Not so long ago, it seemed nothing could stop demand for large-cabin business jets, not even a global financial crisis. As the market for light and mid-sized jets fell victim to a global recession in 2008, deliveries of the industry’s largest and most expensive offerings continued apace. Speculators could take delivery of a large-cabin jet, then flip it on the used market for a tidy profit.

Those days are over.

A growing body of evidence suggests the large cabin jet market peaked by the end of 2014 and is entering a period of decline. Seven aircraft by three manufacturers account for all deliveries in the sector: the Bombardier Global 5000 and 6000, Dassault Falcon 900 and 7X and Gulfstream G450, G550 and G650. Deliveries in the segment fell 8% in 2015 compared to the previous year, the largest one-year dip over a turbulent, 10-year period for the business aviation industry. Shipments are likely to decline further this year, given already announced production cutbacks for the Global series.

The sudden change in fortune comes only a couple of years after large-cabin jets were almost single-handedly propping up the industry. As smaller aircraft slowly struggled to recover from pre-2009 delivery peaks, the large-cabin sector moved from strength to strength. In 2006, the combined value of large-cabin deliveries accounted for 15% of the overall business jet market. By 2015, that proportion had doubled to 30%, making the entire industry more dependent on its most expensive products for growth.

The rise of the large jets seemed as meteoric as it did peculiar, leading to certain odd statistics, such as the $54 million G550 leading the market not just in the value of shipments, but also the number of units delivered over a three-year period during that 10-year stretch. Demand was so high it was not uncommon to hear anecdotes of aircraft appreciating in value upon delivery, rather than the reverse.

Only a few years later, the mood has shifted. Manufacturers that have not already acknowledged production cuts now speak of holding rates steady, rather than continuing to grow.

“Supply is reaching demand,” says Brian Foley, an independent market analyst. “Going forward we can’t anticipate these excellent residual values.”

Bombardier seemed to be the first to feel the shift. In July, the Canadian and US manufacturer announced a cut for the Global production rate, which would fall from about 80 annually to about 50 this year. At the same time, Bombardier postponed entry into service of the Global 7000 by two years to 2018, as the company focused on the CSeries entry into service and production ramp-up.

Meanwhile, Dassault’s deliveries of large-cabin jets dropped significantly. The 20 combined shipments of the Falcon 900 and 7X last year marked the company’s lowest annual total since 2006, well below a peak of 65 shipments four years later, according to the General Aviation Manufacturers Association (GAMA).

Less vulnerable, so far, has been Gulfstream’s production output, which last year fell only one delivery shy of matching an historic peak of 121 shipments in 2013. The company’s top line has been buoyed by the relatively recent introduction of the G650, in 2012, which continued a steady ramp-up to 59 deliveries last year.

“Gulfstream will probably the the last to feel the pinch,” Foley says, citing the strength of the G650.

There are signs, however, demand for Gulfstream jets is weakening. Public databases show 20 G650s were for sale on the used market, accounting for about 12% of the delivered fleet. In general the industry prefers a used inventory of less than 10%, to keep new aircraft pricing stable. More worryingly, the used G650 fleet available in early May included nine aircraft that were almost straight off Gulfstream’s assembly line in Savannah, Georgia.

“Having nine aircraft [on the market] is a high number,” says Daniel Hall, senior analyst of Flightglobal’s Ascend consultancy. “It would indicate some really quite significant backlog risk at Gulfstream.”

So far, Gulfstream’s order backlog of G650s is holding firm, says Phebe Novakovic, chief executive of parent company General Dynamics.

“The number of pre-owned 650s apparently on the market is higher than in the past but to the best of our knowledge, we have not lost a single sale to pre-owned aircraft,” said Novakovic, speaking to analysts on a first-quarter earnings call last month.

Large-cabin long-range biz jet

Moreover, the G650 backlog is sold out for two years, she adds. If rates remain at 2015 levels, that translates to a backlog of around 120 aircraft.

“Remember, I think it's important to recall, but the 650 has 100% market share for a market it created, and from my perspective would appear to [be] likely to remain in that position for the foreseeable future,” Novakovic says. “It's still a hot plane and our demand is solid.”

The picture for Gulfstream’s two smaller large-cabin models – the G450 and G550 – is less clear. Novakovic says Gulfstream has adjusted pricing for the G450 and G550, but demand remains “in line with expectations”. The G550, in particular, is still seeing healthy demand in the market, she adds.

The smallest version of Gulfstream’s family, however, is beginning to show its age. Gulfstream delivered 22 G450s in 2015, with shipments down a third compared to two years earlier, according to Flightglobal's Fleets Analyzer.

Demand pressure is showing in the used inventory. Typically, one-year changes in value average about 8%, says Hall. But for some vintages of the G450 and G550 – especially, aircraft delivered from 2004-2006 – year-on-year value declines average 22%.

“That’s really quite big cuts,” Hall says. “Nobody would have these coming for those types.”

Several explanations come up for the sudden shift in fortunes in large-cabin jets, and few offer comfort to those hoping for a quick cyclical downturn followed by a rapid recovery.

Aside from large corporations, large-cabin jets also appealed to wealthy owners in emerging markets, such as Brazil, China and Russia. Those markets have been hit hard by the crash in oil and commodity prices, coupled by the rising strength of the dollar. That theory could help explain the curious glut of used G650s for sale with very little flight time on the airframe.

“A lot of G650 customers placed orders several years ago,” Hall says. “So circumstances have changed.”

Others in the industry have suggested an alternative theory. A new class of mid-size jets offer certain amenities, including a flat-floor and inter-continental range, once reserved for the likes of Gulfstreams, Globals and Falcons.

“It’s not uncommon to see that same [customer] evaluating a Legacy 500,” says Embraer chief executive Frederico Fleury Curado, speaking to analysts on a first-quarter earnings call.

More promisingly, some potential customers for large-cabin jets could just be playing a waiting game. A swathe of new models featuring new technology and increased performance are in development. The introduction of the Dassault Falcon 8X this year leads the way. Other models, such as the Global 7000 and Dassault Falcon 5X, will arrive in service later than expected. Gulfstream’s G500 and G600 are also in flight test or entering assembly.

As customers wait, demand in the large-cabin sector is not likely to change any time soon.

“It’s going to be a tough stretch for the next three years,” Foley says.

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