Nearly half of the global business jet fleet is 15 years or older.
More than 10,700 of the more than 21,900 global business jets were built in 2002 or earlier, according to data analyzed for The Eagle by aviation market research firm Amstat.
Normally that would mean owners and companies would be replacing those older jets with newer ones – and stimulating sales for the likes of Wichita’s Textron Aviation and Bombardier.
But the current market is anything but normal, business aviation industry experts said.
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“This is the ultimate delayed re-equipment cycle,” said Teal Group analyst Richard Aboulafia.
Corporate profits are up. Companies have lots of cash. The stock market is performing well.
Those are typically the factors that stimulate sales of new business jets.
Add to that the fact a big slice of the active business jet inventory is turning gray, and new business jet orders and deliveries should be peaking.
But they’re not.
Worldwide business jet deliveries between 2012 and 2016 have varied annually from a high of 722 in 2014 to a low of 661 in 2016, according to the General Aviation Manufacturers Association.
Aboulafia and independent business aviation analyst Brian Foley think what’s holding back the market from shedding older jets for newer ones is used business jet pricing.
Pricing is so low on used business jets that a buyer could purchase a larger jet with a bigger cabin and more range for the same price as a new one that’s smaller and has less range.
“I’ve talked to some of the big cabin manufacturers, and their caliber of customer in the past would have never considered a used airplane,” Foley said. “But now they are.”
“There’s a huge price difference between new and used.”
Manufacturers like Textron Aviation are experiencing that pricing pressure on their new jets. Textron Inc. CEO Scott Donnelly said in a conference call with analysts in January that the company walked away from several Cessna Citation jet sales in the fourth quarter of 2016 because potential buyers wanted lower prices than the company was willing to go on new jets.
“We saw a lot of price pressure,” Donnelly said on the Jan. 26 call. “We traded out some volume because ... we’re not willing to go to the price levels people want us to go.”
Selling used jets at low prices is also likely discouraging people from buying them, because “you don’t want something that’s valued less than what you paid for a year ago,” Aboulafia said.
The good news is used jets are selling, which means the number of them available for sale is shrinking.
“Now all we need is that last missing piece,” he said, which is a return to higher pricing.
Foley said another factor that could benefit new jet sales is the point at which it becomes too expensive to hang onto an aging business jet, where the cost to overhaul an engine or upgrade avionics exceeds the value of the jet.
“Any maintenance event will be a major decision point for the owner,” Foley said. “So these plummeting used values, in a way, might actually help the industry.”
But no one really knows when the expense and pricing factors will come into play.
“A lot of jets that haven’t been replaced need replacing,” Aboulafia said.
“Looking at the numbers, that’s a very reasonable thesis. But it’s been a decade waiting for that to happen.”