Following EBACE in Geneva this week, Alan Peaford evaluates the business aviation market outlook and explains why “sluggish” could be the best we can hope for.
The business aviation sector may be a niche market but it is often a good indicator of the world economic mood. It may be simplistic, but business aircraft get close to new markets long before the rest of us.
In the developing world, if you could follow the visiting Gulfstream or BBJ, then you could get a hint of the next big industrial deal or concession. Once the business jets or rugged turboprops make their visits, then airliners follow as corporate contact steps down from business owner to business manager.
When business aviation falters, it is often because the owners are retrenching and no longer taking risk.
The industry itself tries to plan for the times of optimism, and industrial and economic growth, and manufacturers develop new models timed to arrive as demand grows – but sometimes they get it wrong and too much choice and an oversupply of equipment results in a flat market.
Testing the mood
As this part of the industry gets together at its specialised trade shows, there is the opportunity to compare notes and test the mood of the sector leaders, and to judge where we are in the peak-and-trough cycle that dogs aviation.
EBACE, held in Geneva this past week, proved a perfect opportunity to do so. With more than 10,000 attendees there were a lot of views. Of course, there was unanimous agreement that The Economist’s claim that Geneva offers the world’s most expensive burger is absolutely spot on. But that was the only clear opinion at the show.
Business jet operators were certainly the happiest. One UK charter owner said: “In May 2015 we flew 150 hours on our Learjet 75; in May 2016 it was just 30 hours. This May we have already passed 200 hours with a third of the month still to go.” Another told me he had been looking to buy four new jets but the manufacturer had cut production and so none would be available. On the other hand, a manufacturer of large jets said the year had been torrid and that orders were scarce.
The debate was whether we should be cautiously optimistic or pessimistic.
Overall, there was perhaps an underlying hint that the green shoots of recovery might soon break through the manure that has been covering them for the past five years.
There were indeed some positives.
At the light end of the market, the arrival of the newly European-certified Piper M600 single-engine turboprop and the world’s first personal jet (with parachute), the Cirrus Vision Jet, suggest that a move to more personal transport could be on its way. New regulations will drive charter prices down and introduce a new group of customers into the world of private aviation.
At the very top end of the market for those Very Very Important (and wealthy) People, there was also movement. Both Boeing and Airbus announced new corporate variants of their latest models (BBJ 7 Max and ACJ 330neo), and the exclusive aircraft sales and aviation intelligence business Scarfell and Partners is offering four superjumbo Airbus A380s as a hybrid head-of-state aircraft with a palatial VVIP suite on one deck and airline seating for the entourage on the other.
For those whose time is really valuable, the news that Aerion and GE have taken a step to work together on an engine for the supersonic business jet would have been a real positive. After teaming with Airbus last year, the programme has been developing credibility. But for many there are still doubts that the technical and financial challenges can be overcome.
So while the two ends of the business had positives, the middle ground – featuring the mid-size, the large cabin and the long range jets – remained flat. Several manufacturers like Embraer and Bombardier were sounding confident about the future but others like Dassault have been feeling the pinch.
So where is it going?
While business aircraft owners drive the economy, the industry itself notoriously lags behind movement in the global economy.
At the moment, financial analysts are talking about sluggish growth, leading to Luxaviaton UK’s CEO Patrick Margetson-Rushmore, addressing the current outlook for the industry as “sluggishly optimistic”.
This is as good a phrase as ever to describe the mood.
With new models coming through from Gulfstream, Bombardier and Pilatus there are stimulators to drive it forward and at the same time it looks like there could be some casualties among some of the current models as the industry consolidates leaving me to believe it could be 2019 or even 2020 before it is fully back on track.
So sluggishly it is.