Driven by robust demand from new and established users, the business jet industry continued to show strength in Q4 2021.
Business aviation flight and transaction activity was strong, the major OEMs reported improving results following COVID-19 related disruptions, and the pricing of pre-owned aircraft improved as inventory declined. With new users continuing to enter the market, economic growth expected to maintain a positive trajectory, and general business activity expected to increase, the business jet market should maintain its current positive posture into 2022. Growth in Europe and Asia will further drive the market as border restrictions ease and international travel gradually resumes.
Q4 2021 HIGHLIGHTS
- Despite concerns related to supply chain disruptions, continued COVID-19 outbreaks, and inflation, the global economy grew at a strong pace.
- Driven by entry of new customers into the market, business jet flight operations increased substantially compared to the same period in 2020, and 22 percent compared to 2019.
- OEMs reported another strong quarter for their order books, driving up backlogs.
- With a 29 percent increase in 2021 compared to 2020, the value of pre-owned transactions drove the overall business jet transaction market, which grew 14 percent compared to the same period in 2020.
- Inventory levels continued to decline and remained at historic lows.
- Limited supply and continued demand have given business jet sellers additional bargaining power, resulting in broad-based strength in bluebook values.
With GDP increasing 4.2 percent, the global economy experienced strong growth in Q4 2021, capping a strong 2021. Economists credit decisive government action and declining COVID-19 infection rates for the strong economic performance in 2021. Still, threats remain for future growth including continued COVID-19 outbreaks (driven by virus mutations), supply chain disruptions, and inflation. While COVID-19 continues to threaten economic growth, the global vaccine campaign continued to make progress with over 9.9 billion vaccinations administered globally by mid-January 2022ii. Furthermore, supply chain disruptions began to moderate by the end of 2021, with further improvements expected through 2022. As supply chains improve, manufacturers will meet demand from consumers, easing pressure on inflation. Central banks are also expected to increase interest rates in 2022, further slowing inflation. With all of these factors taken into account, the economic outlook for 2022 remains strong, despite threats.iii
Business jet flight operations have recovered from pandemic lows and have now surpassed 2019 levels. In 2021, global flight operations were 8.8 percent above levels seen in 2019. Although flights declined sequentially in Q4 2021, they were 22 percent higher than Q4 2019 – the last full quarter before COVID-19 became widespread globally. With more than 3.3 million flights globally in 2021, business jet operators flew more sectors than in any previous year on record.v
This increase in demand, driven by the entry of new customers into the market, has benefited business jet operators and manufacturers alike.vi One study found that flying privately can reduce almost 700 “person-to-person” touchpoints compared to a commercial flight, a major selling point for the industry.vii
Although many people began using business aviation to avoid potentially crowded airports, a substantial number are expected to continue to utilize business aviation as they become accustomed to the safety, comfort, convenience, and productivity that come with flying aboard a business aircraft. In a recent survey of business jet users, 97 percent of all respondents indicated that they would use business aviation as much as or more than they did prior to COVID-19. Of the respondents who started using business aviation during the COVID-19 pandemic, nearly all said they would use business aviation at least some of the time after the pandemic is over, with 53 percent saying they would use it regularly.viii The business aviation market will further benefit as large corporate business travel returns, driving continued growth in business jet flight operations.
Strong demand for business jets drove robust orders for new aircraft in Q4. With orders surpassing revenue, the industry-wide book-to-bill ratio was 1.3-to-1 and backlogs increased to $32.2 billion – a 36.3 percent increase from a year earlier. The rising backlogs have increased lead times for new aircraft, improving flexibility and manufacturing efficiency for many OEMs. Orders for new aircraft are being driven by new users to the business jet market, habitual pre-owned buyers ordering new aircraft due to low pre-owned inventory, typical replacement and trade up patterns, and fleet operators who are experiencing demand for their services.
Note that 2021 figures are based on preliminary data and may increase as more transactions are reported.
In 2021, new and pre-owned transaction dollar volume increased 13.8 percent compared to 2020 and increased 5 percent compared to 2019. The recovery in business jet transactions is being led by the pre-owned market, which increased 29.2 percent in 2021 from a year earlier and 34.2 percent from 2019.
The number of pre-owned transactions increased despite low inventory (which can reduce selection for buyers), demonstrating both strong demand and buyers’ resourcefulness in finding aircraft when relatively few options exist on the market. Strong demand drove the number of 2021 pre-owned transactions to the highest level on record. It remains to be seen if transactions can continue at these high levels with continued diminishing inventory levels.
During the early stages of the pandemic, many manufacturers reduced production due to supply chain issues and anticipated reductions in demand. In response to strong order activity, deliveries in 2021 were 0.9 percent higher than in 2020. However, production remained about 15 percent below 2019 levels as manufacturers gradually increased production rates. Some manufacturers expect to return to 2019 production levels in 2022.
The number of aircraft listed for sale started to decline in late 2020 as owners held onto their business jets during COVID-19. That trend continued throughout 2021, with listings 16.5 percent lower than in 2020. In 2020, the average number of aircraft listed for sale per week was 45 and that declined to 35.4 in 2021. There is growing evidence that many pre-owned aircraft are being sold prior to being listed, meaning transactions can continue despite low listings and inventory. Listings may remain low until new deliveries begin to pick up, driving owners to market current aircraft once they take delivery of new aircraft.
Strong pre-owned transactions and fewer aircraft listings led to declining business jet inventory in 2021. At the end of the year, inventory stood at 3.7 percent of the total fleet – lower than at any time during the last two years and representing an all-time low. Furthermore, inventory of aircraft younger than 13 years old (typically seen as more desirable) was only 1.9 percent of the global fleet.
Business jet bluebook values have increased since lockdowns and other COVID-19 measures began easing up. Overall values climbed 13.1 percent on average compared to a year ago, with prices having appreciated even more in some cases. On a model-by-model basis, values varied, with some aircraft outperforming others in the market.
With recent increases, like-aged aircraft values have recovered to near pre-COVID levels and have even exceeded them in some cases. On an absolute basis the current values have returned to, or even exceeded in some cases, pre-COVID forecasts based upon historical depreciation rates. As such, business aircraft values have performed better than they did during the 2008 financial crisis and the 2016 decline in commodity values.
Though the world remains in a fluid situation, users of business jets are enjoying the comfort, convenience, and productivity that these assets provide. As a result, owners held onto their aircraft while new buyers entered the market. Disciplined production rates by major OEMs have added to the sellers' market. While prices can fluctuate model by model and deal by deal, reports have emerged of buyers offering high premiums to get quality aircraft. Whether the current situation continues beyond 2021 depends on both strong demand and low supply continuing.
Global Jet Capital is a leader in the business jet financing market, providing leases and loans for both new and used aircraft. Our customers are diverse but all value flexible financing solutions for their aircraft. Below is a brief overview of a few recent transactions that Global Jet Capital facilitated.
Global Jet Capital provided an operating lease to a major North American retailer and first-time customer on a short schedule and with precise term requirements. GJC provided flexible terms to meet the client’s needs, while providing an option to buy the aircraft after a set period of time.
This transaction marked Global Jet Capital’s first financing in New Zealand. Global Jet Capital was able to provide a new customer with a long-term senior debt solution. Furthermore, Global Jet Capital’s customer focus and highly experienced employees facilitated a closing of this transaction 30 days following the acceptance of the financing proposal.
An existing North American client wanted to upgrade into a Gulfstream G600. With a strong existing relationship and a history of delivering expected solutions to clients, Global Jet Capital was selected to provide an operating lease of the aircraft when delivered, and to provide the customer with a pre-delivery payment (PDP) financing solution.
The business jet industry demonstrated the strong market dynamics that have developed over the previous years – including production discipline and steady demand growth.
The second half of 2020 saw the industry enter a period of strong growth and demand which continued throughout 2021. Led by the entrance of new users, business jet flights have increased compared to 2020 and 2019 levels. Pre-owned transactions continued at a high level and inventory declined to a new historic low, a further sign of robust demand. Orders for new aircraft have also remained healthy, with manufacturers reporting active order books and increasing backlogs. Strong demand and low inventories have led to broad-based price strength.
Thanks to an improving economy, increasing business activity, and new users entering the market – who are expected to stay – demand for business aviation flights and business jets themselves are expected to remain strong in 2022.
i Oxford Economics, ii Hannah Ritchie, Esteban Ortiz-Ospina, Diana Beltekian, Edouard Mathieu, Joe Hasell, Bobbie Macdonald, Charlie Giattino, Cameron Appel, Lucas Rodés-Guirao and Max Roser (2020) - "Coronavirus Pandemic (COVID-19)". Published online at OurWorldInData.org. Retrieved from: https://ourworldindata.org/coronavirus [Online Resource], ii Oxford Economics, iv WingX and Global Jet Capital Analysis, v WingX and Global Jet Capital Analysis, vi Aviation International News, vii The Weekly of Business Aviation | Aviation Week Network, viii Private Jet Card Comparisons, ix Company financial reports. Dassault and Embraer have not reported as of publication time and are not included in this analysis. xJetNet and Global Jet Capital analysis. Units are in parentheses, xi Amstat and Global Jet Capital Analysis, xii JetNet and Global Jet Capital Analysis, xiii Aircraft Bluebook and Global Jet Capital analysis