Much like other sectors of the aviation industry, business aviation is undergoing unique and unprecedented challenges in light of Covid-19. Domestic flight activity, in every region, contracted considerably in late-March 2020 and remains well down as seen in year-over-year levels. Cross-border travel too remains severely restricted as many countries remain in various states of lockdown.
New deliveries in H1 2020 were down 24% YoY
As shown in the graph above, Cirium Fleets Analyzer data records new deliveries in the first half of 2020 as down nearly 24% year on year, with global lockdowns resulting in production shutdowns as well as manufacturers not being able to make deliveries. Earnings guidance calls from OEMs have shed light on how organizations are adapting to the new normal by cutting production rates and seeking creative workarounds to make deliveries. Ascend by Cirium’s Business Jet Fleet Forecast has been recently revised down by up to 25% for 2020 to reflect furloughs, production slowdowns and a potential lower capacity of new business jet customers taking deliveries. Cirium believes this to be the most likely scenario as things stand today, with lockdowns starting to ease and production being restarted by some manufacturers, at lower rates.
Quarterly business jet deliveries for 2019 and 2020
The early days of global lockdowns brought the secondary market to a halt, with both buyers and sellers waiting to see how things would pan out. While some transactions did happen in March, they appeared to have been finalized pre-lockdown. There have also been some comments on customers forfeiting deposits on contracts decided pre-lockdown, hoping for a better deal. Since May, Cirium has observed market activity picking up again, with many transactions closing despite being slowed down by Covid-19 related difficulties. Pre-purchase inspections and in-person showings have become quite difficult.
Unlike in previous market downturns, there have not been any observable Covid-19 related spikes in inventory available for sale. There does, however, appear to be downward pressure on Market Values for core types. Another aspect in contrast with previous downturns, is that while corporate wealth has seen significant decline from businesses being shut down, personal wealth has seen limited impact to-date.
On a positive note, Cirium experts have been hearing of more interest in the charter, fractional and full-ownership markets. New inquiries are being seen as a result of premium commercial customers looking for safer and more socially distant methods of travel. This increase may be limited to those that have the means and only until a vaccine is available for Covid-19. Furthermore, this new interest may also be offset by some corporate operators being driven out of the industry due to economic reasons stemming from the crisis.
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