The Strategist

Prices for business jets are falling due to low demand and oversaturated market

10/10/2017 - 09:49

Bloomberg agency reports that the private aircraft market is experiencing a prolonged decline in prices against a background of reduced demand and market oversaturation. Manufacturers cannot get any help even from production curtailment, because of which it is necessary to introduce serious discounts.

Prices in the private aviation market keep falling, and the nearest recovery is expected only in 2018. This is reported by the agency Bloomberg, which analyzed the dynamics of prices and supply plans. Only in August, the prices for second-hand business jets fell by 16% compared to August last year. As a result of 2016, business jet shipments declined by 7.9%, and sales - by 16%.

There are several reasons for this situation on the market. One of them is the continuing weak demand for aircraft. According to the annual study of Honeywell International, companies’ plans to purchase private aircraft fell to a 17-year low. Another reason was the disappointment that befell the market six months after the reign of Donald Trump. Market participants hoped that Donald Trump, known for his love of business jets, would cut taxes on them. This, in turn, would stimulate sales of aircraft. However, this has not happened yet. Moreover, at the end of September, Health Secretary Tom Price resigned after the scandal over the excessive use of private aircraft at public expense. "Hopes associated with Trump have disappeared," Bloomberg quotes Janine K. Iannarelli of specialized brokerage company Par Avion.

Not only this situation forces many manufacturers to cut production, but also to offer substantial discounts to find a buyer. According to Bloomberg, Gulfstream gives discounts of up to 35% on the G450 lineup, which is being replaced by a new G500 line. Bombardier offers discounts of up to $ 7 million for the Challenger 350 model, with a standard price of about $ 26 million. Yet, manufacturers hope that the next year will somehow be better. According to JP Morgan, in 2017 shipments of new aircraft fell to 630 from 657 in 2016 and 689 in 2015. In 2018, shipments may recover slightly - up to 640 aircraft. Experts predicted this scenario at the end of last year. "We are very positive the prospect of the market as a whole, but now it is going through a difficult period," said a representative of JetNet iQ, a specialized consulting company, in the last November. "The year 2018 should be good for the industry," Rolland Vincent, Managing Director of the same company, added.