Professional Pilot, October 2018

07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Micro indicators As good as it gets except where it matters There are regrettably few signs that these good times are translating into business jet demand The most positive industry indicator is used jet availability This remains at record low levels particularly for new in production models In fact availability as a percent of the total fleet is at levels that historically have indicated a boom market for new jets But this has been the situation for several years now with no signs of resurgent demand Next used pricing and aircraft utilization are both increasing but at very low double digit rates and with occasional setbacks in some months and certain segments Average asking prices tend to be unpredictable indicators but at the very least they have stabilized and seem to have stopped falling The only other positive indicators are orders and backlogs Generally these are rising particularly at Cessna at least on a year over year basis Thanks to conservative production guidance we can at least say that book tobill ratios should be above 10 this year which for most manufacturers is an improvement over the past few years But again weve seen positive indicators like all of the above come and go over the past 10 years without any signs of additional metal being cut And this years deliveries numbers show no signs of hope According to GAMA total airplane billings in the first half of 2018 were down 5 relative to the first half of 2017 Total airplane shipments rose 53 but this reflected a strong piston market The most important metric was deliveries of business jets which stayed perfectly flat 296 jets in both 1h 2017 and 1h 2018 Outlook Flat for most until otherwise proven The past 5 years has seen several false recovery starts That fact coupled with the generally underwhelming industry 12 PROFESSIONAL PILOT October 2018 conditions evidenced in spite of a strong economy leads us to a very conservative forecast A broad and sustained return to growth is an upside departure scenario Most of all we forecast ongoing sluggishness in the small and mid cabin segments through the Super Mid Sized segment in our forecast chart In fact we do not see these segments returning to their 2008 deliveries peak during the next 10 years We do see continued growth in the large cabin segment But this makes life harder for the other segments One pattern that has emerged since the Great Recession is that very high output in the new ultra high end segment jets selling for 75 million and above has suppressed demand for jets in the segment below But production of these has continued suppressing pricing and demand for new and used jets in the segment below them and so on all down the line In fact the high end growth the market enjoyed until 2015 was almost purely due to the Gulfstream G650 s arrival Everything else was flat or down The arrival of Bombardiers Global 7500 later this year will only make this problem worse particularly since Gulfstream continues to deliver G650s at a high rate In conclusion Teal Group no longer believes that market growth is imminent after a lost decade Rather this is the new normal and while the high end will see some growth the other segments and manufacturers will need to cope with a different outlook Richard Aboulafia is VP Analysis at Teal Group Corp an aviation and defense market intelligence and consulting company He has tracked the business aircraft market for over 25 years 35 30 25 20 15 10 5 0 2018 Billions Business aircraft market by class A shift towards larger aircraft Very light Entry level Midsized Super midsized Large Very large Ultra Jetliners RJs Turboprops