The glut of recently used aluminum appears to be clearing out, and that’s good news for sales of new jets, in the sense that things aren’t going to get demonstrably worse. According to Rollie Vincent of JetNet iQ, “If you look at used airplanes that are five years old or newer there’s virtually nothing left on the market. That cleanup has largely happened in the last 12 to 18 months, especially to the extent that it has taken away from new aircraft sales. The buyers are companies that normally would have bought new but could not pass up the value of a pre-owned.” The available used business jet inventory for sale at the end of the summer was 7 percent lower year-over-year and represented 10.3 percent of the installed base, the lowest since before the financial crisis, according to data from UBS Global Research.
Nick Popovich of Sage-Popovich concurs. “This market is going to tighten pretty soon.”
While optimistic, Alex Overstrom, head of PNC Aviation Finance, said that OEMs are still “in a tough spot, as used aircraft price declines have made new aircraft less competitive with pre-owned. That said, we are still financing a decent number of new aircraft, particularly with large corporate clients, who are often leasing. I expect that the used aircraft market will remain robust while new aircraft will be challenged over the next 12 to 24 months. As used aircraft inventory declines and prices rise, and OEMs bring production to lower levels, the market should begin to get back closer to equilibrium.”
As deliveries decline, OEMs typically tend to focus on maximizing revenue per aircraft, either by skewing their attention to large-cabin offerings or by adding value to existing models and raising the price. Both trends continue to dominate the new business jets coming to market and under development this year, and both are arguably healthy in the sense that they drive innovation.
However, given the current new business jet delivery numbers (661 last year, according to the General Aviation Manufacturers Association), one cannot expect the innovation to be uniform across product lines. As Vincent sanguinely points out, several OEMs have room for “pruning in the garden,” by discontinuing slow-selling models or consolidating product lines. While almost any new aircraft can sell when sufficiently discounted, for production to be rational in this market for the OEMs’ shareholders and customers, the aircraft must cross into new frontiers of operational efficiency over its entire life cycle. Several of the following aircraft are poised to do just that with new engines, new airframe alloys, more capable avionics and cabins that maximize interior space, comfort and convenience. New jet buyers are demanding more and OEMs that fail to deliver do so at their peril. While the new jet market’s descent has slowed and it is poised to recover, it will do so by redefining value and catering to customers less tolerant of tardy or incremental product improvement.