Bizav in “cautious recovery”: JetNet IQ

The positive vibe on the show floor at the National Business Aviation Association’s 2018 Business Aviation Convention & Exhibition (NBAA-BACE) in Orlando, Fla., is validated by the latest market intelligence.

Rolland Vincent, left, and Paul Cardarelli, co-hosted a presentation of aviation market research by JetNet IQ at NBAA-BACE. Lisa Gordon Photo
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In a presentation co-hosted by Paul Cardarelli and Rolland Vincent of aviation market research company JetNet IQ, recent third quarter 2018 data was presented that points to a period of continued “cautious recovery” for the industry, which has remained largely flat for the better part of the last decade.

“There are some great stimulants out there; some great products coming out now,” said Cardarelli, the company’s vice-president of sales. “That’s always a good sign. Here in the U.S., which is home to about 60 per cent of the [business jet] fleet, there is a very favourable tax environment right now.”

While JetNet IQ is charting positive trends in business aviation, they do have some specific areas of concern.

“One of them is the global concentration of the product,” said Cardarelli. “The U.S., E.U., Mexico and Brazil represent about 80 per cent of the global fleet. We see that as a challenge to be rectified over time.”

In addition, he said JetNet IQ is watching declining aircraft residual values closely.

As the global pool of older business jets–estimated at about 3,200 units–is gradually retired, Cardarelli said the industry is swinging to more of a seller’s market. On average, however, it still takes between nine and 12 months to sell a business jet.

“The older aircraft aren’t flying much, aren’t worth much anymore, [the U.S. deadline for] ADS-B is coming very quickly,” agreed Vincent, JetNet IQ creator and director. “We believe that puts a lot of aircraft on the ground, probably permanently. We think there is a retirement wave that has to be coming. These aircraft are 40 years old or more, and the economics don’t work.”

One final concern highlighted by the JetNet data is that overall business jet utilization is trending downward.

“We are flying our aircraft roughly one third less than in 2004,” noted Cardarelli. “That’s a concern we see. We think that biz av will really flourish when we are really using those assets. We hope that will start to recover.”

Market opportunities

Barring difficulties posed by government and geopolitical forces, Cardarelli sees opportunities for business aviation in non-traditional countries posting healthy GDP growth of three per cent or higher.

AirSprint operates a fleet of 12 aircraft, including Embraer Legacy 450, Cessna Citation CJ2+, and Cessna Citation CJ3+ business jets. Adam Falwell Photo
The sun peeks out from behind an AirSprint Embraer Legacy 450. A positive outlook is prevalent in the industry, with 69 per cent of people saying the industry feels like it has truly recovered. Adam Falwell Photo

“Brazil is also showing up nicely now. Just a couple of years ago, Brazil was in a dire situation as an economy. Now, it’s trending more positively.”

With a stabilizing backlog at the major aircraft manufacturers, JetNet IQ is bullish about the future.

“Looking at the big five OEM backlogs, it is stabilizing at about two per cent,” said Cardarelli. “Not all the OEMs report this data, so we have to look at other metrics, but we do feel it’s stabilizing.”

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In addition, the book to bill ratio (new orders to completed sales) is trending positively. As completed aircraft are rolling off the production lines, OEMs are finalizing new orders to ensure future productivity.

“It should be a very good year,” said Vincent. “If you’re an OEM now, you should be taking in a lot of orders and getting a lot of phone calls.

“The orders to delivery ratio should come well above 1:1 by the end of the year. That’s the first time we can say that since 2008.”

A positive outlook is prevalent in the industry, with 69 per cent of people saying the industry feels like it has truly recovered.

Here are some other industry insights reported by JetNet IQ:

  • Average hours flown per year, per fixed-wing turbine aircraft: 340.
  • 25 per cent of future buyers plan to acquire a small jet; 40 per cent are looking for a medium-sized jet; and the large jet category is attracting 35 per cent of buyers.
  • Trade wars, elections, currency concerns, credit and interest rates all impact the decision to buy.
  • A whopping 73.9 per cent of survey respondents said millennial customers aged 20 to 40 have different needs from traditional customers.
  • The talent shortage is hitting North American biz av hardest.
  • JetNet IQ predicts the industry will deliver a total of 7,800 business jets valued at $240 billion over the next 10 years, including this year.
  • Next year should see an increase of about five per cent in units delivered and almost nine per cent in dollar value.
  • The average value of a business jet transaction today is $30 million. This is a significant increase.
  • If the WiFi isn’t working, an aircraft is increasingly likely to be grounded.
  • Worldwide, there are about 21,500 business jets in operation.

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