Professional Pilot, May 2017

POSITION HOLD an editorial opinion Business aircraft myriad disappointments little consolation 16 14 10 8 6 I t has been nearly 10 years since the Great Recession triggered a serious business jet downturn Since then the market has seen a strange and unpleasant mix of false recovery starts modest gains and serious anomalies The past 2 years have seen the market drop and 2017 does not look like it will break the pattern The best way to summarize the state of the industry is as a series of disappointments and 1 notable consolation Disappointment 1 Recovery stalled The biggest disappointment of all is with the top line market numbers After an unpleasant 27 market decline by value between 2008 and 2010 the market saw a rather modest 195 recovery between 2010 and 2014 This was a much slower and weaker recovery than any other cycle in the business jet market history usually we see a classic V shaped upturn which within the space of a few years restores the market to its peak and then within a few years brings it to new heights Instead after 2014 the market took another hit And in 2017 dollars deliveries last year were almost exactly the same as the market trough in 2010 2011 and 2012 around 20 billion excluding jetliners and regional jet business variants Overall the past 9 years have basically seen no recovery and no growth aside from a few modest and temporary upticks and a few false starts If anything the manufacturers are preparing for further production cuts These moves are aimed at firming up 10 PROFESSIONAL PILOT May 2017 03 08 CAGR 197 Bottom 153 Top 10 15 39 08 10 568 pricing which had been under pressure every time output increased Were expecting a slight market decline of 15 in 2017 Disappointment 2 The myth of endless high end growth Even after the 2008 downturn hit the high end of the market jets selling for 26 million and above continued to gain altitude This half actually managed a 6 compound annual growth rate CAGR between 2010 2014 while deliveries of less expensive jets fell by a devastating 57 Clearly strong emerging market demand and high resource prices helped boost sales for the most expensive and profitable business aircraft Unfortunately with the decline in oil prices and the partially related decline in emerging markets along with a vague but menacing anticorruption campaign in China the top end has been hit hard over the past 2 years In 2015 the segment fell 82 from its 2014 peak And the problem got much worse in 2016 with a 206 decline in deliveries by value There are only 3 producers in this segment and their numbers tell an unpleasant story Dassaults Falcon Jet output fell from 55 in 2015 to 49 in 2016 More worryingly Gulfstream went from 120 large cabin business jets in 2015 to 88 last year Bombardiers output in the same category fell from 98 jets to 77 Our high end market segment output numbers exclude business variants of large commercial jetliners But these programs tell a particularly bad story Airbus and Boeing produced 15 business jetliners in 2015 and last year they delivered just 5 By Richard Aboulafia VP Teal Group Bottom half bizjet segment vs top half Bottom half 26 million Top half 26 million 18 12 4 2 0 89 97 93 01 06 11 91 99 95 03 08 13 15 90 98 94 02 07 12 92 00 05 10 96 04 09 14 16 Market value in 2017 billions