Index returns to positive territory on election optimism

Indicator at 52: Our Barclays Business Jet Indicator (BBJI) increased 27% with our index at 52, with above 50 indicative of an improving market. Our straight-up measure of overall business conditions came in at 6.4 (0-10 scale), 6% higher, indicative of better-than-normal market conditions.

View on market/stocks: Our survey index has historically been well correlated with manufacturers’ book-to-bill, with current index levels in the low 50s aligning with a ~1.2x bookto-bill (Fig 8). We expect extended backlogs (two-to-three years) with higher pricing will allow for manufacturer delivery growth and improved margins over the next few years, with current manufacturer supply at only ~4% of the installed base. We have Overweight ratings on GD/TXT. GD currently trades at a ~20% discount to the market while TXT trades at a ~40% discount.

Index components: The increase in our index reflects a 62% improvement in outlook, a 44% increase in dealers’ willingness to increase inventory, a 32% increase in pricing and a 27% increase in customer interest. All of our index components, other than pricing, are now in positive territory (>50).

Election: When asked about the impact of the election on the market, a large majority of respondents see it as positive for the bizjet market. Specifically, 70% see it as slightly positive (53%) to significantly positive (17%) as compared to only 6% that see it as slightly negative.

G700: When asked about timing of G700 deliveries, 81% don't see deliveries accelerating until mid-to-late 2025. A much smaller 19% see deliveries accelerating in early 2025. We estimate only two G700 deliveries so far in Q4 as compared to GD guidance for 27 in Q4 (14 in Oct/Nov).

GENEVA—Following two years of decline, the new and pre-owned business jet market is expected to restart the trend of gradual growth in 2024, according to Global Jet Capital.

Over the next five years, used sale transactions are expected to total 13,050, valued at $88.9 billion, with transactions projected to grow at an annualized growth rate of 3.8% and dollar volumes at a 2.3% annualized rate, according to a business jet market forecast from Global Jet Capital released ahead of the European Business Aviation Association Convention & Exhibition here.

“The forecast is really reinforcing the theme that we’re seeing across the industry, which is one of stability,” Vivek Kaushal, Global Jet Capital CEO told Aviation Week’s Show News. “It’s no longer the ‘go-go’ times of 2022, but backlogs are strong, and production is increasing—but it’s increasing gradually. You’re not seeing a sea state change in the production schedules of the manufacturers. . . . I think the underpinnings of what we’re seeing is the usual patterns of replacements, upgrades and new growth. .  .  . Wealth creation remains in place; there is no change to how we see our customers behaving. In addition to new aircraft orders, near-demand for young and younger aircraft is very much there, and that will continue to drive pre-owned trading for a good while.”

In the pre-owned market, in the 10 years following the Great Recession of 2007 to 2009, pre-owned aircraft were trading below their fair value, Kaushal says. The market then corrected for that and went even farther, he says.

“But as time has gone on, it’s come back into balance,” Kaushal says.

Demand for heavy jets, which has grown in popularity because of their long range and high passenger capacity, is expected to grow to 28.5% of the pre-owned market by 2028 from 24.6% in 2023, with an annualized growth rate of 6.9%.

“Those are the kinds of planes—the super-mid, large-cabin, the upper midsize—that deliver the performance and user experience that our client base wants,” Kaushal says. “People want to travel in those spacious cabins and go longer and longer distances, and those are the planes that fulfill those missions.”

North America, which has the largest installed base of business jets, is expected to account for 76.3% of the global business jet market over the next five years, it says, with 77.1% of all pre-owned transactions taking place there, followed by Europe, Latin America, the Middle East and Africa and the Asia-Pacific region.

Pre-owned sale transactions rose in 2020, followed by record growth in 2021 with 3,243 transactions. Transactions declined in the following two years. In 2024, however, the used market is expected to grow to 2,404 in 2024 from 2,311 transactions in 2023, with continued growth anticipated through 2028.

“In 2023, many sellers held out for high prices seen in the immediate post-COVID period, while many buyers waited for prices to drop, creating an inertia in the marketplace,” the forecast says. “Continued low inventory and economic uncertainty further contributed to a slower market. As a result, transactions declined 19.5% in 2023 compared to 2022.”

The market is predicted to grow in 2024, and despite continued economic uncertainty, economists are increasingly optimistic about future growth, it says.

“High volume in late 2023 further indicates a loosening market, while high activity in early 2024 should translate into more transactions later in the year,” the forecast states. “As a result, transactions are forecast to increase 4%, while transaction dollar volume is expected to increase 2.2% year over year.”

Molly McMillin
Molly McMillin, a 25-year aviation journalist, is managing editor of business aviation for the Aviation Week Network and editor-in-chief of The Weekly of Business Aviation, an Aviation Week market intelligence report.