European business aviation operators are currently the most optimistic in the world, according to results from the latest JetNet iQ quarterly survey. Since 2011, the Utica, New York-based industry data provider has asked operators the question: “Where is the business aviation industry in the current business cycle?” and more than 40 percent of European respondents indicated that they now believe it is past the low point, the highest percentage for the region since the survey began. This eclipses North American respondents, who traditionally have been the most optimistic but came in at about 38 percent in the most recent survey.
Worldwide, the level of industry optimism has rebounded to a new high, since a low in the third quarter of 2016, when Europe was struggling with the threat of Brexit, and the U.S. was wracked by a bitter, divisive election.
At EBACE 2018 on Tuesday, JetNet vice president Paul Cardarelli noted key economic indicators in Europe and the U.S. such as consumer and business confidence have been trending upwards, while unemployment has declined in both areas over the past five years. GDP growth in the first quarter was 2.9 percent in the U.S. and 2.7 percent in Europe. “Getting close to 3 percent, which is an indicator if you will, the threshold that makes business aviation very happy,” he told the audience. “Traditionally, if you have a 3 percent or greater GDP in a country, they were likely good buyers of business aircraft, so we see the U.S. and Europe trending up and getting close.”
The declining pre-owned inventory is another source of encouragement, Cardarelli noted, with available business jets sinking below 10 percent of the fleet for the first time in a decade. As the inventory has come down, aircraft are trading faster, with days on market shrinking by nearly three months, from approximately a year in January to eight months in March.
One of the concerns in the survey lies in the flight-hour utilization profile. JetNet iQ founder and director Rolland Vincent noted that, over the past 12 months, 45 percent of business aircraft flew 250 hours or less, while less than 6 percent exceeded 1,000 hours of flight time. “That’s an incredibly expensive asset that is very underutilized,” he said, adding that the average aircraft usage was 328 hours annually.
When asked about new aircraft purchase intentions, 45 percent of likely buyers said they would acquire a midsize jet, while 40 percent replied that they were interested in large cabin. “We’ve been watching for growth in the small jet segment, but right now we’re still seeing compression there,” stated Vincent. “It means people aren’t replacing at the lower end as they were—they’re not planning to replace, at least.”
Vincent believes that 2017 was the trough in the latest cycle, and expects the OEM output to begin picking up. In its latest business jet forecast, the company sees deliveries of 7,885 jets worth $236 billion by 2027. According to the prediction, Cessna will account for 23 percent of those aircraft, followed by Gulfstream (20 percent), Embraer (19 percent), Bombardier (18 percent), Dassault (8 percent), and HondaJet (7 percent).
Reflecting the mix of larger higher-priced aircraft, Vincent said Gulfstream would account for more than a third of the total value of aircraft shipped, followed by Bombardier (26 percent), Dassault (14 percent), Textron Aviation (12 percent), and Embraer (8 percent).