Pre-owned Business Jet Market: Five-Year Overview

 
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Inventory Value Change & Market Dynamics

The global market’s inventory value (average asking prices x total aircraft for sale) experienced an uptrend until Q2 2016, when the trend reversed. During Q2 2016, of the models that ASG monitored, there were more than 390 aircraft for sale representing 10% of the total operational fleet at the time. This number pushed the total pre-owned market value to its highest level until that point — US$8.2 billion. This can be compared to the first quarter of 2014, just 24 months earlier, when there were 229 aircraft for sale representing 7.5% of the total operational fleet, with an inventory value of approximately US$5.2 billion.

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The pre-owned business jet inventory value increased 60% from Q1 2014 to Q2 2016, creating a market oversupply. During this time, aircraft for sale stayed an average of 330 days on the market, making it a typical Buyer’s Market.

With the 2016 US election results shocking the market and the US President’s tax tweaks later in 2016, US investors’ economic outlook along with market confidence increased. A reflection of this was seen as the stock market hit historical highs, which has consequently impacted all industries including bringing increased demand to business aviation. The market dynamics started changing, however, after Q2 2016. Finally, some long-standing unsaleable aircraft types that failed to meet sellers’ expectation were removed from the market and those remaining listings instigated price deductions, which ultimately attracted buyers’ attention.

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The changes were particularly noticeable among the large-cabin jet market, such as Gulfstream’s G550 and G450, as well as Bombardier’s Global 6000, which all saw significantly higher demand. Thus, as soon as prices dropped, these three types reflected an enticing value, which pushed buyers to act. This significantly stimulated the market, further increasing the number of transactions and drove average asking prices higher as lower-priced aircraft exited the market first.

The market’s momentum continued in 2017 and 2018, with the percentage of total fleet for sale decreasing and, likewise, inventory values decreasing.

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Today’s market inventory value stands at US$5.7 billion, which has dropped by 30% since the high seen in Q2 2016; yet still higher compared with 2014. Currently, the market has around 270 aircraft on market for sale and it takes, on average, a business jet 290 days to be sold — about 30-60 days less than in 2016 and 2017.

Forecast – Will the Market Get better?

Since December 2016, the regained economic confidence has supported the pre-owned business jet market’s revival, now the market is moving out of a Buyer’s Market and is working its way toward rebalancing itself to a more seller-friendly situation in the future. However, recent economic factors may lead the market in a different direction; those factors being the world’s largest economies slowing down, the ongoing trade war between China and the US, and much weaker international trade activity.

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ASG’s predictions are supported by the above market trend signals, which show the market demand is slowly decreasing. Likewise, since Q1 2018, the worldwide market inventory value has increased as the number of transactions lowers. In the foreseeable future, there is a high chance that market demand will continue to lower and inventory value will increase.

Greater China’s Business Jet Market

Pre-owned Market Inventory Value

During 2016 and 2017, the Chinese business jet market, was in sync with the world market, experienced an increasing inventory level. The inventory value reached its highest point of US$1 billion, with almost 13% of the fleet in operation available for sale, in Q2 2017. It then started decreasing, as the US market consumed part of its inventory. However in 2018, as signs arose of the worsening Chinese economy, the business jet market was weakened again. A high number of corporate aircraft were put on market for sale which resulted in the Q3 2018 inventory value, once again, reaching a high point of US$1 billion.

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This can be attributed to a much weaker Chinese economy. In ASG’s quarterly Market Survey, (Page 8) there has been more Chinese respondents than ever who feel pessimistic about the future economy. And, the country’s GDP growth and government stimulation methods support this sentiment.

The asking price for pre-owned aircraft from Greater China ranges from US$25 million to 30 million. Similar to the global market trend, when the inventory value began to drop with well-priced listings sold, the market average asking prices started to increase.

Fleet Size: Additions vs. Deductions

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38 business jets exited Greater China in 2018, which is the highest number ever recorded. The fleet deductions consist of mainly long-range and large cabin aircraft. The trend shows that for the past four years, there has been an increasing number of long-range and large cabin aircraft that were sold or relocated to other regions. The relocated long-range and large cabin aircraft are generally younger (7.6-7.8 years old) compared with corporate airliners and medium sized aircraft, which tend to be more than 10 years old on average.

OEMs’ Presence in Greater China

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Since 2015, the large cabin and ultra-long-range aircraft types have been in high demand in the Greater China market. Gulfstream has enjoyed the most deliveries among all OEMs, with 62 new G450, G550 and G650 deliveries combined. Bombardier’s Global 6000 was its most successful model in Greater China, with 21 new deliveries. Dassault Falcon follows, with a total 10 new aircraft delivered to China over these four years.

On the pre-owned market side, corporate airliners, including Boeing’s BBJ series, Airbus’s ACJ319 and Bombardier’s Challenger 850 series, made up a high portion of pre-owned aircraft delivered to China. Still, the most welcomed models are Gulfstream and Bombardier’s large cabin and long-range aircraft, such as G650, and Global 6000/XRS.

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