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Trying to Predict the ‘New Normal’ for Business Aircraft Markets

April 6, 2016

The vagaries of the business aircraft marketplace continue to challenge even the most sophisticated forecast models. In the U.S., sales are not keeping pace with the improving economy, as they were expected to do, and the global market has been negatively affected by Russia’s unanticipated military aggression in the Ukraine, and political challenges to business aircraft ownership in China.

Trying to Predict the ‘New Normal’ for Business Aircraft Markets

“Russia and China were two major markets for business aircraft – especially large-cabin planes – and those two unforeseeable actions have reduced demand for business aircraft purchases,” said Dean Roberts, director of market analysis at Rolls-Royce North America. “However, professional forecasters like myself know that the market always goes through peaks and troughs. The fact that we are in a trough now means that a peak will be coming.”

In the U.S., which accounts for the vast majority of the small and medium-size business aircraft sales, Roberts warned that the traditional relationship between the S&P 500 and aircraft sales – if the S&P 500 goes up by a certain percentage, aircraft sales rise by about the same percentage shortly thereafter – does not apply in today’s market.

“During this cycle, there is not a strong linkage between the [performance of the] S&P 500 and business aircraft sales,” said Roberts. “The market is not behaving like it used to.”

Regarding the large-cabin business aircraft market, Roberts said that in recent months the Gulfstream G650 pre-owned inventory has risen sharply to around 20 aircraft, and asking prices have dropped. However, he added that certain large-cabin aircraft were in exceptional demand, and G650 prices may just be coming down to normal, similar to a market correction. “The sky is not falling, and this is the type of behavior one would expect to see in a more mature market.” said Roberts.

Roberts will discuss today’s business aviation market and share data on the latest trends and forecasts during NBAA’s upcoming Business Aviation Taxes Seminar, which is to be held May 6 in Washington, DC. His session is titled, “Analyzing the Business Aircraft Market: What is the New Normal?”

Register for NBAA’s Business Aviation Taxes Seminar.