Indicator at 58: Our Barclays Business Jet Indicator (BBJI) came in at 58, 18% higher from September and its highest level since late 2018, indicative of improving market conditions. Our straight up measure of overall business conditions came through at 5.9 (0-10 scale), 10% higher from September and reflective of a better than normal market.

COVID-19 impact: Over the short term, 56% of respondents expect higher demand (including 6% that expect much higher demand) on COVID-19 impact. Longer term, 71% of respondents (similar to our September survey) see higher demand on COVID-19 impact.

Election impact: Nearly half of respondents believe the Biden Administration will be negative for bizjet demand while 15% see it as positive, although nearly 40% see no impact at all.

Respondent commentary (pgs 13-14): Overall commentary reflects strong Q4 demand driven by heightened year-end tax activity post the election along with ongoing COVID-19 concerns that has driven an increasing number of first time buyers. Used market activity continues to be seen stronger as compared to new and small/midsize markets seen stronger as compared to large.

View on market: We forecast new delivery volumes rebounding slightly (<10%) to ~500 in 2021, albeit still ~30% lower from 2019, driven by improvement in small/mid while large lags.

Raising price target on TXT: Our revised $52 price target reflects a more positive view of the small/mid market and incorporates a blend of 9x EBITDA and 15x FCF/sh on our 2023 estimates, discounted back one year. Our prior $37 price target reflected a blend of 9x EBITDA and 8.0% through-cycle FCF yield (or 12x FCF/sh) on our 2022 estimates, discounted back a year.

From all angles so far, Christmas demand has been historically strong. We have been above 2019 for the last five days. In similar fashion to Thanksgiving, the highest volume day so far has been the Saturday preceding the holiday, which follows the trend we have seen toward longer stays in general and in particular around holidays.

Remarkably, even Part 91 aircraft are trending above 2019 levels for the past week, showing volume levels we haven't seen since the pandemic began. For Part 91 operations, Friday was the peak day.

Large cabin aircraft are also showing the best numbers in a long-time.

When I looked at individual airports nearly all of them are showing YoY numbers above 2019. One exception is Aspen, which is trending below 2019 in light of their negative test/quarantine requirements. All-in-all, a strong end to a year that we will never forget.

No glut in available inventory—which had been hovering between 10.1 and 10.3 percent in pre-COVID months—occurred, either: 10.7 percent of the business jet fleet (2,264 aircraft) were for sale at August’s end. In contrast, in the wake of the 2008 market meltdown, inventory bloated from similar pre-crisis levels to some 18 percent of the fleet.

The passing decade has also brought acceptance that—irrational exuberance aside—preowned aircraft, like other capital equipment, declines in value. That lesson was made all the more brutal by the annual value declines of some 20 to 25 percent that many models endured in the immediate post-crash years. Though today’s value declines are greater than those in pre-crash times, the intervening shock made drops of recent years easier to plan for and bear.

WHY THE PREOWNED JET MARKET MIGHT BE STRONGER AFTER COVID

Meanwhile, a possible inventory shortage looms. Aircraft changing hands are getting older. The composite profile of a preowned business jet sold in the first half of 2019 was a 2004 model priced at $4.4 million; for the first half of this year, the aircraft was a 2002 vintage, sold for $3.7 million, according to JetNet. (The data service derived the figures from sales of the 236 business jet models it tracks.)

With a shortage of newer pedigrees, older airframes including early Citations, Hawker 700/800s, Bombardier Challengers, and Falcons and Gulfstreams into the vintage 900 and GIV series remain in demand, if they’ve been well maintained, refurbished, and upgraded, and are cosmetically appealing. Concurrently, lesser examples of these same models are being sold for the value of salvageable resale parts.

“A turnkey older business jet ready for operations will attract a substantial number of [cash] buyers,” says Jason Zilberbrand, president of aircraft valuation and appraisal service Vref.

Yet even as demand for late-model preowned aircraft grows, new business jet shipments will shrink about 22 to 25 percent this year, JetNet forecasts. A decline in new aircraft sales, of course, creates more squeeze in the preowned market.

“The largest segment of buyers for business jets in the U.S. is those looking for a sub-$5 million aircraft that can seat eight and travel over 2,500 nautical miles,” Zilberbrand says. “Until one of the manufacturers can build a midsize jet that doesn't breach the $15 million sales price, the preowned market will continue to attract buyers.”