With steady growth every year since 2008, and with the company’s international reach now well secured, Jetcraft is in an excellent position to forecast where business aviation is likely to be in 2024.
As Jetcraft President Chad Anderson told EVA, “We see things from the point of view of both buyers and sellers across the world, plus we get the perspective of various funders, bank and non-bank, who lend to the private jet market. On top of this, we’ve spent many years studying both the pre-owned and the new-from-the-OEM market, so we decided to pull all this knowledge together into our first ever business aviation market forecast, which we released in late October.”
As well as forecasting aircraft deliveries and revenue, Jetcraft also looks at avionics and engine OEM sales to provide an overall picture of the sector. The main ‘takeaway’ from the survey, as far as aircraft deliveries are concerned, Anderson says, is that we can expect deliveries to proceed at an annual growth rate of about 7.5% year on year, with a potential dip somewhere around 2022, as the next downswing in the business cycle kicks in – if that is when it happens.
“This is a much more sustainable picture than the sharp ramp up to boom and bust that we had in 2007 and 2008,” he comments.
The Latin American market is in deep trouble right now. The sharp downturn in global demand for commodities such as iron ore has hammered Brazil’s economy. One consequence of this, Anderson says, is that today there are now more sellers of pre-owned aircraft than buyers in Brazil and several other Latin American countries.
“Thankfully, when they were doing very well, South American entrepreneurs were buying very nice jets with a minimum 4,000 nautical mile range. So the class of aircraft coming onto the pre-owned market from South America is very good,” he adds. Jetcraft has recently opened a sales office in Mexico to strengthen its ability to address this market and to move product from South America to areas of strong demand in North America.
“Right now there is more than enough of a price disparity between new and pre-owned aircraft for buyers to see some attractive value in younger pre-owned aircraft,” he notes. This price disparity is a big turnaround from the way things were in 2007. At that time an owner of a private jet in good condition and under ten years of age would generally expect his or her asset to go for a premium over new aircraft. The reason for the premium was obviously the fact that the jet was available then and there, whereas anyone buying a new jet would have had to join a long queue, with delivery probably at least 24 to 30 months away.
Another strong point helping the pre-owned market in the US in particular is the ready availability of finance. “There is a lot of cash about. We have a very willing community of financiers, both bank and non-bank. Plus we have the world’s largest base of current owners of private jets, and these are the most likely people to be upgrading to bigger and better pre-owned aircraft,” Anderson notes.
The US also has the world’s largest infrastructure supporting private aviation, with a very large number of airports across the country that welcome corporate traffic, and a well-established maintenance network.
“If you take a step back and look at the fundamental reasons for people choosing to fly privately, everything points to demand simply getting stronger. The client’s options are the regular scheduled airlines – and you know they seldom expand the number of locations they go to and never get more convenient to use. Or they can choose to charter, buy fractional ownership or buy their own aircraft,” he notes.
Charter is simply a way of dipping a toe in the water, as it were, when it comes to private aviation and many people who charter will end up buying their own aircraft. People may go to fractional as a move up from charter, when they are not flying enough to justify buying their own aircraft. Or they move to fractional as they retire from their main business and sell their jet because they expect to reduce the number of hours they are flying. This, of course, brings yet another jet onto the pre-owned market, creating another opportunity for a sale.
“All of this means that there is plenty of momentum out there to keep the industry established and growing at a reasonable rate. Growth at little over 7% year on year is a realistic, conservative estimate in my view and reflects the lessons the industry learned during the last bubble. The market could not sustain that level of orders. There were far too many speculative orders going forward at the time, with no meat on the bone behind them,” Anderson comments.
One of the most astonishing things to come out of NBAA this year was undoubtedly the announcement by Aerion and Airbus that Flexjet had signed up to buy 20 of the new AS2 supersonic jetliners, despite the fact that the AS2 is, in many ways, still on the drawing board and Aerion has yet to decide which engine it is going to opt for to power the AS2. So what does Anderson think of the fact that private aviation could be on track to see a major game changer if the Aerion/Airbus combination can in fact get the AS2 to first flight by 2021?
“The first thing to say is that this is a very exciting project backed by a very serious and highly capable management team,” he considers. “The Aerion board have put together a tremendously experienced team and now they have a launch customer in Kenneth Ricci, who is a highly respected figure in the industry. That makes Aerion, with the support of Airbus, a very credible proposition. They have issues to resolve, most importantly the choice of engines for the AS2, but you have to remember that supersonic flight is done every day by the military. It is well understood, even if civil aviation has not yet managed to get to grips with it – Concorde excepted, of course.
“I am also very impressed by the fact that Aerion’s business case does not require legislative change to enable supersonic flight over the continental US. They can go subsonic over land and supersonic over water and fit inside the current legislative framework. Besides, we are in the sales business. Who wouldn’t want to sell a $100 million plus aircraft? How cool would that be!