2015 Brings Optimism for Future Jet Growth

As the economic outlook for major global corporations has improved, so has their investment in private air travel. It’s encouraging to see corporate heads traveling by private aircraft once again. However, out of the stir of market activity, new questions arise about the state of the jet aircraft market: How healthy is the market? What’s happening with prices? And most importantly, how does the current atmosphere affect you as a buyer or seller?

Uncertainty in the market

The reality is that the answers aren’t completely concrete, as there are many factors that affect the market and prices, such as the overall health of the economy, demand and supply, corporate profits, wealth creation, emerging markets (notably Asia and Latin America), and global trade.

The slow recovery of the aircraft market since 2008 adds to the sense of uncertainty. According to a report from Flightglobal Ascend Consultancy, there were only around 650 aircraft deliveries in each of the past five years. And jet sales aren’t the only indicator of a slow turnaround. Even commercial flight sales lagged: The Private Jet Services’ PJS 2015 Market Outlook report cites the Bureau of Transportation and Statistics, reporting that commercial airlines only reached an average of 80% capacity on flights over the past 5 years.

In addition, prices have stayed low and depreciation has been unsteady. Pre-2008, the most widely accepted depreciation figure for aircraft value was 5% per annum. However, Ascend saw depreciation values skyrocket to 12% at the end of 2013. This atypical rate of depreciation has fed financers’ reluctance to lend for the past five years.

A turn for the better

However, demand is up! As the economy has steadily recovered, so has business growth. Businesses are once again turning to corporate jets for transportation: PSJ found that 77% of survey respondents use private aircraft for business and personal use. The third quarter of 2014 saw 3.5% growth in the U.S. economy and a 24% rise in demand for private aircraft over the previous year. With a healthy increase in business travel, the need for private transportation has once again become a priority.

So what does this mixed bag of factors mean for the market today and moving forward? Industry experts predict that demand will foster better growth in 2015 and in coming years. Ascend anticipates deliveries of just under 10,000 aircraft in the next 10 years as OEMs bring new aircraft models to market. With five new models already stimulating demand in 2014, it is a good sign that the trend will continue and encourage more sales PSJ also predicts a shift in interest to larger aircraft, from super-midsize to VIP airliners — two classes that are expected to account for 45% of new aircraft purchases and 75% of total value.

The takeaway from all these statistics? As the economic well being of global corporations turns skyward, the private aircraft market follows.