In a report a week ago JP Morgan North American Equity Research analyst Joseph Nadol III indicated that there is a “significant overhang” of pre-owned jets available at attractive prices. This makes for bad news for new jet sales which he described as “anemic”. He indicated that new aircraft sales were continuing to decline and stated:
“We see potential for further rate cuts if orders do not pick up. However, there are reasons for optimism. Global corporate profits were up an estimated 46 percent in 2010, and they have historically been correlated with bizjet deliveries, though there is a one- to two-year lag.”
The report revealed that used business jets have trended down since the middle of 2009 and are now 3 points off of the peak sales. The trend included a .4% drop from 11.7% to 11.3% last month. Nadol stated, “The bad news is that even after this decline, inventories remain at a level identical to the 2001 peak.” This does not bode well for new business jet sales but if the trend continues it could mean a turnaround. The growth for 2012 is forecast at 20% and JPMorgan opines that if the demand picks up, that the industry could meet that figure. If orders do not continue to increase or do not pick up, the forecast of recovery may be longer than the next two years and will be longer. The report said, “If orders do not start coming in, the recovery will get pushed out.”
For those of us selling pre-owned business aircraft this report was not necessarily bad news but for the manufacturers looking for new jet sales, they are probably “cautiously optimistic”, but yet only if the amount of pre-owned jets drop.
The Gulfstream 650 continues to use and test its aircraft under serial number 6001. Recently, Gulfstream, the jet manufacturer that is located in Savannah, Georgia, flew its S/N 6001 on a test flight using only an electrically powered, fly-by-wire (FBW) backup flight-control actuation system. The entire flight was approximately 3 1/2 hours and four pilots were on board to test the system which was ran about 2 1/2 hours and during that test time the jet performed 5 landings using the FBW system.
The system is different from most as it works on electric backup instead of using hydraulics like most systems. Gulfstream’s FBW is designed for the G650 as electric backup hydraulic actuators (EBHA)–one at every primary control surface (elevator, rudder and aileron) and the outboard spoiler. This is great news and the Senior Vice President of programs, engineering and test discussed the test stating:
“The system performed flawlessly. There was no difference in handling qualities between the electrically and hydraulically powered modes.”
This is good news for the Gulfstream team that is working on the 650. Personally I am watching the progress of the Gulfstream 650 as this jet has always been one of my favorites, ad who knows I may some day have the Gulfstream 650 as part of my fleet.
According to reports the business use of corporate jets has increased in a year over year analysis. The number was 4.4% reported last month and was a year over year figure. Part 91 flying increased 10 percent while it rose 12.2% in November. This is another comparison to the same time last year and should not be thought of as just due to the holiday increase. Fractional flying only rose a mere 2.4% so we did not see increased used across the board making for just an overall increase of 4.4%
In spite of the increase in use of corporate jets in the industry, safety remained relatively unchanged. In a report by Boca Raton, Fla.-based industry safety analyst Robert E. Breiling Associates it was stated that there was just one more accident last year involving U.S.-registered business aircraft than in the previous year, with the total business jet accidents rising to nine from eight.
It is nice to see that safety remains nearly unchanged in spite of the increased use. The turboprop industry was somewhat more increased and that could be due to its increased use, but corporate jets remain a safe alternative to commercial flying and we like to see these numbers. If you are looking at safety as a reason not to choose a private aircraft it has great numbers.
The new Florida governor is keeping a promise to residents of Florida and is selling off the private jets owned by the state. The newly elected Rick Scott has directed his staff to liquidate the two business jets owned, a 2000 Beechcraft King Air 350, and a 2003 Cessna Bravo. This is seen as a political move that will obviously be seen as a way for the state to cut back on costs and will add to the difficulties faced by the business aviation industry to not be seen as a perk business for others. Florida’s governor stated:
“The privilege of using a state-owned aircraft is an unnecessary burden to taxpayers, especially when lower-cost travel options exist.”
An interesting understory to the issue is that the governor used his own private aircraft during the campaign trail to be elected to the governor’s spot. According to the Florida Aviation Trade Association executive director, Paula Raeburn, the governor knows about the benefits of using the business aircraft as a business tool as she stated:
“Scott used his own corporate aircraft extensively during his campaign, so he knows what a resource and business tool an aircraft is.”
The business aircraft will be sold at auction on February 9, and experts are believing that the bids on the aircraft will begin at about $2M. The average of the cost of the aircraft is about 2.75M according to reports. It will be interesting to note if the new governor will use his own aircraft and bill the state for its use or asked to be reimbursed for the use of his own aircraft.
The Chinese business industry is continuing it meteoric rise and the numbers coming from China related to its business market can be staggering. This is good news for the likes of business jet sellers all over the world. The demand for business jets in the country are rising as fast as the business market itself. Recently in the world of business aviation it was announced that the trend continues. David Tang, the attorney and business aviation consultant for Minsheng Financial Leasing has announced the intention of the company to increase its fleet and its intent to purchase more jets for its fleet. At the end of the year in 2010, Minsheng Financial has placed orders of 17 business jets.
The jets that have been ordered include Gulfstream, Hawker Beechcraft, Cessna and Dassault Falcon. It is unclear what numbers are associated with each company however the company has already taken delivery of a Gulfstream 450. The company was formed under backing from a couple financial institutions in April 2008. The company is seeing its future rise and the needs for its business aircraft is increasing as well. This is indicative of the market in China and we will see many new companies formed and their needs for corporate jets rise throughout the coming years. My friends in China or those doing business with the country are all trying to keep up with demand. Business jet sellers and buyers might look to the country as a place to do further business.
Many people increase their travel in and around the holidays. This means good news not only for the commercial travel industry but for the private and business aviation as well. The travel increase means that for most charter companies that provide jet travel saw an increase in their booked flights and saw prices increase a little. Now that the holiday season is over and we are going back to the status quo in the world of private travel, In fact it has been reported that private charter flights are now down 50% from this time last month. Charter flights are down and the bookings of that type of travel has gone back to pre-holiday levels. It is nice to know that people are still booking at the previous level.
Further good news is that prices are not only staying current but might have had some of an upswing in charter jet prices. The global price index was stated by Avinode at 97.37 and that is up almost a point from this time last month. We here in the North American market may not have the same increase s prices for charter flights were seen as “softened”. Hopefully, we will see increased usage of private jet across the industry in the future.
JetNet provided some good news for those selling pre-owned business jets in recent time. According to their report, from January through October 31, business jet sales transactions climbed by 16 percent, followed by turbine helicopters (up 15.2 percent) and turboprops (up 4.5 percent). The report from JetNet went on to state that, pre-owned inventory went down over the same period last year for all but turbine helicopters, which rose slightly by 0.4 points, to 7.2 percent of the in-service fleet–but still below the 10-percent mark that delineates a seller’s market (inventory below 10 percent) from a buyer’s market (inventory above 10 percent).
Finally, pre-owned business jet inventory went down slowly but steadily to 15.2 percent at the end of last month, compared with 16.7 percent a year ago. Turboprop inventory decreased by 0.7 points, to 10.7 percent, edging closer to the 10-percent market equilibrium. Despite increased transactions and lower inventories as stated, the report from JetNet said aircraft are selling more slowly now than they did a year ago, ranging from 41 to 93 more days on the market, and in turn asking prices are down by double digits for jets and turbine helicopters–by -12.6 percent and -11.6 percent, respectively. JetNet reported that turboprop asking prices were 2.6 percent lower year-over-year.
These are numbers that might spell good news for corporate jet sales and will perhaps show the climb from current trends in the business aviation industry and private jets.
Inventory of used corporate jets is an indicator of the market and the inventories of used aircraft has fallen off last month which changes what the trend has been over the last three months. The demand for that used aircraft still remains low however. JPMorgan aerospace analyst Joseph Nadol III said in the monthly business jet report released last week that:
“While we expect gradual downward movement to remain the trend, it should be some time before enough used inventory clears to spark new demand if this pace does not pick up materially.”
The report went on to indicate that average asking prices decreased 1.1 percent, to $10.8 million, and that the new aircraft sales, the investment firm noted that third-quarter deliveries declined 32 percent from a year ago. Apparently, heavy jet indicators “remained strong,” with deliveries down only 5 percent. Light jet deliveries fell 54 percent, while midsize jets were down 41 percent. Cessna and Hawker were the hardest hit, with year-over-year deliveries down 62 and 60 percent, respectively, while Gulfstream was the only manufacturer to post an increase, with deliveries up 35 percent.
These indicators are not great news of the industry but they are well received as manufacturers and sellers and others are looking for any signs that the industry is looking to change its current slide and the trend of poor performance in business aviation sales.
Just following along with the news about Santa and his travels. The FAA released this information this week:
WASHINGTON – Federal Aviation Administration (FAA) safety inspectors at the North Pole certified Santa One, the reindeer-powered sleigh piloted by Santa Claus, for its Christmas Eve round-the-world delivery mission.
Santa One, led by Rudolph the Red-Nosed Reindeer, is outfitted with new satellite-based NextGen technology, which will allow Santa to deliver more toys to more children with improved safety and efficiency.
“Children around the world will get their gifts on time, regardless of the weather, thanks to NextGen,” said U.S. Transportation Secretary Ray LaHood. “We’re proud to say NextGen is bringing Santa Claus to town.”
Rudolph’s red nose has been outfitted with avionics that will broadcast Santa One’s position via satellites to air traffic controllers around the world with improved accuracy, integrity and reliability.
“Santa’s cockpit display will help improve his situational awareness by showing him and his reindeer flight crew their precise location in relation to other aircraft, bad weather and terrain,” said FAA Administrator Randy Babbitt. “NextGen will help make this an extra-safe Christmas Eve.”
The sleigh’s onboard systems have been upgraded with state-of-the-art, NextGen technology that will allow Santa One to maintain cruising altitude for as long as possible before making a continuous descent into cities and towns around the world. While maneuvering on rooftops, an advanced, onboard runway safety system will help reduce the risk of incursions between the sleigh and chimneys.
Santa’s reindeer-powered sleigh is already energy-efficient, but the NextGen technologies will further reduce Santa One’s carbon hoofprint. The shorter, faster routings means that Rudolph and the other reindeer will consume less hay, resulting in fewer greenhouse gases.
Unlike any other pilot, Santa has special permission from the FAA to fly thousands of domestic and international short-haul and long-range flights in one night. In keeping with the FAA’s science-based proposal to give pilots more rest, Santa will arrange his flight plan based on his circadian rhythm. Mrs. Claus also assured FAA safety inspectors that she’ll make sure he gets plenty of rest before the flight on Christmas Eve.
Follow Santa’s progress on Christmas Eve at the NORAD Tracks Santa website: www.noradsanta.org
See how NextGen is going to improve the safety and efficiency of Santa’s rooftop descents: http://www.faa.gov/go/santa
This last week the business aviation industry gathered in Dubai at MEBA 2010 to hear all the latest in the middle east and from the jet manufacturers. Jet manufacturer from France, Dassault Falcon, imparted some good news at the gathering. Dassault reported to AIN,
“The Middle East business environment still remains challenging, but confidence levels appear to be rising,” said Dassault Falcon president and CEO John Rosanvallon. “Dassault has seen much greater demand over the last two quarters of the current financial year, with larger cabin jet sales and prices holding up better than smaller jets.”
The report goes on to states that there are about 60 Dassault Falcons based in the Middle East. The company sold 14 aircraft in the region in the last two years and has a backlog of 16 to be delivered to regional buyers by 2013 with the manufacturers delivery of its tenth this month in December.
It is also indicated that hours being flown by business jet operators in the Middle East has been increasing, while the client base is evolving beyond a small group of users to include “corporate heads, entrepreneurs and other business leaders”. Other areas of the world that are also showing signs of increasing in the business aviation industry include; India, South America and Asia.
