Used aircraft, pricing affects 2016 deliveries in general aviation

Fewer piston-engine airplanes and business jets led an overall decline in general aviation aircraft shipments in 2016, according to a report Wednesday by the General Aviation Manufacturers Association.

A slump in business jet shipments also drove airplane billings sharply lower, according to GAMA’s 2016 General Aviation Aircraft Shipment Report, an annual report that tracks worldwide airplane deliveries.

The report said 37 fewer piston aircraft and 57 fewer business jet deliveries contributed to a 3 percent, year-over-year decline in airplane shipments: 2,262 total airplanes in 2016 compared with 2,331 in 2015.

Year-over-year billings also fell 14 percent: $20.7 billion compared with $23.2 billion in 2015.

“The only thing I guess I was surprised at, or disappointed might be a better word, was the used side of the aircraft market has not corrected itself,” said GAMA president and CEO Pete Bunce. “One of the reasons we are having the challenges we are having right now is we need to see stability in the used aircraft market for us to be healthy.

“When you have a lot of those aircraft out there, you’re going to have a tough time selling new aircraft.”

Shipments and billings of Wichita’s three general aviation aircraft brands mostly mirrored those of the broader industry, except for Cessna’s Citation business jets.

Shipments of that line of aircraft actually increased 6.7 percent: from 166 jets in 2015 to 178 in 2016.

That might explain why billings for Textron Aviation, Cessna’s parent, rose 2.6 percent from 2015 to $2.96 billion. That’s because its mix of aircraft shipped skewed toward pricier jets.

Textron’s total airplane shipments for the year including Beechcraft were 630 compared with 697 in 2015, the report said.

Bombardier also delivered fewer jets including eight fewer Wichita-built Learjet 75s. The Montreal-based planemaker shipped 163 business jets in 2016, compared with 199 the year before.

GAMA’s Bunce said general aviation shipments and billings were likely hardest hit by the used aircraft market.

And that’s not just because there’s a lot of them for sale. Rather it’s the prices that those aircraft are selling for and the firmness in their pricing.

While a used business jet might be had for a good price right now, buyers hesitate when pricing on them has been moving lower. They don’t want to buy a jet for say, $1.5 million, only to watch a similar jet on the used market sell for $900,000 a few months later.

If the buyer financed the jet, they’re suddenly underwater on their aircraft loan.

“(Used pricing has) ebbed and flowed,” Bunce said. “It’s been better in some areas, like for large cabin, long range.

“But if you look in total, I don’t think you’ve had the stability,” he said. “It’s not the total problem … but it is a significant contributor.”

Bunce said he thinks some potential buyers of new aircraft are also waiting for the rollout of new aircraft models, including Cessna’s new Citation Longitude super midsize business jet, deliveries of which are expected to begin late this year.

“There are a lot of things that influence the market,” he said.

But there are some positive signs for 2017. Bunce said some GAMA member companies reported “good, end-of-year inquiries” on new aircraft purchases. And talk of a possible reduction in corporate taxes in the U.S. is another positive sign.

“We’re in a wait-and-see, but there are some good things that could come out of that,” he said.

This story was originally published February 22, 2017 at 12:01 PM with the headline "Used aircraft, pricing affects 2016 deliveries in general aviation."