Industry Insights

Jetcraft’s recently released 10-year business aviation market forecast sees a sector set to enter a new business cycle – one that will be defined by large jets and big revenues. Chad Anderson, President of Jetcraft, takes a closer look at how this will impact the market, aircraft prices and the pre-owned segment.

By Chad Anderson, Jetcraft President

According to Jetcraft’s latest annual 10-year business aviation market forecast, our industry is at a new beginning point. After nearly a decade since the recession, business aviation has good reason to be optimistic as we’re now well-positioned for several years of steadier, healthier growth and expanding revenues. Let’s take a closer look at what’s driving this sentiment.

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Written by Chris Brenner, Jetcraft’s former SVP-Sales, Americas

NBAA-BACE always serves as a good annual reminder to check the pulse of the business aviation market. According to the latest data provided by JetNet, of the 21,870 business aircraft worldwide, 2,285 are currently on the market. This is the equivalent of 10.5% – a level unheard of since November 2007. In other words, pre-owned inventories are back to pre-recession levels.

As the preowned business jet market is a good leading indicator of the new business jet market, this is great news for our industry. Residual values of aircraft are still lower than desired, however, buyers and sellers have seemed to acquiesce to common ground fueling the activity we see today.

From Pause to Fast-Forward

According to JetNet IQ’s third-quarter industry survey, confidence is back up. Nearly half of the respondents indicated that they believe the business aviation market is past the low point of the current economic cycle. The survey goes on to state that overall optimism has rebounded since NBAA-BACE 2016, which took place during the height of a contentious US presidential election.

During last year’s show, I remember industry leaders discussing a “pause” in the market, with many buyers opting to wait until after the election for purchase decisions. Regardless of whether or not this pause actually happened, the market has since gone fast-forward. In North America alone, pre-owned inventory levels are down and good aircraft are being quickly bought up. Whereas Jetcraft became accustomed to carrying 80 to 90 listings over the last 5 years, today we have a level of inventory that suggests a much more fluid market – with 17 sales pending.

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Written by Fabrice Roger, former Jetcraft Sales Director, Latin America

Latin America hosts the second and third largest business aircraft markets by fleet size within the Americas, with Mexico’s fleet (988) recently overtaking Brazil’s (782) for the #2 spot behind the US, according to AMSTAT. There is a healthy appetite for private aviation in the region, fueled by long distances in air travel, increased security concerns and proximity to the United States. However, the market’s growth potential continues to be challenged by economic pressures, government changes, commodity pricing fluctuations and a lack of a modernized infrastructure.

There is still a need in many Latin American countries for more runways, airports and maintenance operations to reach a US business aviation standard of quality and efficiency. Mexico has the most advanced airports and maintenance facilities due to its proximity to the United States. Despite being a top business aviation market in Latin America, Brazil has a very limited amount of runways suitable for business aircraft. The country is starting to privatize airports now, but its current economic and political environment has slowed this process. However, if the new government prioritizes these investments after the planned elections in 2018, it could have a positive effect on infrastructure and growth.

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When buying or selling an aircraft, many believe that engaging multiple aircraft dealers will increase their opportunities and faster materialize the best deal —but this is rarely the case. Working with a high quality and dedicated aircraft transaction specialist under an exclusive representation agreement consistently results in faster, easier transactions with better outcomes.

Here we highlight some of the key advantages working exclusively with one aircraft specialist affords buyers and sellers:

• Tailored Relationships and Expertise: Orchestrating a successful transaction takes time, money, and expertise. The representation agreement signifies a partnership that lets the transaction specialist fully devote its resources to your deal, whether that includes marketing an aircraft for sale, or finding the perfect aircraft to purchase. The partnership also provides peace of mind to you, knowing that a team of professionals is working diligently on your behalf 24/7.

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Selling an aircraft does not have to be an overwhelming endeavor. Keeping in mind the proper pre-sale procedures and knowing what pitfalls to avoid can make the selling process simple and eliminate unnecessary hurdles. Here is our advice on the most common mistakes sellers make and how to avoid them.

Setting an Accurate Valuation – A common mistake made by sellers is not knowing the true market value of their aircraft, ending up with unrealistic price expectations. Sellers should not base pricing solely on upgrades, Bluebook / VREF values, cosmetic changes, and listings that seem similar to their own. Sellers should carefully consider real-time market trends and changes. It is critical to use specific data about the subject aircraft – its condition, maintenance and usage history – to set an accurate figure. Valuations are also critical prior to performing any upgrades or cosmetic changes to best understand what features will help aid in the sale of the aircraft.

Set a Realistic Timeline – One of the most common issues where sellers misstep is establishing a realistic timeline to closing. Many think the process from the signing of the Letter of Intent (LOI) to closing should take only a few weeks, when in reality it could be longer. To avoid extra stresses and pressure, work with a transaction specialist and plan ahead to ensure that a realistic timeline is set, especially if there is an upcoming event like the end of a lease or new aircraft delivery. Also, try not to deter a buyer by pushing too hard for a closing, and be open to a compromise so that both parties can feel good about the transaction.

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This is an exciting time for business aviation in Europe, as echoed this month at EBACE 2017. Europe has quality aircraft priced correctly and good market conditions that are attracting the western buyer—great news for the European seller. Last year, the best fiscal year in our company’s 55-year history, Europe accounted for approximately 20% of our annual transactions.

The recent election of a new president in France is beginning to chip away at some of the uncertainty surrounding the European business aviation sector’s longevity. In addition, the recent German, French and United Kingdom high stock markets results are also paving the way for transactions. These conditions, along with the euro increasing while the U.S. dollar continues to fall, has flushed Europe with motivated sellers. What this means is Europe has plenty of sellers with aircraft that are attractive to buyers in the region and in North America, and sellers that can benefit from the current currency situation....

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by Dan Kilkeary, former Jetcraft Senior Vice President of Sales - Americas

Private aviation, especially in today’s chaotic and often stressful travel environment, offers many benefits for both leisure and business travelers. But how do you decide when to invest in chartering, or whether you should purchase a private aircraft? Here are some parameters to keep in mind when weighing the options of chartering versus buying.

Advantages of Chartering an Aircraft

If you only fly private a few times a year, then chartering can be a more economic choice. With numerous charter options available today, you can choose exactly the type of plane that fits your travel needs for each specific trip. Keep in mind these three benefits to chartering an aircraft:

Flexibility—a charter affords you the ability to decide when, where and how to fly. In the end, chartering is ideal when flight usage is sporadic and needs are difficult to predict.

Variety—chartering offers the option to ch...

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The Asia-Pacific market continues to show signs of business aviation growth, and we are tracking promising activity throughout the region. Jetcraft’s 10 Year Market Forecast predicts Asia-Pacific will remain one of the most active of the emerging markets (and the third-largest business aviation market behind North America and Europe), accounting for 10% of unit deliveries from 2016-2025 (789 units). As we closed 2016, the best year in our company’s 55-year history, Asia-Pacific accounted for approximately 20% of our results, on par with Europe.

One of the key drivers for Asia-Pacific’s business aviation sales activity, from our perspective, is a greater acceptance of pre-owned aircraft among buyers as well as an increase in the number of first-time sellers in the market. It remains a region where buyers are inclined to purchase new aircraft, but there is a significant shift in attitude, where buyers are acquiring pre-owned aircraft in greater numbers and with growing confidenc...

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The business aviation industry today is showing continued signs of growth, and improved business conditions are creating a favorable environment for individuals and corporations who may have postponed such transactions during the economic downturn to again consider making the high-value investment of procuring an aircraft.

As with any purchase, paying cash is the easiest way to close a transaction. Another option may be for owners to complete an aircraft trade-in transaction which can free up capital so the owner can move more quickly toward acquiring a model more suitable for their changing needs. Some experts, however, advise that even if an individual or corporation has enough cash available or an asset they can trade in, it may make more financial sense in certain instances to either finance or lease the aircraft.

Many aircraft financing institutions focus on the ability of the client to repay the financing. It does not mean they do not care about the aircraft itself, but r...

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