November 21, 2024
Analyst Daniel Hall told investment bank Jefferies that fears of crashing private jet values appear to be unfounded.
New private jet deliveries are expected to increase by 12% in 2024, according to Ascend by Cirium Senior Valuation Consultant Daniel Hall.
Speaking to investment bank Jefferies, Hall projects a further 5% growth in 2025.
His host is projecting 20% and 7% growth for 2024 and 2025, respectively.
During EBACE JetNet IQ forecast a 12% increase this year, or 820 units.
That would be the industry’s best result since 2009.
Hall expects that by the end of the decade, annual new private jet deliveries will be in the 870 to 900 range, still below the high mark of 2008, when OEMs churned out 1,317 tails.
According to notes from the call provided by Jefferies Equity Analyst Sheila Kahyaoglu, Cirium is “seeing the market reach a period of stability, especially compared to a year ago when many questions remained around the cadence for demand and the supply chain amid a dimming macro backdrop.”
She wrote, “The supply chain remains an issue, but the constraints are often unique to the OEM and limited to just a few—or even one—specific materials. Backlogs remain robust.”
Hall told the bank’s client that while flight activity is “ solidly above 2019 levels,” there has been “stronger retention of new business aviation users that had been captured since 2020.”
According to Hall, there have been no changes in the geographic concentration of buyers.
However, according to a Jefferies recap, “[F]ractionals have been making gains from user transition up from charter and down from whole ownership.”
Additionally, “Corporate jet usage has still not rebounded as expected despite companies holding onto the assets, suggesting there also may be a minor shift to fractional usage for business travel as well.”
Hall said each incremental fractional aircraft “adds about 160 new users, which should be a net benefit for the industry, likely leading to some movements up to whole ownership over time.”
Over the past year, NetJets has signed options for over 2,000 private jets from Textron Aviation, Embraer, and Bombardier.
Last July, Airshare added 20 orders and options to an existing deal for 20 Challenger 3500s.
Last Fall, Flexjet Chairman Kenn Ricci teased a major order that would add to the totals. Its current fleet includes aircraft from Bombardier, Embraer, and Gulfstream.
The Jefferies notes say Hall told attendees that “entry-level charter has been declining, with more active users moving up to fractional, and less active users returning to commercial transport.”
Hall also expects “large cabin, long-range jets accelerate from 180 deliveries per year to 260 per year on average over the next five years.”
This will likely lead to a market mix shift as customers opt for new products that are leaning more toward the premium/long-range segment.
Cirium is tracking private jet flight activity at 15% above 2019 in 2023 and expects similar activity this year.
With the overall fleet growing, stable activity suggests that utilization is declining, according to Hall.
After significant valuation appreciation over the last few years amid limited aircraft supply and robust demand, fears grew that a meaningful normalization would follow.
However, Hall said that has not yet occurred, even as inventories creep higher.
He said light and midsized jet prices are now about 10-30% higher than in 2019. Hall said the resilience is expected to persist, given that price hikes were long overdue entering this period of high inflation.
Aircraft values are important for fractional buyers, who sell their aircraft shares back to their operator at the end of the term.
The residual value of their shares is based on the market when their contract ends.
Find the perfect solution for your private aviation needs
Save Time. Buy Confidently.
Receive an apples-to-apples comparison of programs that meet your needs from more than 500 jet card and fractional options covering 65 points of differentiation and over 40,000 data points.
