Get ready for a bumpy ride. The sputtering global economy is sending the pre-owned aircraft market into a steeper dive and is likely to slow new aircraft sales and new aircraft development programs, according to leading industry analysts and observers. Prices for pre-owned business aircraft have been trending down for the last five quarters and the number of new jet buyers looking to unload their delivery positions is increasing.
According to UBS Investment Research’s business jet update issued on Friday, U.S. and international bizjet flight activity was “sharply lower” in August. However, about 86 percent of the flights UBS tracked were domestic flights within the U.S., meaning the international sampling is somewhat under-represented.
As if there hasn’t already been enough bad financial news, reports from UBS Investment Research and JPMorgan indicate that pre-owned business jet inventories continued to increase in August, leading both firms to warn that deliveries of new aircraft could fall as a result.
Lehman Brothers’ bankruptcy filing will have no impact on XOJet’s international expansion plans, according to the San Carlos, Calif.-based charter operator. XOJet announced last year that it had secured $220 million in aircraft leasing finance from the New York-based investment banking firm, along with an additional $143 million in equity financing from Lehman Brothers and TPG Growth.
Separate reports released in the past week by JPMorgan and UBS Investment Research indicate that pre-owned business jet inventories continued to increase last month, leading both financial analyst firms to warn that deliveries of new aircraft could fall as a result.
In UBS Investment Research’s business jet update released on Tuesday, industry analyst David Strauss noted that U.S. business jet flight activity last month declined 11 percent from the same month last year.
The business aviation downturn will last at least another year or two but there is still plenty of room for good deal-making, according to financial advisors First Equity. Director of investment banking Brett Pogany told NBAA Convention News that new aircraft sales are being stifled by “negative factors” such as supply pressure from a strong pre-owned market.
“Things are better than they appear,” Sentient Flight Group vice president of aircraft management Gil Wolin said today at the 13th annual Corporate Aircraft Transactions Conference in New York City. Despite the souring U.S. economy, the business aviation industry is expected to be sustained by a growing number of international millionaires, declining airline service and fractional aircraft owners.
In his opening speech at Crossair’s December 6 extraordinary shareholders assembly in Basel, Switzerland, Crossair founder and outgoing chairman Moritz Suter expressed regret over the new shareholders’ decision to oust him and six other members of the board, but resigned “to ensure a smooth transition and secure a good start” for the reconstituted Crossair intercontinental airline.
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