Global Jet Capital talks strength of BizAv market in Q4 Market Brief


Global Jet Capital released its Q4 Market Brief, highlighting the strength of the 2022 market, high level of orders and low inventory.

Transactions were down compared to the record-setting 2021 but remain higher than pre-COVID numbers. Aircraft listings increased but pricing was still stable and inventory levels remained low. Many economists are predicting a recession in 2023, making the health of the global economy a cause for concern for many buyers and sellers.

Global Jet Capital said that due to business aviation’s “unique value proposition, the business jet market has remained resilient but will likely be tested this year.”

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Here is what we learned from the IADA Q4 market report

While economists predict a looming recession, Q4 2022 numbers indicate the impact may be less severe than anticipated. Flight operations dipped slightly but remained roughly 18 percent above 2019 levels as business aviation continues to endure.

OEMs have experienced heightened demand in 2022 and backlogs continue to grow. An increased number of deliveries have been reported and a “normalized order intake” throughout Q4 led to lower book-to-bill ratios. Pre-owned transaction levels dipped in 2022 compared to 2021, but remain above pre-COVID levels.

Inventory levels increased alongside the number of aircraft listings but are below historical levels. Business jet bluebook values increased in Q4 with the strong demand and low supply, but the market may be normalizing soon.

2022 was hit with continuing supply chain disruptions and rising inflation costs that have driven banks across the world to raise interest rates. With the war in Ukraine and increased energy instability in Europe, there is much uncertainty about 2023. Zero-COVID policies in China also contributed to the instability across the world, causing global economic growth to slow and stock prices to decline.

There is widespread consensus that most major economies will suffer a recession in 2023 due to increased interest rates. The International Monetary Fund has recently increased its 2023 growth forecasts, relating the growth to slowing inflation, the opening of China’s economy, the strong labor market in the U.S. and a good response to the European energy crisis.

While there are still risks to economic growth in 2023, the overall global economy has faired better than expected and higher growth can be expected if the trend continues.

Flight operations were a positive trend in business aviation, with a 12 percent increase in flights from 2021 and 19.1 percent from 2019. The increases were driven by a strong network of existing customers and a growing number of new customers that entered the market during the pandemic. Many customers were driven to the BizAv market due to the industry’s flexibility, durability and comfort compared to commercial travel.

Flight numbers declined in Q4, dropping 2.6 percent compared to Q4 2021 and 4.2 percent from Q3 2022. The number of flights was 17.8 percent above 2019 and much of the overall decline was driven by the cut in European business travel while facing high energy prices. Many business aircraft fleet operations were at full capacity in 2022 and capped on how many additional flights they were able to make.

OEMs had a strong 2022 overall. With new users in the BizAv market, many pre-owned buyers opting to buy new aircraft, typical replacement and trade-up orders and fleet operations increasing the demand for services, OEMs had growth despite a small slowdown from 2021. Industry-wide, the book-to-bill ratio remained above 1-to-1. Orders had slowed down by Q4 but remained around the historical norms. Year-end deliveries were high, which is a normal practice in the industry.

The total number of pre-owned and new delivery transactions declined 15.1 percent in 2022 from 2021 but was still 7.1 percent higher than 2020 and 7.5 percent higher than 2019. The rapid growth in 2021 was not sustainable with the decline in pre-owned inventory and supply-chain disruptions impacting aircraft production.

With a unit volume decrease in 2022, the dollar volume increased by 5.5 percent with the rise in aircraft prices. This increase was largely in the pre-owned market and driven by increases in trading.

After a decline in 2020 and 2021, the total number of aircraft listings was 23.7 percent higher in 2022 than in 2021. This was partly due to the low levels in 2021. Listings in 2022 were 6.3 percent lower than in 2019 and reports say that many owners were motivated to sell to take advantage of the pricing environment.

Many of the aircraft sales in 2021 involved unlisted aircraft and in 2022, many sellers returned to publicly listing aircraft for sale. As new deliveries increase, listings may see a bump in 2023. Listings began to increase in Q4 2022 as deliveries increased, indicating a likely increase in Q1 2023.

With an increase in aircraft listings came an increase in inventory levels. By the end of 2022, there was five percent of the total fleet, over 3.1 percent at the end of Q1 2022 and still below levels from the last decade. As the market age grows younger, so did the aircraft inventory. Aircraft younger than 13 years old made up 3.5 percent of the global fleet, an increase of 1.8 percent from the end of Q1 2022. Inventory will likely continue to increase as the market returns to normalcy.

High demand and low supply have led to business jet bluebooks values to increase in Q4 2022. The average blue book value has climbed 29.5 percent compared to Q4 2021. Values vary on a model-by-model basis. Older aircraft have appreciated in value faster than newer aircraft since many buyers chose to buy older aircraft at the peak of the market, rising 58.1 percent.

There are signs that values are beginning to stabilize. Many industry players feel that the stable pricing environment will reemerge when supply and demand come into balance.

Contact

Name: Haley Davoren
, Digital Content Manager
   
Company: GlobalAir.com   

Website: https://globalair.com

Email: [email protected]   
Phone: 502-456-3934

©2023 GlobalAir.com, Haley Davoren. All rights reserved.



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