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EBACE: Flight Ascend Consultancy sees positive trends in business aviation market

This year marks 10 years since the global financial crisis – an event that certainly made its mark on the business jet market. While the stability of recent years had been characterised by a slowing market and lower oil prices, 2017 started to produce some genuinely positive signs for the sector. This year may signal that the turning point has been passed.

New deliveries peaked at over 1,270 in 2008, before a dramatic fall to just under half that in 2012. Since then, deliveries have averaged less than 700 annually, with a recovery in 2014/2015 stymied by the drop in oil prices impacting the long-range, large-cabin market.

Deliveries may have only increased by 1% in 2017, to 667 business jets, but the airframers have certainly come to terms with the new dynamics – streamlining their product offerings and bringing some genuinely exciting new types to market.

At the smaller end – very light jets – some 10% of all new deliveries came from market entrants Honda and Cirrus, something that incumbents cannot ignore. The HondaJet had more than 40 deliveries, and recently ANA Business Jet announced it will launch connecting flights in Japan (and potentially other regions) with the type later in 2018. The single-engined Cirrus SF50 Vision is also opening a new market for personal jets.

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The light segment saw a second year of falling deliveries, with fewer shipments of the popular Embraer Phenom 300 and also the Cessna Citation CJ4. Embraer delivered the first Phenom 300E in April: an upgraded version of the aircraft including a new cabin. The light aircraft segment became more competitive with the February 2018 delivery of the first Pilatus PC-24 to US fractional PlaneSense. Offering a larger cabin, and with capability to operate from shorter runways and soft fields, the PC-24 could prove to be a formidable competitor. More than 20 are expected to be delivered in 2018, and Pilatus is reopening the orderbook after taking more than 80 launch orders.

Midsize deliveries also saw a drop, of 9%. Among the most recent introductions, the Citation Latitude was the only type to increase, to 53 deliveries and almost a 50% share, with the Embraer Legacy 450 staying flat at just 13.

The super-midsize category is one of the most competitive, and there was a second year of falling deliveries in this segment. Deliveries of the Bombardier Challenger 350 fell by six to 56 – still a 40% share – with the Legacy 500 and Dassault Falcon 2000LXS/S also falling. Deliveries of the Challenger 650 were flat, while Gulfstream G280 deliveries increased. This segment will become further crowded with the service entry of the Citation Longitude later in 2018.

There was good news in the long-range sector, with a 4% increase in deliveries, reversing two years of falls as oil prices impacted demand for larger cabin, higher value machines. The market-leading Gulfstream G650 increased by 10, albeit offset by fewer G450s and G550s, with the former ending production in early 2018. Gulfstream is busy testing its new G500 and G600 programmes, with certification due this year.

There were mixed fortunes for the other aircraft manufacturers. Bombardier delivered seven fewer of its Global family, but is introducing a new cabin for the 6000 as well as commencing deliveries of its new Global 7000 in 2018. With a range now confirmed as 7,700nm (14,300km) with eight passengers, the Global 7000 will become the longest range model available, as well as offering four cabin zones. Dassault increased its deliveries as the stretched Falcon 8X ramped up, but had to cancel its 5X programme after more delays to the new Safran Silvercrest engine. It has now launched a slightly larger 6X for 2022, which will use the PW812D engine and take the G500 head-on with a larger cabin and longer range. There is also industry speculation about a new Gulfstream product launch to challenge the Global 7000.

It was a quiet year for “bizjets” – business aircraft derived from single-aisle airliners – with no deliveries, as the market prepares to transition to the Airbus ACJ320neo family and Boeing BBJ Max versions over the next few years.

Looking ahead, in its new 2018 forecast, Flight Ascend Consultancy is predicting some 7,500 deliveries will be made over the next decade – valued at $208 billion in 2018 dollars and based on full-life base values. The long-range category will continue to dominate both in aircraft numbers (29%) and value (61%). This will be followed by super-midsize in value terms with 17%, and light jets with 24% of aircraft numbers.

Although 2018 may be relatively flat in total deliveries compared with the past two years, numerous new programme introductions should result in a steady increase from 2019, which may lead to more than 800 deliveries per year by the end of the forecast period.

The used market is undoubtedly causing the most excitement. Transactions were up by 8% year on year in 2017. Indeed, 16% of the installed fleet traded in the year made for the most impressive year since 2008. Used inventory available on the market has declined to record 10-year lows, at less than 2,000 units today, or just under 9.5% of the fleet available (6-7% if only in-production models are considered). Some markets can now be described as balanced – some even as a strong sellers’ market. Recent tax reform in the USA is certainly helping this. Manufacturers will be encouraged that young (up to 10 years old) inventory is significantly down – this should help new sales, and is already translating into better value stability.

2018 will be another crucial year for used aircraft, with the spotlight on the NextGen mandates of ADS-B Out, FANS and Link 2000+, as their deadlines approach. It remains to be seen how this will affect the value of types that require upgrades, and how many owners and operators actually opt for these on a cost-versus-benefit basis. It is entirely possible that more than 1,000 older business jets will be pushed into retirement come 2020.

On the values front, market participants will have noticed much more stability through 2017 compared with 2016 – this resulted in the lowest annual market value changes for quite some time. Across the whole market, there was an average decline of 7.1% year on year.

In summary, 2018 will be a year of transition, with potential for impressive growth from 2019.

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