The business aviation market’s shift towards larger aircraft continues and the impact on the industry is growing, according to Teal Group’s latest annual business jet overview.
“Last year saw a welcome but largely meaningless upturn, with an impressive 16.3 percent increase in deliveries by value. But all of this growth came from very large cabin jets, particularly Gulfstream’s G650. All the smaller segments remained firmly stuck in first gear,” said vice president of analysis Richard Aboulafia. During the 2008-2012 decline, the top half of the market–jets costing $26 million and more–actually grew slightly in value, he added, while the bottom half suffered a catastrophic 56 percent drop. “The growth we saw in 2013 means that market bifurcation has gone into overdrive,” Aboulafia explained.
Looking at the next 10 years, the aviation market guru does not see the bottom half–rather a bottom third now–going back to its record 2008 level. For the overall market, enough positive signs such as lower used jet availability support a prediction for growth. However, it will be modest, he said.
One problem has been overcapacity. The five legacy OEMs were joined by Embraer, with Honda arriving soon as a niche player. This dynamic has forced Hawker out of the market for new jets.
By contrast, production of several high-dollar jets, including the Gulfstream G650, is still trending upward. Moreover, Dassault last fall unveiled a much larger and more expensive aircraft than expected, the Falcon 5X. Aboulafia estimated this was “undoubtedly the correct decision.”
The annual overview also includes a focus on China. Fewer than 400 business jets were registered in the country in early 2014, compared with well over 10,000 in the U.S. But this is up from fewer than 150 in early 2011. The economic drivers are clearly there for China. However, some impediments should not be ignored, such as slowly relaxing airspace regulation and the lack of maintenance centers and FBOs.
The Teal Group forecasts production of a total 13,030 business aircraft worth $325.6 billion over the next 10 years (2014-2023). By value, 63 percent of them will be in the larger categories. The last 10 years saw production of 11,398 business aircraft worth $234.6 billion.