Is Business Aviation’s ‘Lost Decade’ Coming to an End?

The 2008 financial crisis created what many in the private and business aviation industry view as a “lost decade” with slow sales and decreased flight numbers. They liken the current situation to the lost decade that occurred between 1986 and 1996 when business jet deliveries fell off at about 350 aircraft annually. According to an AIN Online article, Jon Raviv, U.S. aerospace and defense senior equity analyst at Citi Research, said overproduction of aircraft in the 2000s created a “shadow” pre-owned inventory which “cannibalized” the market for new jet demand this decade.

The end of an era?

But the light and midsize jet market may be nearing the end of the lost decade. Raviv expects recovery to be slow — with sales in these sectors remaining flat at an average of 444 deliveries per year. Although the economy is stabilizing and the jet market has adjusted to demand, some corporate leaders are still skittish, so it will likely take time to get back to prerecession numbers.

While the light and midsize jet market appears to be poised for an upswing, the large-cabin jet market may be on the verge of its own lost decade. Over the past 10 years, jet deliveries in this segment surpassed demand, creating a glut of inventory and driving prices down. However, new Gulfstream and Bombardier models soon to hit the market may help lessen the impact.

Another factor contributing to slow aircraft sales is the fact that other private and business flight options — charters, memberships and fractional ownership — are quickly gaining popularity.

A good time to buy?

Although jet sales are down, aircraft manufacturers have been slow to catch on. Though some manufacturers have cut back a bit, there is still a large excess of jets available. This is driving deep discounts on new jets and fueling a price decrease on pre-owned jets. In fact, pre-owned private aircraft prices were down 16% year over year in August 2017. Case in point: A 5-year-old plane sold in 2016 was worth just 56% of its original price, down from 2012’s 64% value on jets half a decade old. This is a boon for buyers as jet brokers are offering great deals, enticing them to purchase new and pre-owned jets.

But many experts believe things are starting to look up for aircraft sales. With Gulfstream and Bombardier releasing their new jets — the G500 and G600 as well as the Global 7000, respectively — in the coming months, many believe sales activity will begin to slowly and steadily pick up. It’s difficult to predict how quickly the market will rebound, but for the time being, buyers are likely to get their hands on some tremendous bargains on both new and pre-owned aircraft.

Contact the experts at L & L International if you need assistance acquiring or selling a private jet.

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