Guest Blog: Why Bizjet Sales Will Stay Soft

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Sales in the bizjet sector declined substantially after the 2008 economic downturn and there are good reasons to believe they’ll stay that way for quite some time to come. Quite simply, the supply of business jets—or at least their capacity to fly people places—has exceeded demand.

The issue becomes clear when the growth curves of the number of hours flown by these business jets is matched against the number of business jets in the fleet multiplied times the number of hours these jets can reasonably fly in a year. After much research, I have concluded that 400 hours per year is about all a business jet can reasonably fly.

This is because the airplane must be maintained, the pilots must attend recurrent training and the passengers must still conduct business at home. The net result is that 400 flying hours per year represents a happy medium between the cost of ownership and running an ongoing business at home.

Note that the two curves—available hours versus hours of demand—stayed very close together until the last recession in 2008. Then flying hours dropped off significantly and have only recovered to pre-recession levels recently. In the meantime, the fleet size has continued to grow as manufacturers aggressively pitch new airframes and models. This produced a large gap between the hours these airplanes can fly and what they are actually flying. What this means is that the average business jet is underutilized by about 20 percent. That is likely the reason for the recent softness in business jet sales. We have more than enough airplanes available to satisfy the need for travel.

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If those lines are extended out into the future to see where supply meets demand again, as it always has in the past, then the forecast models indicate soft sales into the 2030s.  But I don’t think that will happen.  What’s difficult to forecast is the effect of things like ADS-B and FANS 1A/CPDLC. Bringing an old airplane into compliance with these mandates is a very expensive proposition and has the potential to force older airplanes into retirement a few years earlier than normal. If that were to happen, then supply and demand reach equilibrium in the early to mid-2020s.

In the meantime, manufacturers are faced with the dilemma of deciding how many airplanes to produce.  New airplanes like those being introduced by Gulfstream, Bombardier, Dassault and Textron will be coming online in the interim and this has the potential to make the supply situation worse. What that means is that new airplane sales of everything else will likely remain very soft, and the prices of previously owned planes will continue to decline. So if you’re in the market for a good, low-time business jet, there will likely be plenty available in the next few years.

A general aviation veteran, Patrick de la Garza is the principal at BizAv Research Consulting where he provides market research, forecasts and sales analytical services to general aviation companies worldwide. He is a commercial pilot with multi-engine and instrument ratings. 

Comments (3)

"What that means is that new airplane sales of everything else will likely remain very soft, and the prices of previously owned will continue to decline."

Realistically "...very soft" means "very bad and getting worse". Can't seem to get away from "decline".

Posted by: Rafael Sierra | July 19, 2017 2:23 PM    Report this comment

Unless congress can pass legislation to keep ATC in the FAA, reduce taxes and get some infrastructure projects going, the economy will grow at lethargic rates. If there is some certainty, then business will take off and so will aircraft usage. The uncertainty, is a big determent to all businesses; aviation included.

Posted by: Leo LeBoeuf | July 19, 2017 8:51 PM    Report this comment

The author is very ambiguous with the data and makes many assumptions. I would like to see more details on how demand was calculated and what population of airframes multiplied by 400 hours was used to generate his capacity curve. I believe this forecast is an over-simplification of the broader trends in the new and used business aviation market.

Posted by: Tom Kovac | July 22, 2017 9:25 AM    Report this comment

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