Kerry Lynch AIN ONLINE
Bizav Production Poised To Recover by Year-end
January 3, 2022
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  • Market indicators provide hope of “great things” for a business aircraft market that a leading industry analyst said “is seeing its best times in years.” But with Covid-19 and other factors generating uncertainty, Richard Aboulafia, formerly v-p of analysis for Teal Group who is today stepping into the new role of managing director for AeroDynamic Advisory, provided a more conservative forecast of output returning to 2019 levels in late 2022 or early 2023 with modest growth afterward.

    Aboulafia noted corporate profits, equities markets, and oil prices ostensibly have been drivers of the business jet market and “all have spent the last year in a remarkable rebound from some terrifying pandemic-related declines.” This rebound implies a great deal of wealth and liquidity currently. Oil prices, meanwhile, have been closely correlated to large aircraft demand.

    But Aboulafia cautions that the business aircraft market has “badly lagged” those wealth indicators over the past decade. This creates a question of whether the market is delinked from those indicators or whether in the past decade it was still digesting the overcapacity created in the 2003 to 2008 production boom. In the latter scenario, the market would be set to rebound with strong economics.

    Regardless, other immediate indicators are also positive, supporting the “glass half full” thesis, including record-low used jet availability, pricing strengthening, and the upswing in fractional and charter utilization.

    However, aircraft production still hasn’t recovered to 2019 levels—let alone 2008 peak levels—and OEMs do not yet appear ready to announce production increases, he said. Given the deflation of jet prices post 2008, “there’s the question of how much OEMs will want to firm up pricing before they commit to higher production rates,” Aboulafia noted.

    Also, time will tell about the “stickiness” of the influx of new users of business aircraft.