Demand for large-cabin business jets is waning as turbulent markets and geopolitical uncertainties dampen the desire for the ultra-long-range segment, according to industry analyst Brian Foley. Sales of new large aircraft have declined from half of all business-jet deliveries in 2013 to less than a third in 2019, he said, citing data from the General Aviation Manufacturers Association. “It would appear that supply has finally caught up to demand.”
This marks a turnaround from the past decade, said Foley, who runs his own consultancy, Brian Foley Associates. “As the last decade commenced, the world had an insatiable appetite for the biggest of corporate jets,” he noted. A crop of new Gulfstream, Bombardier, and Dassault Falcon models over the past decade drove demand to the point it outstripped supply.
“Impatient buyers were known to have paid multi-million-dollar premiums to existing order holders to jump to the front in the line instead of waiting two to five years for their new airplane,” explained Foley. This occurred as sales for small- and mid-size jets atrophied, he added.
But many of the demand drivers for the large-jet market have ebbed, he said. “Emerging markets, once a primary purveyor of long-range jets given their geographic remoteness, have fallen victim to lackluster stock markets, geopolitical instability, and a dive in natural resource prices,” Foley said. “China, once the fastest-growing business jet market on the planet, has seen its fleet contract as deteriorating economic conditions and a new reluctance to ostentatiousness have taken a toll.”
He further pointed to a relatively strong U.S. dollar that magnifies purchase prices. While the prevailing belief holds that a drop in oil price would boost demand for larger business aircraft, “quite the opposite is true,” he said. “Some analysts have postulated that up to one in five big corporate jets sold are either directly or indirectly dependent on the health of the oil industry, which has recently seen prices fall from over $60 per barrel into the $20s.”
Preowned business jets brokers are reporting most demand at the small end of the market, he added, pointing to data from industry analyst Amstat showing that large jets now account for a fifth of all preowned transactions.
Workforce cuts might reflect this downturn, Foley said, noting the recent decision by Gulfstream to lay off 699 workers this month after laying off 446 in October.
“Longer term, the pendulum will inevitably swing back towards an improvement in big-cabin sales,” he said. “There are a plethora of brand-new large business jets now available or coming in the next couple of years, which tend to stimulate sales.” Eventually, emerging markets and oil prices will recover, spurring more interest in international flight, he added.
“Until then, both new and used smaller business jets will garner most of the attention, for the time being, a distinction not seen in ages, which may benefit companies such as Textron Aviation’s Cessna unit and Brazil’s Embraer,” he concluded.