A glut of pre-owned business jets and low utilization levels has led to “significant oversupply” in the market, according to the latest data from industry information provider JetNet (Booth X129). It believes that this trend will continue for about the next 18 months, with a “beginning of an uptick” expected in 2019, said JetNet iQ managing director Rolland Vincent. Europe could lead the recovery, he added.
The current oversupply is exemplified by the fact that business jet utilization in the U.S. is on par with 2003, even though corporate profits have nearly doubled since then. “We’re not seeing the typical corresponding increase in aircraft utilization as company earnings increased,” noted JetNet vice president of sales Paul Cardarelli. In fact, average utilization per business jet is just 352 hours per year, with half of the operators falling below 300 hours.
While pre-owned inventory has stabilized, pricing still remains soft, Cardarelli said. According to the latest JetNet data, 11.1 percent of the 21,817 business jets in service are currently on the market, which is above the 10 percent mark that is considered the dividing line between undersupply and oversupply. “It is clearly still a buyer’s market,” he said. “This is a good time for concept buyers, because prices are low in the pre-owned market.”
This presents a challenge to new aircraft sales, however. “The gap between aircraft trade-in values and new aircraft keeps getting wider,” Cardarelli pointed out. “This inhibits buyers from trading in their jet for a new one. In fact, about half of the owners/operators we’ve surveyed told us that low residual values caused them to delay purchase of either a new or pre-owned aircraft over the past two years.”
Looking ahead, JetNet estimates that 7,489 business jets worth €193.5 billion ($217 billion) will be delivered over the next decade. After a trough over the next year or so, the JetNet forecast continues on a nearly unabated upward trend until 2026, in terms of units delivered. For this year, Vincent expects jet deliveries will be down about 5 percent, while billings will fall by 10 percent from 2016. Last year, 661 business jets were shipped.
According to the latest JetNet iQ survey, buyer sentiment is most optimistic in Europe, with 61.8 percent in this region saying that the business jet market is past the low point. This is followed by Latin America, with 59.1 percent believing the market is on the upswing and North America at 57 percent. “Uncertainty has accelerated in the U.S. because of the Trump administration, but Brexit has had little effect on buyer sentiment in Europe,” said Vincent.
However, buyer sentiment in the rest of the world is decidedly pessimistic, which Vincent attributed mostly to troubles in the emerging markets. “Just 28.6 percent of those in the rest of the world think the market is past the low point, while 32.7 percent believe that we have not yet reached the low point,” he said. The remainder in these regions said the market is already at the low point.
The company will hold its annual JetNet iQ Global Business Aviation Summit in New York City on September 5 and 6, 2017. The event brings together leaders of business aviation’s manufacturers, suppliers, trade organizations, financial institutions, data analysts, as well as sales and marketing executives, to network and discuss the current state and future direction of the industry. Those who register for the event by June 30 will get a $200 discount off of the $995 full-price registration, said JetNet.