Large Business Jet Sales Cool

20 May 2020 – As the last decade commenced, the world had an insatiable appetite for the biggest of corporate jets notes Brian Foley. More recently though, that love affair has broken up as many of the previous demand drivers have gone the way of the Harlem Shake and planking.

 

Back then, the large jet category, capable of whisking passengers between continents, was still a relatively new jet segment with demand outstripping supply. Some of the newly-minted models included Gulfstream’s G450, G550 and G650, Bombardier’s Global 5000 and 6000 and Dassault’s Falcon 7X. Impatient buyers were known to have paid multi-million dollar premiums to existing order holders to jump to the front in the line instead of waiting 2 to 5 years for their new airplane.

 

During the financial crisis of 2007-2008, these luxo-barges proved to be recession-proof too. As the lower end of the business jet market collapsed, in part due to buyers not having the financial wherewithal to weather the financial storm, large business jet order holders stood pat, having their own sources of financing to keep their orders intact. This market bifurcation witnessed a steady stream of large jets delivering briskly while small-and mid-size jets atrophied.

 

Today, the demand drivers that seeded this wave of orders have waned. Emerging markets, once a primary purveyor of long range jets given their geographic remoteness, have fallen victim to lackluster stock markets, geopolitical instability and a dive in natural resource prices. China, once the fastest growing business jet market on the planet, has seen its fleet contract as deteriorating economic conditions and a new reluctance to ostentatiousness have taken a toll.

 

Other factors resulting in less big cabin buyer interest nowadays include a relatively strong U.S. dollar, which when converted to local currencies magnifies lofty list prices which top $50-80 million and up. While one may naturally assume plunging oil prices would be a boon for fuel-thirsty large aircraft, quite the opposite is true. Some analysts have postulated that up to 1 in 5 big corporate jets sold are either directly or indirectly dependent on the health of the oil industry, which has recently seen prices fall from over $60 per barrel into the $20’s.

 

Field intelligence from brokers of used, ahem, preowned business jets is that most of their activity has been on the smaller cabin end. This is corroborated by aviation statistical firm AMSTAT, showing that large jets are now accounting for a fifth of all preowned transactions, down from a fourth.

 

When splitting new bizjet delivery statistics provided by industry association GAMA into cabin sizes, the percentage of new, large aircraft delivered has steadily declined from half of all 2013 deliveries to less than a third in 2019. It would appear that supply has finally caught up to demand.

 

The sales sag may also be presenting itself as workforce cutbacks, which were likely accelerated and in all likeliness exacerbated by virus-related impacts. Gulfstream, one of the premier makers of top-end jets, announced 699 layoffs this month on top of 446 employees let go in October. Other large jet manufacturers have mostly gone the rolling furlough route, at least for the time being.

 

Longer term, the pendulum will inevitably swing back towards an improvement in big cabin sales. There are a plethora of brand new large business jets now available or coming in the next couple of years, which tend to stimulate sales. Emerging markets and oil prices won’t be downtrodden forever, and when they do return there’ll be the added interest of flying internationally in a more germ-free environment.

 

Until then, both new and used smaller business jets will garner most of the attention for the time being, a distinction not seen in ages, which may benefit companies such as Textron Aviation’s Cessna unit and Brazil’s Embraer. But then, it seems everyone is downsizing in one way or another these days.

SMEA becomes the first cargo airline on the San Marino Registry

SMEA has become the first cargo airline to receive an AOC from the San Marino Aircraft Registry. Pictured is the airline’s A300-600R T7-ASK aircraft.

Cargo airline SMEA has become the first air cargo airline to achieve an Air Operator Certificate (AOC) from the San Marino Aircraft Registry. The airline achieved the distinction after satisfying the CAR OPS 1 requirements for the certification.

David Colindres, President of the San Marino Aircraft Registry, said: “SMEA deserves to be acclaimed not only for becoming the first air cargo airline on the San Marino Registry but also for their efforts and support with medical supplies during the Covid-19 pandemic.

“The air cargo industry is entering a period where it must ensure that sensitive cargo is transported and delivered to the highest standards, meticulously and punctiliously.”

SMEA diversified its management services into cargo operations towards the end of last year, when it began operating the A300-600R T7-ASK aircraft (pictured). The airline recently completed 27 charter flights from China to Italy, including deliveries to Pisa and Bologna, transporting key medical supplies.

Waked Jayyousi, SMEA Airlines accountable manager, said the Covid-19 global pandemic has highlighted the contribution of air cargo. “We are living in times where we have realised how fundamental air cargo is for our daily lives,” said Jayyousi. “We have demonstrated to the San Marino CAA that our special cargo operations meet international standards during such a vulnerable and critical period.”

SMEA plans to fly to other EU destinations and continue its medical missions until the end of June 2020.