First-quarter numbers for the aircraft resale market show that the lighter side of business aviation is looking up, but not so bright that you should be going out and stockpiling an inventory of small and midsize jets. Still, according to Amstat’s Market Analysis, “Both the medium and light business jet segments kicked off 2017 with two of the best first-quarter resale retail transaction starts in these segments in the last 10 years.” Turnover in the first three months was 2.6 percent for the medium-jet fleet and 2.8 percent for light jets—both representing the second-best numbers for their segments since 2008.
Some (but not all) particular light-jet models illustrate this trend—as glacial as the upward movement might be. Measured by resale retail transactions as a percentage of the overall fleet, the Beechcraft/Hawker 400XP, for example, clocked in at a low-end 0.8 percent in the first quarter of last year but jumped to 3.2 percent in the same period this year. Likewise, those numbers were 1.6 percent for a Citation V in last year's first quarter, improving to 4.7 percent for the same time frame this year. Bucking the trend, however, was the Citation CJ1 market: transactions as a percentage of the fleet in the first three months of last year were at 4.6 percent but dipped to 3.12 percent in Q1 this year.
In the midsize class, Hawker 900XPs and Gulfstream G200s were both up—to 3.6 percent from 1.6 percent for the Hawker and to 4.9 percent from 1.6 percent for the Gulfstream—in this year's first quarter. The Citation Sovereign is the outlier in this class, but only as a result of virtually flat growth in sales numbers—to 1.2 percent of the fleet in the first three months this year from 1.1 percent in the same period last year.
Shifting Demand
At the start of the global recession in 2008, retail activity in the pre-owned market took a giant tumble across the board, but it was heavy jets that led the field in sales growth as a percentage of the fleet from about 2013, when all other segments sagged. The heavy set only stayed flat, but by comparison it looked a lot better than its smaller siblings. But lighter jets have improved for the first time in recent memory, and that could be a result of a few developments.
The first is the re-emergence of North America as the top market for business jet sales and activity. A graph of retail sales in the U.S. over the last decade compared with the rest of the world looks like a mirror image. In 2006, the U.S. accounted for 61.1 percent of resale retail pre-owned transactions. That dipped to a low of 49.2 percent in 2008, the first and only time more sales were recorded outside the U.S. market than inside it. The gap has widened steadily since then, reaching a high of 66.6 percent in 2015—two-thirds of the total.
Observers point out that in the years when BRIC (Brazil, Russia, India and China) dominated growth in the business aviation landscape, it was the large jets that took center stage. Buyers in those markets wanted to be able to go far and carry a lot of people. With austerity taking over in China and a combination of low oil prices and political sanctions taking a lot of wind out of the Russian market’s sails, the market for large jets is not what it was in its heyday. The existing market is still strong, particularly as residual values drop and long-range jets become more affordable. But the numbers in the Amstat report seem to indicate a shift in activity toward lighter aircraft.
That makes sense, in that business jet flying in North America is far more diverse than in most of the rest of the world. A light or medium jet could be valuable for a small business in a rural area, or a medium-size operation getting from the crowded Northeast or the West Coast to smaller rural markets or satellite plants. Where American aviation grew up from small to large, in most other parts of the world it’s the opposite.
Maybe the latest numbers on improved activity in the light and midsize categories indicate an upward trend to come. Or maybe they just mean the market has stopped digging the hole it was in. Either way, there is cause for some optimism in these developments.
