Utica, NY (Vocus) October 23, 2010
JETNET LLC, the leading provider of corporate aviation information, has released the September 2010 results for the pre-owned business jet, business turboprop, and helicopter markets.
The 63rd Annual National Business Aviation Association Meeting & Convention (NBAA) launched with a general air of optimism that the global industry’s economic outlook is on the upswing. While it’s generally agreed that optimism is in the air, questions about the recovery still linger. With nine months of 2010 behind us, a common feeling is that we are not there yet.
New aircraft orders are based on the successful sale of existing aircraft in the pre-owned market, a good first predictor. Recent history of the build-up in the inventory for sale of business jets shows that the market began a decline sometime in 2008. After some five years of record sales and rising aircraft values, the bubble finally burst amid a world economic collapse and banking crisis of historic proportions.
Highlighted in Table 1 to the right are the key worldwide trends across all aircraft market segments for the first nine months of 2010 versus 2009. The percentage of Business Jet inventory For Sale shows the largest change (down 2 points), from 17.1% to 15.1%. Most important is the percentage change in the Sale Transactions; Business Jets lead with the largest percentage gain, 22.8%, compared to 2009. Aircraft in all categories have been taking longer to sell in 2010, ranging from 41 to 110 more days in the YTD comparisons. The Pre-owned Piston Helicopter segment is the only market sector to show an increase in the average asking price (of 2.9%). However, the Piston Helicopter segment is also the only sector to be down in sale transactions (a 9.4% drop).
As seen in Chart A to the right, in June 2008 the resale market demonstrated it was in obvious peril. This was significant because it was the last time the For Sale business jet market was fewer than 2,000 aircraft.
In October of that same year, there was an increase of 216 airframes for sale from the previous month—a single month increase of 9.8%. This was a substantial change and it happened even before the Big Three automakers flew to Washington D.C. asking for a bailout in November of 2008.
Beginning in August of 2009, For Sale inventories began to decline, and have continued to do so through the first six months of 2010. However, in the past two months there has been an increase of 1.8%. The September 2010 percentage of 15.1% is down a full 2 points compared to 17.1% for September 2009. Interestingly, the 15.1% recorded in September 2010 is the exact same percentage recorded in September 2008. However, the current inventory has more than 240 aircraft For Sale compared to September 2008.
On the flip side of the For Sale inventories are Full Sale Transactions. There was a rapid decline in annual Full Sale Transactions for two years in a row (2008 and 2009) for both business jets and business turboprop aircraft. In the first nine months of 2010 we have seen an increase in the monthly year-to-date Pre-owned Full Sale Transactions compared to 2009.
As the For Sale inventory has declined, the number of Pre-owned Full Sale Transactions, seen in Table 2 to the right, has increased by 22.8% in the first nine months of 2010 versus 2009, which is very welcome news. However, when the first nine months of 2010 (at 1,342) are compared to the first nine months of 2008 (at 1,435), we see that Pre-owned Full Sale Transactions are down only 6.5%. We are hopeful that the results of the 4th quarter of 2010 and year-end will inch closer to the 2008 levels.
Other recent industry metrics reveal a mixed picture. The current average number of days that a pre-owned business aircraft remained on the market is 345 days, or 82 days more in the January-to-September 2010 period than the same period in 2009. Also, the average asking price during the first nine months of 2010 fell by 6.2% compared to the first nine months of 2009.
Just as the increase in Full Sale Transactions is excellent news, the 2nd quarter of 2010 U.S. Gross Domestic Product (GDP) grew by 1.7% (that is, from the 1st quarter), as reported by the U.S. Bureau of Economic Analysis.
The 1st quarter real U.S. GDP grew at 3.7%. This is the fourth consecutive quarter that the U.S. GDP has shown growth after four quarters of decreases. However, the 2nd quarter increase of 1.7% indicates that we are now seeing a slowing in the U.S. economic recovery. Historically, when GDP has been greater than 3% the business aircraft market is healthy and in a growth mode.
Another important economic metric is U.S. corporate profit. Corporate Profits have shown an upward trend for six consecutive quarters after hitting a low in the 4th quarter of 2008, and is now within 2.5% of the record that was set in the 3rd quarter 2006.
Additionally, the FAA reported that U.S. Based Business Jet Flight Operations in the first eight months of 2010 grew by 11.5% compared to the first eight months of 2009. So more companies are flying in 2010 compared to last year, when flight operations had declined by 30.5% in February 2009 compared to February 2008. While this flight operations increase is welcome news, it is still 17% below the first eight months of 2008.
The U.S. FAA-reported Business Jet Flight Operations are divided into Domestic and International markets (Chart B). Domestic flight operations account for about 84% of all flight operations in the U.S. These flight operations have been increasing rapidly in recent months, but are still well below the 350,000 recorded during 2007 (by about 100,000).
U.S. International flight operations reached a new record peak of 60,906 in March 2010. However, because of the volcanic ash problem in Europe, Flight Operations activity in April and May 2010 declined by 24%. The three months following have remained flat. August 2010 flight operations were at 51,454, 15.5% below the March 2010 record of 60,906.
The inventory levels for Pre-owned Business Turboprop Aircraft For Sale at the end of September 2010 have followed the same pattern as those for the business jet aircraft market. The percentage of pre-owned business turboprop aircraft for sale was 10.5% in September 2010, and has declined from the peak set in both May and June 2009 of 12.0%. The number of business turboprops for sale at the end of June 2010 was slightly less than 1,400 aircraft, nearly half the number of business jets currently for sale.
As seen in Table 3 to the right, the number of Pre-owned Full Sale Transactions for business turboprop aircraft increased by 5.4% in the first nine months of 2010 compared to the same period in 2009, which is good news.
However, it’s taking longer (more days) to sell in the current market environment. The average days on the market for business turboprop aircraft was 330 days from January to September 2010, an increase of 14.2%, or 41 more days compared to the same period in 2009. Additionally, the average asking price decreased by 2.2% in the first nine months of 2010 compared to the same period in 2009.
Since 1988, JETNET has delivered the most comprehensive and reliable business aircraft research to its exclusive clientele of aviation professionals worldwide. JETNET is the ultimate source for information and intelligence on the worldwide business aircraft fleet and marketplace, comprised of some 60,000 airframes.
The company offers services for both fixed wing and helicopter aircraft. Headquartered in its state-of-the-art facility in Utica, NY, JETNET offers comprehensive user-friendly aircraft data via real-time internet access or regular updates.
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