Month-over-Month (MoM)

September Business Aviation flight activity was essentially flat MoM, showing a slight decrease against August. Results by operational category were mixed for the month, with Part 135 posting the largest monthly increase. Aircraft categories were also mixed with Large jets posting the largest monthly increase.


October Activity Forecast

TRAQPak analysts estimate a third month of substantial growth from October, projecting a 5.0% increase in overall flight activity YoY.


MI www.argus.aero


Flight Activity - Europe

There were 79,280 Business Aviation departures across Europe in September, up 2.9% YoY, which takes the YTD trend to 3.6%. Activity was still 4.4% behind pre-crisis peak-levels in September-2008. Following are the details…


All the leading European markets were up, with modest gains for Germany, the UK and Italy, 3% growth in France, and 8% growth in Switzerland. Germany, Spain and the UK are seeing a combined increase of around 1,000 flights per month so far this year.


Smaller markets with strong growth included Greece (up 14%), and Turkey (gaining 10% YoY). There was some decline in Norway, and flights were down 6% and 8% from Ireland and Croatia respectively.


Regionally, the Southern Mediterranean continued to be the hub for growth during September, with flights up 7%.


Eastern Europe saw 2% gains, but is still trending up 5% YTD. Overall, Business Aviation flights within Europe were up 3%.


Flights from Europe to other global regions were somewhat muted, though, with flat activity to Middle East and declines to North America and CIS region. Arrivals into Europe from Asia-Pacific were up 21%, and arrivals from China increased almost 40% YoY.


Similar to the US, the main growth in September continues to come from AOC activity, with 39,288 AOC flights this month, up 7.5% YoY. AOC activity has grown in every month since October 2016. Business jet AOC flights were up 9% this month. Private flights, meanwhile, declined YoY.


“The summer season for Business Aviation slowed slightly in September but still saw strong demand in Charter activity, especially in the Small jet segments,” concluded Richard Koe, Managing Director, WingX. “By contrast, owner flight activity continues to stagnate.


“Newer aircraft such as the Citation Latitude are seeing very strong growth, although older types including the Citation Bravo and Legacy 600 are also much busier year-on-year. It will be interesting to see if the charter market can sustain its growth trend going into Q4.”


MI www.wingx-advance.com


Cessna Citation XLS+ Jet


First Time Jet Buyers on the Rise?

Some 21% of the used aircraft Colibri Aircraft has sold this year have gone to first-time buyers, representing a 50% increase on 2014, says Oliver Stone, Managing Director. Meanwhile, the average price of a jet sold by Colibri to a first-time buyer in 2017 is $3.68m.


The increase in first-time buyers has contributed to a rise in the number of used private jets being sold, according to Mr. Stone.


New analysis by Colibri Aircraft reveals that globally 1,103 used jets have been sold this year so far compared to 979 for the whole of 2016.


For Europe alone, the corresponding figures are 89 and 95, respectively.


The company believes the growing number of first-time buyers is being fueled by the rapidly increasing number of high-net-worth individuals, the falling price of jets across all segments, and the big increase in people chartering private jets for the first time and then deciding they would prefer to own the aircraft they use.


“There is a rapidly increasing number of high net worth and ultra-high net worth individuals, and this means a bigger base of potential private jet owners,” notes Stone. “All of this is leading to more people chartering private jets and for some of those that do this, they eventually decide they want  their own aircraft.”


MI www.colibriaircraft.com


Used Jet Market Turns a Corner

The latest UBS Business Jet Market Index jumped 10% from the August survey as respondents noted healthier used business jet inventories and improved pricing, as well as higher customer interest…


Now at 53, the index score returns to its post-US election high and denotes an improving market. By cabin size, Mid-size jets took the lead with an index score of 54, up 7%, followed by Light jets at 53, up 15%. Large-Cabin jets, at 51, climbed 12% from August.


UBS Global Research said the straight-up measure of absolute business conditions came in at 5.4, up 5% from the previous survey and the highest since before the financial crisis.


According to UBS aerospace analysts David Strauss and Darryl Genovesi, the overall index reflects an improved view of used aircraft pricing and inventory, with those scores soaring 24% and 22%, respectively, along with higher customer interest, which rose 11%.


North American customer interest increased 11% and remains strongest at a score of 70, followed by an ‘improving’ Europe (56), while Asia (51), Latin America (48) and the Middle East (47) “appear stable-to-slightly-improving”.


“Respondent commentary was generally optimistic on lower, young, used inventory levels and improved utilization trends, although used pricing is still seen as declining, albeit at a slower rate,” the UBS analysts said.


“In addition, commentary suggests improved trends not yet seen translating to new markets. The Zetta Jet bankruptcy was highlighted as risk.” (Courtesy of AIN)


MI www.ubs.com


Asia-Pacific: Positive Trends Continue

Asian Sky Group has released its Q3 2017 Asian Sky Quarterly, including an updated forecast on the business jet and civil helicopter markets throughout Asia-Pacific. According to Managing Director, Jeffrey Lowe, “Q3 2017 sees the same positive trends in the region that we highlighted last quarter persisting…”


Among the continued positive trends were:


  • Used inventory declining;
  • Asking prices flattening out;
  • Market stabilizing; and
  • The continued move towards supply and demand balance.


“The ‘feel good’ factor has been growing consistently each quarter,” adds Lowe, “and finally this quarter we see the anticipated spike in purchase intent: an 11% increase for a new aircraft and 8% increase for a used aircraft, where the preferred type remains Large-Cabin aircraft.”


MI www.asianskygroup.com


Dassault Falcon Business Jet


AMSTAT: Encouraging Signs for Used Market

According to AMSTAT, there have been further encouraging signs coming from the business aircraft resale market. In its NBAA‐BACE Business Aircraft Resale Market Update, the company examined the market based on aircraft size and age…


The clear message from the AMSTAT report is that in almost all markets, transaction activity has been most robust in the ‘Newer’ and ‘Mid‐Age’ segments.


Heavy Jets: In the Heavy Jet group, the Newer and Mid-Age segments have shown the greatest January-August YoY growth in resale retail transaction numbers, with jumps of +38.2% and +12.9% respectively.


While these percentages seem high, especially for the Newer segment, we should remember that this is the smallest jet segment and that a few transactions plus or minus will have a significant impact from one period to another.


By contrast, the Older Heavy Jet segment saw transaction activity contract ‐3.4% versus the first eight months of 2016.


Medium Jets: The report shows a similar story in the first eight months of 2017 in the Medium Jet segment with the Newer and Mid-Age segments leading the way with +33.0% and +30.7% resale retail transaction growth YoY, respectively. The Older Medium Jet segment saw a ‐10.0% decrease YoY.


Light Jets: Similarly, the Light Jets did well in the first eight months of 2017, racking up a +20.9% increase in transactions over the same period in 2016. Interestingly, the Older Light Jets also performed well, with an 11.1% increase. Transactions in the Mid-Age segment fell ‐6.4%.


Turboprops: This segment saw very little YoY change in the first eight months of 2017. Each segment was either up or down about 1.0%.


Inventory Reductions

Reviewing inventories, the report shows a reduction in availability in almost all market segments.


Heavy Jets: AMSTAT recorded a contraction in inventory in the last year. Overall, the percentage of aircraft for sale fell from 10.5% in September 2016 to 8.5% today. The Newer segment dropped from 9.3% ‘For Sale’ to 7.1%; the Mid-Age segment dropped from 10.4% to 8.3%; and the Older Heavy Jet segment dropped from 12.7% to 11.8%.


Medium Jets: Inventories also contracted over the last 12 months. There is 10.5% of the fleet ‘For Sale’ today versus 11.5% a year ago. Interestingly, the largest drop in inventory was in the Older segment from 15.9% in September 2016 and 14.7% today. By contrast, the Newer segment fell from 7.5% to 6.7% and the Mid-Age segment fell from 12.0% to 11.2%.


Light Jets: There was minimal YoY change in the Light Jet inventory, but that aggregated view reflecting the activity in the Newer and Older ends of the market hides a significant increase in Mid-Age Light Jets ‘For Sale’. Inventory in this segment rose from 11.0% a year ago to 12.9% today and has been on an upward trajectory since early 2015.


Turboprops: Inventories contracted only slightly from 8.4% a year ago to 8.0% today. At the segment level, there were also few changes. The Older turboprops were up 1%, Mid-Age were down 2% and Newer were down 1%.


Average Asking Prices

The report shows continued downward pressure in almost all market segments. YoY:


  • The Heavy Jet group as a whole recorded a ‐8.3% decrease in Average Asking Prices. All Heavy Jet Age segments reflected this decline with Mid Age Heavy Jets falling ‐8.9%, Newer models falling ‐7.5% and Older models falling ‐6.7%.
  • The Medium Jet group also saw a decline in Average Asking Prices, in their case by ‐15.9% - the largest of any of the jet groups. The Newer segment saw the biggest decline at ‐20.2%. Mid Age fell ‐12.4% and the Older segment fell ‐4.0%.
  • The Light Jet group saw Average Asking Prices come down ‐9.8%. Again, the Newer segment took the biggest hit, down ‐13.1%. Average Asking Prices fell ‐8.6% in the Mid Age segment and ‐2.7% in the Older segment.
  • The Turboprop market fell ‐6.8%. Unlike most other segments, Average Asking Prices for the Newer Turboprops were up slightly at +0.7%. Older and Mid Age Turboprop segments were down ‐9.3% and ‐7.6% respectively.


MI www.amstatcorp.com


NARA: New or Used? Price is Not the Only Factor

Three NARA executives with decades of aircraft sales and support experience discussed the question of buying new or used business aircraft. The panel consisted of Don Dwyer, Vice President of Sales, Guardian Jet; Al Qualey, 1st Source Bank; and Andrew Young, General Manager, AMSTAT.


When it comes to deciding between a new or used aircraft, cost drives most buyers toward one option or the other. A new aircraft may be out of the range of many buyers, while some Fortune 500 companies and wealthy individuals wouldn't consider buying anything but one fresh off the factory floor.


However, a number of other factors can influence buyers, too. Don Dwyer, Guardian Jet, said a warranty, the desire for the latest technology and what he calls “the new OEM experience” all tilt some buyers toward new aircraft.


Don Dwyer, Guardian Jet


"If you buy a new aircraft through the OEM, it’s just going to be a little bit higher class experience," Dwyer added. "They're going to take you to the factory and give you a VIP factory tour. They are going to have training slots for you when you buy the airplane as initial pilot training and mechanic training slots will come with the airplane.


“In some cases, they’ll send people to your facility for the first week or two to help you get the airplane up and running in your department. They really show the love because you've given them the business.”


Finance & Flexibility

As enticing as that treatment sounds, financial considerations, a desire for flexibility and a changing marketplace persuade more buyers to opt for used aircraft – even some who could afford new.


Al Qualey of 1st Source Bank said a segment of entrepreneurs “are backing away from new aircraft because they see what the depreciation cost is going to be, based on the last five to seven years of experience”.


Al Qualey, 1st Source Bank


Until 2008, the residual value of jets after 10 years was considered to be 35 to 40%. “Today, I don't know anybody that's using more than 35%,” Qualey said, adding that even that figure could be high for some aircraft.


Buying used aircraft is more of a short-term decision than buying a new one, which typically locks buyers into a commitment of up to 10 years. “If you don't like it a year later, it's pretty easy to sell a pre-owned aircraft,” Qualey said.


Based on his 40 years’ experience in the business, Qualey knows that buyers of new aircraft keep them on average twice as long as do buyers of used aircraft. “We have a lot of customers that every two to three years are making a step-up one or two sizes in their jet,” he said. “And they're consistently staying with pre-owned in that process.”


When it comes to obtaining financing, Qualey notes, the bar for buyers of new aircraft may be set too high for some because as a lender “we certainly don't want to have a heavily depreciated one-year-old airplane in our repossession fleet”.


Closing Gap

Andrew Young, General Manager for AMSTAT, said that looking at the new and pre-owned markets as a whole, used aircraft sales tend to anticipate new sales in terms of both peaks and valleys.


Andrew Young, AMSTAT


Dwyer has noticed another trend over the past couple years: buyers who might typically choose new aircraft are opting for used, ‘near new’ airplanes (one to three years old) instead. "And I might say it's shifting back to buying new airplanes again," he said.


"The activity is enough that the near new market is pretty picked over and could hopefully, for the OEMs, lead to some better days."


MI www.naraaircraft.com


Gulfstream Demand by Transactions, Relative to Fleet Size

In its Q3 2017 Market Update for Gulfstream aircraft, Hagerty Jet Group gauged aircraft demand by measuring the frequency of transactions within the available fleet supply. Following are some observations…


Gulfstream G450 Jet


After reviewing the transaction levels for each market, it was surprising that some markets are stronger than others when measured by trade frequency or supply-turn. The used G550 market is the most consistent with an average of 3-4 aircraft selling each month (or 40 per year). With a fleet of 580 aircraft, that means 7% of the fleet is trading hands each year.


The success of the used G450s is arguably better than the G550. Transactions have hovered around 40 per year representing 11% of the fleet of 359 aircraft.


Discontinuation of this model may have pushed prices lower in 2016 but demand is strong for this airplane in 2017.


Even more surprising is the frequency of sales in the used G200 market. With 42 transactions over the last 12 months, nearly 17% of the 250 aircraft in the fleet traded. With used G200 prices ranging from $2.9m to $7.9m, the G200 has broadened its appeal and earned recognition as a great value in the Super Mid-size jet category.


With only 12 used G650 transactions in the past 12 months from a fleet of 250 aircraft, used sales represent less than 5% each year. This is most likely because all G650s are less than five years old. It’s hard to believe that the original warranties of the first G650s delivered in late 2012 are about to expire...


Meanwhile, the used G280 has traded more actively in the past six months than it has in its’ entire history.


With five transactions YTD, it’s a significant improvement from only two previous sales in the history of the model. However, the percentage of the fleet selling is low – 4% of the fleet of 132.


Used GIV-SPs are trading at an average 25 per year or 7.35% of the fleet, which is healthy. Meanwhile, used GV transaction levels have dropped in 2017. With only two transactions to report YTD, this fleet is trading less frequently than any other used Gulfstream market.


MI: www.hagertyjetgroup.com


Private Jet Interior


Avinode: Strong US Charter Market Growth

Requests for US departures through the Avinode Marketplace rose by around 54% for the period January-August 2017 compared to the same period in 2016, from 428,585 to 660,450.


Showing almost identical percentage growth, requests for arrivals into US airports through the Avinode Marketplace grew by around 53% for the period January-August 2017 compared to the same period in 2016, from 396,806 to 607,606.


New York/New Jersey’s Teterboro Airport leads the way as the most requested US airport destination through Avinode over the past 12 months, while the most requested domestic US route, through the Avinode Marketplace in the last 12 months, was from Los Angeles Van Nuys to Las Vegas McCarran, host city of last month’s NBAA-BACE.


The most requested aircraft category for departures from US airports, from January to August 2017 inclusive, is a light jet (293,320 requests), followed by a mid-size jet (245,423 requests).


“Not only is the demand for US Business Aviation flights increasing, but we are also seeing growing numbers of North American Avinode members sourcing flights directly through the Avinode Marketplace rather than using a telephone,” concluded Per Marthinsson, executive vice president, Avinode Americas.


“…The telephone is no longer the only way to complete a flight booking quickly. Put simply, North American brokers are now very comfortable communicating with operators through the online Marketplace.


MI www.avinode.com


In-Service Aircraft Values and Maintenance Condition

An Asset Insight market analysis conducted on September 28, 2017 covering 92 fixed-wing models  and 1,818 aircraft listed ‘For Sale’, exposed a limited number of sales transactions during the preceding month and continued downward pressure on values.


Business Aviation Maintenance Exposure


After falling 4.2% in August, Ask Prices for tracked models receded an additional 1.9%, which resulted in another record low figure and a value loss of 18.4% since December. Large Jets have lost nearly 19% since December 2016, sliding another 1.7% to a new record low figure. Medium Jets posted a new record low value, losing 2.9%.


Though Small Jets have lost nearly 12% since December, they managed to post a 0.6% improvement in September. Turboprops lost 3.0% to post a 12-month low figure, but this group has experienced only a 1.4% loss in value during 2017.


Inventory Fleet Maintenance Condition

Slope of the Quality Rating Trendline (Table A) steepened a bit further as overall Asset Quality receded to ‘Very Good’ for the first time since January 2015.


Quality Rating: The Asset Insight Quality Rating dropped to 5.219 from August’s 5.267, recording another 12-month low figure on a -2.5 to 10 scale.


Maintenance Exposure: The tracked fleet’s average Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) worsened by 4.8% to $1.45m from August’s $1.383m.


Maintenance Exposure to Ask Price (ETP) Ratio

The fleet’s ETP Ratio (an aircraft’s Maintenance Exposure divided by its Ask Price) increased 4.4 AI2 basis points since August, posting the worst figure for the past twelve months. (We consider any ETP Ratio over 40% to represent excessive Exposure in relation to Ask Price and a hindrance to aircraft marketability.)


Assets whose ETP Ratio was 40% or more during Q3 were listed ‘For Sale’ 31% longer (on average) than aircraft whose Ratio was below 40%. All groups posted a 12-month worst/highest figure. At 49.1% Turboprops had the best Ratio, Large Jets were next at 52.8%, Medium Jets at 63.5%, and Small Jets at 67.9%.


Exposure to Aircraft Ask Price Ratio


Market Summary

Overall market demand at 2.91% remained below average. On Asset Insight’s scale of 1 (lowest) to 5 (highest), Large Jets registered slightly lower demand at 2.79, Medium Jets increased to 2.97, Small Jets decreased to 2.90, while Turboprops remained unchanged at 3.15.


The spread between ask price and final transaction value for Small Jets and Turboprops remained unchanged, at 8.0% and 9.2%, respectively. Large and Medium Jet sellers did not fare so well; the former at 12.5% and the latter continuing to post the greatest/worst gap at 14.8%.


Large Jets: Quality Rating remained in the ‘Excellent’ range at 5.412, while Maintenance Exposure increased 4.1%. Sales activity during Q3 was good, removing higher quality assets from inventory, leaving behind the lesser quality, lower priced assets. The effect negatively impacted the group’s ETP Ratio and led to another 12-month high/worst figure.


Medium Jets: Quality Rating remained within the ‘Very Good’ range but fell to a 12-month low point in September, while Maintenance Exposure posted a 3.6% increase. Ask Price, now at another record low point, would appear to be setting the stage for an active Q4 relative to sales.


Small Jets: The group maintained its ‘Excellent’ Quality Rating, but Maintenance Exposure increased over 14% in September to a 12-month peak/worst figure. Keeping in mind that pricing is just above the 12-month low figure, buyers are likely to pursue what they perceive to be good values. As the ETP Ratio has not been this high since August 2016, buyers are strongly advised to thoroughly research a prospective aircraft’s maintenance status before making an offer.


Turboprops: The group’s Quality Rating improved slightly, and at 4.944 remained in the high-end of the ‘Good’ range. Maintenance Exposure was slightly better/below the 12-month peak figure posted in August. While the high Maintenance Exposure and low Ask Price figures conspired to produce the worst ETP Ratio since July 2015, the group’s Ask Price has only decreased 1.4% since December. Asset Insight stands by August’s view that values have stabilized for this group. Furthermore, it anticipates high quality aircraft to be absorbed early in Q4, and therefore advise serious buyers to act.


Aircraft For Sale Quality Rating


MI www.assetinsight.com


New Jet Delivery Forecasts

Citing “an uncertain economic and political environment along with a very competitive used aircraft market,” Honeywell forecasts a market of 8,300 new business jet deliveries worth $249bn through 2027. JETNET iQ predicts a 10-year market totaling 7,722 jets worth $221.5bn, excluding personal jets. Mike Potts summarizes…


Honeywell Aerospace 2017 Ten Year Forecast Units


The forecast from Honeywell represents a reduction in the 2-3% range compared with Honeywell’s 2016 forecast (which called for 8,600 aircraft worth $255bn). The 2016 forecast was also a downturn from the year before, when the prediction called for 9,200 aircraft worth $270bn.


In truth, Honeywell’s forecast has been on a downward trend going back to 2012. At that time the forecast was for 10,000 airplanes worth $250bn for the coming 10-year period, and the company rather famously summed up the market by saying “flat is the new normal”.


At that time Honeywell had no idea how stunningly accurate that prediction would be.


Honeywell thought at the time, things would be picking up by now - perhaps even approaching the 1,000+ units the industry enjoyed in the 2007/2008 timeframe. As we can now see, things have not picked up and the market is still quite flat.


In raw numbers over the last five years, the market has looked like this: 672 jets in 2012; 678 in 2013; 722 in 2014; 718 in 2015; and 661 in 2016. Honeywell projects we will finish 2017 in the 620-640 range, representing the weakest jet market since 2004. Honeywell’s forecast of $249bn in jet sales over the next 10 years is the weakest predicted since Honeywell’s 2011 forecast.


Dassault Falcon 2000 Jet Series


Forecast By Size

An alternative forecast is JETNET iQ. JETNET updates its forecast on a quarterly basis, and in its latest forecast sees the market as being segmented into nine categories, including Large Ultra-Long-Range jets (18.9%), Large Long-Range jets (7.0%), Large jets (10.3%), Super-Mid-Size jets (17.7%), Mid-Size jets (7.8%), Super Light jets (6.6%) Light jets (18.3%), Very Light jets (12.1%) and airliner-based business jets (1.5%). Essentially, JETNET believes 55.4% of the airplanes sold in the next decade will be Super Mid-Size or larger.


Honeywell sees the world in a simpler format, with just three categories: Big Cabin jets, which it believes will constitute 57% of the market (very close to JETNET’s estimate); Mid-Size jets (18% of the market) and Small Cabin jets (25%).


JETNET sees the Small Cabin market as being a little bigger (30.4%) and the Mid-Size market a little smaller (14.4%).


Financially the big airplanes will account for most of the money spent in the market. JETNET says just four of its nine categories (Large Ultra-Long-Range, Large Long-Range, Large and Super Mid-Size will account for 80.6% of spending. Honeywell thinks 85% of the dollars will be spent on Big Cabin aircraft.


Regional Demand

Honeywell says operators plan to buy new jets totaling about 19% of their fleets over the next five years. This is a reduction of approximately 8% from what was predicted a year ago. Of total purchase plans, 19% are expected by the end of 2018, with 17% in 2019 and 14% in 2020.


In terms of where the buyers for these airplanes are coming from, Honeywell believes 61% of demand in the next five years will come from North America, 14% from Europe, 15% from Latin America, 6% from countries in Asia and the Pacific Rim and 4% for the Middle East and Africa.


The BRIC countries (Brazil, Russia, India and China) are expected to account for 19% of the total market. (Note that the BRIC countries totals are included in their respective regional figures.)


Commenting on the market situation within the regions, Honeywell notes that in North America new jet purchase plans are down over the coming five-year period, but are up in the very-near-term, with 39% operators planning a purchase saying they’ll do it in the next two years.


Honeywell observes European operators are contending with sluggish growth, uncertain effects of Brexit, a surge of migrants and refugees, and continuing threats of terrorism, causing new purchase plans to decline significantly since last year. In Latin America, meanwhile, which is the only region with higher purchase plans than a year ago, slightly lower purchasing expectations in Brazil were offset by significantly higher buying expectations in Mexico.


The longer-range portion of Honeywell’s forecast is predicated on an economic growth rate in the 3-4% range. Unfortunately, 3% growth hasn’t been achieved in the US since the 1960s and 4% has never been achieved going back to the beginning of the 1930s, although President Trump has promised to achieve 4% as part of his “make America great again” initiative. It remains to be seen how that will unfold.


In Summary

Looking at both forecasts it is hard not to think they are very optimistic in light of the current market conditions. In this decade, beginning 2011 we have averaged 691 jet deliveries per year.


For JETNET iQ to be right, we’ll have to average 772 jet sales per year. To reach Honeywell’s total the average will have to be 830. If either of these forecasts are going to pan out, jet sales will have to become a whole lot more robust than they are today…


MI www.honeywell.com or www.jetnet.com


Private Jet on Airport Ramp

Jetcraft Ten-year Market Projection

A new business cycle, improved absorption rates of used aircraft and a trend for wide-body aircraft to continue are all predicted by Jetcraft…


Jetcraft released its third annual 10-Year Business Aviation market forecast and project that the global Business Aviation installed base of just more than 21,000 aircraft will surpass the 28,000 unit mark (net retirements) in 2026, growing 33% during the forecast period.


Jetcraft’s 2017 forecast calls for 8,349 unit deliveries representing $252 billion in revenues (based on 2017 pricing) to be realized by 2026. North America will again lead the way with 62% (5,176 units) market share of unit deliveries, followed by Europe with 17% and Asia with 12% (1,420 units and 1,002 units, respectively).


Used Market Pace Improves

If market assumptions established over the previous business cycle remain, absorption rates in the used market will shorten over the forecast period. This trend characterizes a healthy used market across all aircraft categories, with significant improvement in the Large aircraft segment.


Furthermore, absorption rates for used aircraft should shorten during a period of important new program releases during the coming years.


Substantially More Revenues

Through 2026, Jetcraft’s forecast projects significantly more revenue, peaking at $31.4bn in 2025. This trend is despite limited incremental growth from a unit delivery perspective, as demand continues to shift more toward wide-body models at the expense of narrow-bodies.


The Large jet category will constitute 31% (2,589 units) of the total unit delivery forecast, accounting for more than 63% of total revenue.


MI www.jetcraft.com


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