Posted by Michael Chase
Our aerospace expert and business partner Michael Chase shares with us his insight from aerospace trends, including the latest Pre-Owned Business Jet, Business Turboprop Aircraft and Helicopter market information.
Firstly, Michael comments on what he perceives as the most important discovery or innovation for the business aviation field that influenced the conception of business aviation market or the way of private jet traveling:
The continued development of the business aircraft “itself” from the size, range, speed, and overall capability that keep pace with the growing needs of the traveler. There are now over 200 business jet models with over 18,000 in operation today that cross a broad spectrum from the very light jet – Mustang, Eclipse, and Phenom to the ultra-long range Gulfstream and Global Express into the spacious Boeing BBJ and Airbus Corporate Jets. Summarized into a few words……
- Business Jet Product Line Expansion & Capability Increases
- Vehicle Centered Technology Evolves Rapidly – more powerful engines, new avionics
Market changes have occurred faster than infrastructure development for Commercial Aviation which has fueled Business Aviation growth. Major hub congestion and delays worsen is unacceptable to most travelers. Business jet ownership is a business necessity to leverage time as point to point service becomes a requirement and hub avoidance travel planning emerges.
Secondly, Michael compares key worldwide trends across all aircraft market segments between March 2011 and March 2012:
“Fleet For Sale” percentages for all market sectors were down in the March comparisons. However, the current “For Sale” percentages and numbers for both business jets and business turboprops are still higher than were recorded before the current downturn began in 2008. Business jet sale transactions increased 5.9% YTD ending March 2012 compared to 2011. Business turboprops decreased 5.4% and both turbine and piston helicopters saw double-digit declines in sale transactions YTD at 14.5% and 19.5%, respectively.
Pre-owned aircraft categories showed increases in average asking price percentages in the YTD March 2012 comparisons to March 2011. Both business turboprops and turbine helicopters have continued to show doubledigit increases in average asking price since the start of this year.
Business jets showed a positive start in the 1st quarter of 2012, with a 5.9% increase in pre-owned sales transactions, by selling in less time than last year, and with a 7.8% increase in average asking price. However, the other market sectors are not showing similar results. Pre-owned sale transactions for the other sectors decreased, taking longer to sell on average, and at much greater average asking prices compared to the same period in 2011.
While the number for sale and percent for sale of pre-owned business jets and business turboprop aircraft continue to decline, a comparison of the four years prior to the downturn (March 2005 to March 2008) to the four years since (March 2009 to March 2012) reflect on average nearly 1,000 more business jets and more than 350 business turboprop aircraft. The good news is that business jet for-sale inventories are declining, and full sale transactions continue to increase.
A review of the current business jets for sale by age shows that 51% are 20 or fewer years old and 49% are more than 21 years old. In March 2007, business jets for sale that were 20 or fewer years old represented 36% and those more than 21 years old were 64% of the total. Those from 11-20 years old showed the largest percentage increase of all the age groups.
A review of current business turboprops for sale by age shows that 35% are 20 or fewer years old and 65% are more than 21 years old. In March 2007, business turboprops for sale that were 20 or fewer years old represented 27% and those more than 21 years old were 73% of the total. Those 30-plus years old showed the largest percentage increase of all the age groups.
Lending to small and medium-size businesses after the recession recovered more slowly in the U.S. than in other countries such as Canada, France and Italy, according to a report by the Organization for Economic Cooperation and Development. U.S. banks of every size pulled back on small-business loans during that period, cutting lending to small and medium-size businesses by $43 billion, the OECD said, citing statistics from the Federal Deposit Insurance Corp. But the biggest U.S. lenders, those with over $50 billion in assets, cut back the most, lending $18 billion less to small businesses in 2010 than they had in 2009, the report said.
"The financial institutions in the U.S. tightened credit to small and medium-size businesses for five [quarters] longer than many other countries," said Sergio Arzeni, an economist who oversees entrepreneurship and small business for the OECD. He added that this was the opposite of the 2001 credit-tightening cycle, when the credit conditions for smaller businesses recovered more quickly.
There is no doubt that this lack of funding had an adverse impact on the business and helicopter aviation markets. There are still large inventories of business aircraft available at very affordable prices as 2012 continues to unfold.
The percentage of financed versus cash full-sale transactions for business jet aircraft in the United States from 2000 to Mid-Sept. 2008 was roughly split 50%–50%. Then with the start of the economic meltdown in late 2008, financing of business jets became increasingly more difficult to obtain for buyers, resulting in only 19% being transacted at the end of the 1st quarter 2012. This is based on a four-quarter total moving trend.