Another flat year?
It’s been eight years since the recession of 2008, and although the crisis hit business aviation particularly hard, recently there’s been whispers of a recovery. With economies growing, especially in the US, one would expect business aviation to be showing similar signs of growth.
So where are the numbers?
2015 was an interesting year for business aviation. Although statistics continue to be compiled, it’s safe to say it was an across the board flat year. When looking at units delivered, total movements, backlogs and used aircraft sales – everything comes up flat.
Some of this of course is the result of market demand continuing to shift away from the rest of the world and towards the North American market – a trend that began in 2014 and picked up momentum in 2015. Today, North America constitutes approximately two-thirds of the imbedded business jet fleet, reestablishing its preeminence with respect to new deliveries and essentially putting an end to past enthusiasm about so-called emerging markets.
Last year OEMs posted book-to-bill ratios of less than 1.0 and, as a result, backlogs are shrinking. Furthermore, 2H-2015 saw a deceleration in transactions on the used aircraft market, which has the trickledown effect of causing inventories to trend higher. These trends are worrisome, especially as strong backlogs played a substantial role in keeping the industry afloat during the worse of the recession years.
On the topic of used aircraft, we saw some interesting changes here too. Whereas in the past demand came primarily from the medium and large cabin aircraft, last year this segment posted a double digit decline in value. At least half of this trend could be attributable to the effect of a strong US dollar, although this is only a theory. What is not a theory, however, is that large cabin aircraft are, in general, declining in value at a rate that is inconsistent with the once held truth that these were 20 to 30 year useful life assets.
Also read: European market is flatlining
Which brings us to today – 2016 – a year predicted to end with more of the same. North America will continue to serve as the industry’s engine as other regions go soft due to geopolitical stresses, struggling economies, commodity and oil price pressures and currency fluctuations against the US dollar. The US presidential elections will also impact this year’s numbers, with a likely slowdown during the second half of the year leading up to Election Day.
As we sit at the mid-year point and you add these trends together, it becomes difficult to see where incremental demand could possibly come from. Thus, we expect, when all is said and done, 2016 will prove to be another flat – if not down – year for business aviation.