The shape of the market


Economists love simplifying data by naming recessions U, W or L shaped. Business aviation is going through a much more exciting time. We are in the middle of a square root recovery.

After falling sharply in 2019, the industry is flying up past the dip. Total flights worldwide are set to exceed 2019 levels by the end of the year (although many regions like Asia are still down) and both new and pre-owned aircraft sales have already bounced back.

There are lots of reasons to be optimistic about demand driving the recovery higher. People still want to fly privately, corporates are not fully back, airlines are struggling to return to service and much of the world is still not fully open.

But supply is likely to lead to flattening out (the top of the symbol). Adding supply is hard. Aircraft owners do not want to sell their aircraft only to become one of a group of desperate buyers for their next one. Manufacturers cannot suddenly build tens of aircraft. Owners also want to fly more on their aircraft cutting charter availability.

Having paused light jet sales last month, NetJets last week stopped all new jet card sales because it is worried about not meeting demand if it keeps selling. The FAA also showed that it is keen to stop illegal charter supply moving in to fill demand.

Markets never stay flat for long. But the top of the square root symbol gives manufacturers, operators and others a chance to raise margins. This has not happened for more than a decade. Brian Foley, founder of Brian Foley Associates, is predicting that we will soon see new aircraft pricing rise.

These are exciting times. Square root markets are not as common as U, L or W downturns. But, as many people will tell you, running a business in a boom can be more work than managing a sudden drop.

NetJets has stopped all new jet card sales, after pausing light jet sales last month.

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