Contributor - Middle East

Peter Shaw-Smith

Rising interest rates and increasing economic uncertainty will not blight business aviation’s near-term prospects, Global Jet Capital&nbsp;chief marketing officer&nbsp;Andrew Farrant&nbsp;told AIN on the eve of NBAA-BACE 2022.

 


“We are currently watching the overall macroeconomic environment closely for any and all disruptions or weakness," he said.&nbsp;“Regardless, the business jet market is currently in a strong position. Despite rising slightly over the past few months, inventory levels remain near all-time lows, OEM backlogs are stronger than they’ve been in a decade, and global utilization is at an all-time high.

 


“Furthermore, Covid-19 has highlighted the value proposition of business aviation—safety, flexibility, and productivity—to a new group of users. Those factors, along with disciplined production rates at the OEMs, place the industry in a resilient position to weather any event, including a recession,” Farrant contended.

 


While acknowledging uncertainty, the company’s second-quarter briefing said business jet flight operations and transactions increased during the quarter, continuing an upward trend that started in the second half of 2020. Farrant remarked, “In the current environment, the economy is extremely dynamic.”&nbsp;

 


Economic risks have increased and the likelihood of slower growth, or even contraction, is now higher. Risks include persistent inflation that could&nbsp;require additional monetary tightening, supply-chain disruptions, oil and gas disruptions due to the Russia-Ukraine war, and a slower economy in China.

 


Though there were risks to economic growth in the first quarter, the company’s second-quarter market brief still reflected the confidence among most economists that strong growth would continue.

 


“There are positive elements to the economy as well, such as strong labor markets in most developed countries,” he said. “The overall economic situation remains dynamic and the future is by no means determined. While economic forecasts have become less optimistic, we expect the economic situation will continue to shift over the next few quarters as the current issues play out.”

 


According to&nbsp;Farrant, the industry continues to see new entrants and there&nbsp;are many ways new users enter the industry&nbsp;such as charter or jet-card programs, fractional ownership, or whole aircraft ownership. When entering into whole aircraft ownership, new users in the U.S. historically have purchased preowned aircraft, as their lower purchase price made them an easier entry&nbsp;point into aircraft possession.

 


“Based on conversations with our industry sources, as well as our own internal data, that dynamic was disrupted during the last 12 to 18 months as low preowned inventory levels drove many—but not all—first-time&nbsp;entrants to purchase new aircraft,” he said. “It can be difficult to put specific numbers on this, but those are the general trends we have seen. We expect that as markets&nbsp;normalize, historical trends will reemerge.”

 


Manufacturers are working through supply chain disruptions, the result of Covid-19,&nbsp;as well as raw materials sourced from Eastern Europe becoming unavailable. On the latest second-quarter investor calls, some OEMs even reported that they may not make 2022 delivery guidance due to these supply-chain issues.

 


“That being said, we do expect OEMs to continue to work through these issues,” he said. “The manufacturers are being proactive in managing their supply chains, for example, hiring material analysts to better manage suppliers. We have already seen a slight increase in deliveries this year, compared with last year, despite not reaching guidance, and that steady, gradual increase is expected into the future.”

 


According to Farrant, business jet manufacturers had maintained production discipline for well over a decade. In the run-up to the global financial crisis of 2008, high production levels outstripped demand as the wider economy entered a recession.

 


”Business jet manufacturers have learned from those years and now exhibit a much more disciplined approach to production and deliveries,” he said. “To maintain discipline, they now proactively respond to market conditions by increasing production when demand is high and reducing production when demand declines. For that reason, we expect supply and demand to remain close to equilibrium going forward.”

News about bills, laws, regulations and other governmental decisions affecting aviation and aerospace. Topics include FAA re-authorizations, taxes on fuel and aviation activities, environmental legislation, ICAO decisions, governmental mediation of labor conflicts and World Trade Organization disputes and decisions.

GJC: Industry in ‘Resilient Position’ To Weather Any Recession

Global Jet Capital’s second-quarter briefing said business-jet flight operations and transactions increased during the period.

2024 Corporate Aviation Leadership Summit

Charles Alcock

Kaleyesus Bekele

News and issues concerning the aviation charter and fractional-ownership industries and markets, including company announcements, regulations, new developments and labor issues.

News and issues relating to business, corporate and private aviation, primarily regarding turbine-engine-powered airplanes and helicopters. Subjects include aircraft, engines, maintenance, operations, personnel, acquisitions, accidents, safety, security, and training.

Industry group presses for regulatory progress and continuity across the continent 

African Bizav Strives for Greater Market Opportunity

Amy Wilder

News about simulators and training procedures, as well as workforce.

News and issues concerning general aviation, specifically airplanes and helicopters powered by piston and alternative engines (i.e., non-turbine powered aircraft). Subjects include aircraft, engines, personnel, acquisitions, accidents, safety, security and training.

Rule would not apply to insulin-treated diabetes

FAA Proposes Easing Medical Approvals for Diabetic Pilots

Kerry Lynch

News and issues relating to international air transport and cargo carriers, national airlines and regional airlines, including aircraft, engines, personnel, acquisitions, accidents, safety, security and training.

More In Regulations and Government

African Bizav Strives for Greater Market Opportunity

Industry group presses for regulatory progress and continuity across the continent

FAA Proposes Easing Medical Approvals for Diabetic Pilots

Rule would not apply to insulin-treated diabetes

Congress OKs Stopgap Government Funding Measure

Move averts potential shutdown

Longtime Bizav Attorney Gary Garofalo Flies West

His career spanned more than five and a half decades

New Treasury Rule Limits LLC Information Reporting

The revision relaxes some provisions of the Corporate Transparency Act

Nancy Kassebaum, Architect of GA Product Liability Reform, Dies

Kassebaum pushed through the General Aviation Revitalization Act

Nav Canada Increases ATC Service Charges

Increased fees are to recover pandemic shortfall

FAA InFO Outlines CVR Upgrade Deadlines

Larger new bizav aircraft face 2027 deadline, while small new turbine bizav aircraft have 2029 deadline

AIN Products

SUBSCRIPTIONS

RESOURCES

ABOUT AIN