BizJet Market Primed for Growth — Especially the Large-Cabin Sector

The business aircraft market is looking better all the time — welcome news as the industry slowly recovers from the global economic slowdown. But it’s still a top-down recovery, with the large-cabin sector seeing the greatest growth.

Large and midsize jets drive demand

Nearly two-thirds of new business aircraft that will be delivered in the next 10 years will be large-cabin and ultra-long-range jets, reports the Teal Group. Teal’s latest forecast states that 13,030 business aircraft worth $325.6 billion will be delivered over the next decade. Large-cabin planes are driving the demand for business and private aircraft, while demand for smaller aircraft lags.

Bombardier also reports a healthy long-term outlook for the large-cabin and midsize sectors over next 20 years, with business beginning to pick up slightly through 2014 and true improvement starting in 2015. The rosy forecast, especially for large-cabin planes, mirrors the U.S. economy’s expected continuing recovery. Corporate and ultra-wealthy private aircraft buyers have more money to spend than they did several years ago — and they’re spending it on the largest, most expensive planes.

Good news for preowned jet market

The forecasts indicate that aircraft manufacturers are optimistic about corporate and wealthy buyers’ willingness to invest in new aircraft, and this outlook bodes well for the preowned jet market. Used aircraft inventories continue to decline, especially in the big jet arena. Large aircraft represent 6.2% of all preowned inventory, as reported in Bombardier’s Business Aircraft Market Forecast 2012-2031.

Lower inventories favor the sellers of preowned aircraft and spur a demand for new aircraft. In addition, lower preowned inventories have been associated with higher residual values of aircraft in recent years, per Bombardier. (The exception is 6 to 10-year-old aircraft, which still tend to be overvalued.)

Business jet owners and operators in North America are more hopeful about the bizjet industry than they’ve been in the past four years, reports JETNET iQ Surveys. Owners and operators’ confidence in the industry, coupled with their belief that business aviation has passed its nadir in the recent business cycle, should help to sustain gains in both the new and preowned aircraft markets.