BizJet Sales Outlook: What do the Current Trends Show?

From 2017 to 2019, the top five business jet Original Equipment Manufacturers (Bombardier, Dassault, Embraer, Gulfstream, and Textron) delivered an average of 606 aircraft between them, annually. In 2020, they delivered 493 business jets (19% fewer).

This year, I predict the top five OEMs will deliver between 523 and 544 jets, which would be between 6% to 10% higher than in 2020, but still 10% to 14% below the 2017-2019 average.

In reality, a comparison with the pre-pandemic years is much more meaningful, and the two industry players who will be closest to matching their delivery averages of 2017-2019 are likely to be Gulfstream and Embraer, see Chart A.

CHART A: 2021 Business Jet Shipment Forecast: Top Five OEMs

Source: OEMs 10Q, and 10K reports. Consultant analysis

Moreover, I predict an uptick in Light Jet deliveries to benefit Textron and Embraer, while the Mid-size and Super Mid-size Jet segment will largely benefit Bombardier (Challenger 350) as it continues to see strong retail and fleet deliveries in the Super Mid-Size Jet segment. However, if Embraer wishes to seize a larger market share, it will need to further penetrate the Super Mid-Size Jet (Praetor 500) and Large Cabin Jet (Praetor 600) segments.

The majority of the Large Jet market penetration is likely to come from Bombardier and Gulfstream, with Dassault expected to also enjoy a larger share in the next two to four years as it introduces, and ramps-up production of its new Falcon 6X and Falcon 10X products.

In order to meet my year-end conservative aircraft delivery forecast of 523 units, the top five OEMs will need to deliver a total of 308 business jets in the second half of (H2) 2021, or 1.4 times more units than they did in H1.

Thus, Gulfstream must deliver 71 aircraft (59% more) in H2 2021, while Textron, Bombardier, Embraer and Dassault need to deliver 91, 64, 63 and 19 jets, respectively.

Q4 is a Key Time for Shipments

Positively, between 2017 and 2019, Q4 traditionally saw a surge in OEM shipments, and, excluding Embraer, averaged 32% of total annual aircraft deliveries for the leading OEMs. During the same time-frame, Embraer reported a much higher proportion of its annual deliveries in Q4, with an average 43% of its total annual shipments coming between October 1st and December 31st (see Chart B).

CHART B: Top Five Business Jet OEM Average Shipments, by Quarter (2017-2019)

 Source: OEMs 10Q & 10K reports, GAMA. Consultant analysis

Two OEMs to see Improved Billings…

I would expect to see improved profitability at Bombardier (owing largely to its ultra-long-range Global 7500 product, which should provide a significant boost to the company over the next 24-36 months as deliveries continue to ramp-up.

Moreover, Textron should see improvements in billings as it further positions its Latitude and Longitude products, while Gulfstream and Embraer must keep pushing their products to optimize billings.

Pre-Owned Business Jet Market Continues Recovery

As global economies continue to recover, and scheduled airline capacity remains 30% below their 2019 levels, with little hope of significant improvement this year, the global pre-owned business jet market continues to be strong. Inventory levels continued to decline in H1 2021, and remained at historically low levels as strong demand continues.

Looking at pre-owned jets from the Top Five business jet OEMs, Embraer and Gulfstream had the lowest units available for sale (less than 4.4% of the active fleets were available for sale, per AMSTAT data in September). On the other hand, Bombardier, Dassault and Textron jets on the pre-owned market averaged 5.3% of the active fleet.

In terms of resale retail transactions, Chart C depicts that H2 2020 recorded more transactions compared to H2 2019. The same was true for H1 2021 compared to H1 2020. However, the limited inventory that is currently available for sale may mean fewer transactions as buyers find it more difficult to find a suitable jet for sale.

CHART C: Business Jet Resale Retail Transactions

Source: AMSTAT. Consultant analysis

Pre-Owned Jet Median Value Trends

While reviewing short-term median values, Large Jets (referred to as Heavy Jets by AMSTAT) have continued to rise by 20% over the last 12 months, essentially recovering all of the value that was lost in 2020.

This has been driven by continued robust transactions, which have risen by 49% and 31% in the first eight months of 2021 compared to the same periods in 2020 and 2019, respectively. Large Jet inventory is down 41% year-over-year.

The median values of Mid-size and Super Mid-size Jets have risen 18% and 11%, respectively, over the last 12 months, recovering from their declines in 2020, but the increase plateaued in July and May this year.

CHART D: Short-Term Median Value of Mid-Size Jets

Source: AMSTAT. Consultant analysis

Again, the upward trend in values is being driven by strength of resale transactions, and a continued contraction in unit availability. The Mid-size Jet segment in particular has performed above expectation with strong transaction activity during the first eight months of 2021, exceeding the same time-frame in 2020 by 68%.

Finally, the median value of Light Jets has risen 11% over the last 12 months, but remains 7% below the January 2020 level. We believe values in this segment have not recovered because it simply takes more to move the needle in this segment than with larger jets. Moreover, there are more of these aircraft, and greater diversity and stronger transaction activity is required to drive values higher.

In Summary…

Based on current business jet pre-owned inventory levels, and an improved business jet delivery forecast (compared to 2020, though still below the historical 2017-2019 average), the business jet market remains strong, and is well positioned to harness the momentum, fueling the expectation of stronger residual values in 2022.

OEMs should see a firming of prices, too, along with improved profitability and returns.