October 25, 2023
One of the highlights of each National Business Aviation Business (NBAA) Aviation Convention & Exhibition is the JetNet iQ State of the Market Briefing which provides insights into both industry data and results from its quarterly surveys with business jet operators.
Of course, fleet utilization – or underutilization – the siren’s song for so much of the investment in new ventures to democratize private jet travel over the past decade, continues to be front and center. While optimization is higher than it has been in the past five years, it dropped slightly in the past quarter, Once Bitten, Twice Shy, you might say. Overall, a generally cheery mood may just be the realization that a decade of tepid recovery has caused a decade ahead of what looks to be marginal growth is still better than a dive similar to what the industry went through during the Great Recession.
The good news is as of June the percentage of private jets for sale is down to 9.1%, down a full percentage point since last December and miles from the dark days of 2009 when nearly one in five business jets was for sale. The less good news is how long it still takes to sell a used aircraft. According to the JetNet iQ research, on a month-to-month basis, the average has hopped between 260 and 372 days. As an example, in April 2018 it was down to 262 days, then in May, it jumped to 339 days before dropping in June to 291 days.
Between 2007 and 2009 the business jet inventory for sale spiked from 1,633 to 2,826 airframes while the sale and lease of pre-owned whole jets plummeted from 2,214 units to 1,595. Annual sales recovered to 2,753 last year, although JetNet iQ predict it will dip this year to 2,668 used private jets. The same time inventory continues to fall – in 2017 to 2,147 aircraft and 1,833 this year, meaning that while there are still deals to be had for used private jets, it takes a bit more hunting.
While private jets may be an efficiency tool for business they are not utilized very efficiently, and in fact, over the past 15 years, the average number of hours flown per private jet across the U.S. fleet has actually declined! In 2005 there were 9,650 jets in the fleet clocking just under 4.2 million cycles – or flights, so an average of around 420 flights per year. Today, despite a fleet of 14,233 private jets and 4.8 million cycles, the number of flights flown per year for a private jet has dropped to 340 segments or cycles. One reason is the nobody envisioned aircraft from the mid-1970s and early 1980s would still be flying, which they are.
Looking at current usage, only 6.2% of private jets were flown over 1,000 hours in 2017, itself less than half what the typical commercial airplane does. In fact, divided 1,000 by 365 days and the average private jet is flying less than three hours per day, and that is for the those that are used the most. In fact, nearly two-thirds of private jets fly less than 350 hours per year, or in other words, they average under one hour of flight time per day. Better said, they spend a lot of time parked on the tarmac.
While 37% of respondents say average annual utilization of their private jets hasn’t changed in the past three years 49% said utilization increased versus just 14% said it went lower, which based on the above may be hard to do.
Worldwide, private jet operators are concerned that international trade wars will have an adverse impact on business, 51% strongly or somewhat agree that it’s a potential problem, however, in the U.S. concerns were the lowest at 44% to over 60% in the rest of the world.
While 67% of those who responded in the JetNet iQ poll said they are having difficulties recruiting and retaining pilots, mechanics, and technicians, the situation is particularly acute in North America where 72% agreed it’s a problem compared to 22% who disagreed and 6% were not sure.
Cash was the number one resource buyers of both new (30%) and used (36%) private jets will use for their next transaction, according to respondents with loans in second place.
While JetNet iQ predicts 7,807 new private jet deliveries and today hover around the 800 mark annually, the 1,317 new jets that were delivered in 2008 or the 1,137 in 2007. Put another way, the future if projections for new deliveries hold will mean that it will take three years to deliver the same number of new private jets delivered over a two-year period in those Glory Days.
Despite lots of new shiny metal, the largest inhibitor to buying new private jets is respondents – nearly 1 in 5 – said they “do not need additional” aircraft. The cost to purchase a new jet or trade up was second (15%) followed by uncertainty about the economy (12%) and a decline in business activity (11%). Or since as Ellie Goulding sings it, “I don’t need nobody, need nobody but you,” manufacturers will continue to fight for the love, adoration of fleet operators, corporate flight departments and UHNWs.
While 29% of respondents said Business Needs was the biggest reason that private flying increased, 33% said it was also the reason their utilization decreased.
Final Thoughts
Expensive modifications to make as many as 4,000 of the oldest private jets compliant with new regulations that will come into effect in the next several years should firm up the used private jet market a bit more. However, buyers will still be concerned about how much they will lose in residual value when they purchase a brand new aircraft. While in the past one could budget a 20% drop, and depending on what type of jet you bought, you actually could see an uptick, today it might make sense to anticipate a drop of up to 50% over five years, said the presenters. It might also be why some operators are still singing, “Never going back again.”
