An uncomfortably large inventory of aircraft for sale has been a key feature of the sector for much of the past decade, and one of the main contributors to sluggish demand for new aircraft. However, research by Flight Ascend Consultancy, carried out ahead of the NBAA convention, shows that – while deliveries of new business jets are likely to flatline this year, despite an inching up of orders – the used aircraft market is showing increasing signs of buoyancy.
Ascend reckons that around 2,700 used aircraft were purchased in 2017 – some 200 more than in the previous year. The 9% increase in unique aircraft transactions compares with a 2.2% hike in the overall fleet size. In a webinar presentation on the eve of the show, senior analyst Dan Hall described activity in 2017 as “excellent” for the market, with 13% of used aircraft changing hands. This was the highest proportion since the period before 2008, when the figure hovered around 15%.
Overall used aircraft transactions are likely to be down again in 2018. The first half of the year saw 1,367 sales, compared with 1,442 in the same period in 2017. However, Hall says there is “no need to take this as a negative” as 2017 saw an “excellent pick up”. In addition, activity in the first half was still “well up” on the two previous years, with 1,280 and 1,264 transactions in 2015 and 2014 respectively, according to Ascend’s data.
The overall inventory of aircraft for sale is also declining. Less than 9% of the fleet is up for sale, with the “young inventory” – aircraft less than six years old – likely to soon fall below 150 units. This compares, says Ascend, with between 400 and 550 units between 2008 and 2013. A return to the sales activity of the pre-financial crash 2000s is “a big ask”, says Hall, as it would require an extra 400 to 500 used aircraft sales a year. However, with inventory levels at almost 2,000, “this isn’t impossible”.
When it comes to the new aircraft market, deliveries in 2018 are likely to be very similar in number to 2017, Ascend predicts. First half shipment figures show a stable super-midsize segment flanked by a heavy jet category (including airliner-derived types) down 18% on the same period in 2017, and a small-jet segment (from personal jets to midsize) up 8%. First-half deliveries of heavy jets have fallen every year since 2014, a pattern almost exactly mirrored in reverse by small jets.
The latter sector “continues a tremendous recovery”, says Hall, with the Cirrus SF50, Textron Aviation Cessna Citation Latitude, and HondaJet – all new-generation types – leading the charge. Ascend believes this segment will continue to flourish. However, even at around 160 shipments in the first half, this part of the market has some growing to do to catch up with the peak year of 2008, when it saw an eye-watering 431 first half deliveries – 105 of them for (what was at the time seen as) the revolutionary Eclipse 500 very light jet.
Bombardier continues to dominate the super-midsize segment, with 70% of just over 50 deliveries for its Challenger 350, significantly outpacing rivals such as the Dassault Falcon 2000LXS and Embraer Legacy 500. However, the entry of the Citation Longitude next year could shake things up. Ascend also believes that performance improvements with lighter jets, coupled with “need-based buying – if light jets fulfil the mission profile, why buy larger?” – could be putting the brakes on this part of the market.
The heavy category is “very much one in transition”, says Hall, with just two types – the Bombardier Global 6000 and the Gulfstream G650 – achieving double-digit deliveries. “Falcon had a quiet half, and with G550 deliveries falling to just six, it is a key transitionary year for Gulfstream,” he says. Both manufacturers have significant new types due to arrive on the market – deliveries of Gulfstream’s new-generation G500 are under way, with certification of its G600 sister imminent, while Dassault’s Falcon 6X is further down the line.
Finally, for those in search of a bargain, the older jet market may be worth a look, Ascend suggests. There are 6,000 aircraft older than 20 years, but even at 20 most aircraft have another 10 to 15 years of useful life, says the consultancy. Around 1,000 of them are up for sale and there are some “superb deals for buyers”, while the “arrest in steep declines” in value appears to have stopped. “While you are unlikely to see real value increases, on a constant age basis values could recover,” says Ascend. “Risks remain but it has probably never been a better time to be a buyer of an older jet.”
[HD(1]First one has now been delivered.
Source: Flight Daily News