Scott Glenn, director of Sales at Empire Aviation Group, explains the global business jet market’s current state of equilibrium and the opportunities this has for the Middle East
When it comes to global business jet sales, we have reached a market equilibrium and some might even describe it as a sellers’ market. In some aircraft segments, values have increased; this could also be viewed as a market correction after years of over-depreciating values.
For the first time in a decade, the business jet market has hit a new equilibrium between supply and demand. A new market for business jets is emerging, with a more even balance between buyers and sellers that is creating new opportunities in the global aircraft market.
Market statistics show that the percentage of the global operating fleet of aircraft currently for sale, across a number of the most popular models, is at its lowest level in a decade.
The US is by far the largest business jet market in the world - home to 50% of the world’s business jet fleet - and yet US buyers are still having to look beyond their borders as aircraft sales inventories shrink rapidly across all the major manufacturers and the most popular models.
As with all dynamic markets, there are still opportunities for buyers and sellers who have access to the market, finance and the right professional expertise. As always, it’s a case of ‘caveat emptor’ for buyers especially when they are looking at aircraft which may be based outside their home market.
Business jet market – crossing borders
The business aviation industry transcends national borders and connects people globally. The market for business jets reflects this and is truly global – this means that what happens in the United States, Brazil, or Mexico will have an impact on the regional markets here in the Middle East, the Far East, and in Africa.
For those of us outside of North America, what does this new market equilibrium mean?
If you’re an aircraft seller, it means that the shrinking aircraft inventory in the North American market is reducing the choices for US buyers in their own backyard. So, buyers increasingly have to look overseas for good quality aircraft. In the past, a US buyer would only have ventured across the Atlantic if there was a substantial price incentive. Today, US buyers may not have much choice even outside their own borders, and the best available option could be right here in Dubai.
If you are an aircraft buyer, there are still plenty of opportunities but you will need to be realistic about price, terms, and expectations. The buyer in today’s market cannot dominate the seller because sellers can simply say ‘no thanks’ and move on to the next prospective customer.
It’s a delicate balance to strike between tough negotiating and not pushing a deal too hard and possibly losing the sale. This is where it really pays to have an aviation professional working alongside you, who knows the markets, values, and aeroplane characteristics.
Our own experience this year supports the view that the global market is becoming more active – 2018 has been our best year for aircraft sales in the last several years, with a lot of activity in aircraft replacement for our existing owners, who have taken the opportunity to upgrade their aircraft, from a Falcon 2000 to a Falcon 7X or moving from a Legacy to a Lineage, for example.
Owners may not necessarily be very loyal to a particular aircraft model but they do tend to move around within manufacturer brands. Depending on owner requirements and preferences, they may move to newer pre-owned, certainly larger pre-owned, or larger new models.
Our sales pipeline for 2019 looks equally strong and there is a strong shift by buyers towards aircraft that are big and bright. Looking back over the last 10 years, Empire was predominantly a midsize business jet operator. Now we have only one midsize on the managed fleet - everything else is super-midsize or bigger.
Why does size matter? Business jets have grown bigger to meet the needs of owners who want longer range - including those in the Middle East who may be flying regular intercontinental missions and who always prefer larger cabins and baggage holds. The further you want to fly, the bigger the aeroplane has to be so if we have an owner or charter client who needs to go from Dubai to Beijing or Tokyo non-stop, they will fly in a bigger aircraft.