JetNet iQ Survey Shows Industry Optimism

The business aviation industry remains optimistic despite the Covid-19 pandemic, industry data provider JetNet said in releasing results from its third-quarter 2020 JetNet iQ survey on December 2 at NBAA-VBACE.

“Our industry is doing much better than many other industries, and for that we are thankful,” said Rolland Vincent, managing director of JetNet iQ and president of consultancy Rolland Vincent Associates, “but we’re also mindful of all of the others; industries and individuals and those within our community who have been suffering through this pandemic.”

Since it began a decade ago, the JetNet iQ survey polls more than 500 business aircraft owner and operator respondents worldwide each quarter to measure market sentiment on a scale ranging from negative 100-to-100. That overall score was -43 in second-quarter 2020—the lowest score in the survey’s history—when the Covid-19 Coronavirus first made itself known on a global scale. That number rose to 4.8 by the third quarter and, with the company’s fourth-quarter survey still ongoing, jumped after the recent Covid vaccine announcements. Those fourth-quarter results received before the November 9 announcement by Pfizer and Biontech on the efficacy of their vaccine posted an average score of 18 on the optimism scale, while those after the news broke were nearly 10 points higher.

With the pandemic weighing heavily upon the world, JetNet introduced several Covid-specific questions into its latest surveys. It asked respondents if they believe business aircraft usage (flight hours and cycles) will return to pre-Covid-19 levels within the next 12 months. Among those in North America, more than 73 percent agreed either strongly or somewhat that they would. That response was more tempered in Europe, with 55.5 percent agreeing.

Indeed, among the passengers and customers, topping the list of concerns these days are cleaning procedures on the aircraft between flights, surpassing even the cost of the flight. “That variable would not have been on this screen a year ago, had I shared any of this with you,” said Vincent. Queries about the air circulation on board ranked third, showing how prevalent Covid concerns have become.

With JetNet’s “State of the Market” press conference itself held online, the statement that “virtual online meetings are a very effective replacement for face-to-face meetings” was met with a degree of agreement by more than 70 percent of European respondents. Meanwhile, an overwhelming 82 percent of those in Latin America and the Caribbean echoed that sentiment, compared with just 44 percent in North America.

“This I don’t think goes away,” Vincent noted, adding that virtual meetings have proven their benefit during this period. “We need to think about how this factors into our forecast of demand going forward.”

With estimates of a 3.8 percent decrease in the U.S. GDP for 2020, Vincent explained that while Part 91K and Part 135 flight cycles have held their own year-over-year, Part 91 corporate operations have been off by 32 percent. Thus, he expects a 25 percent overall decline in business aircraft flying for 2020, reaching a total of 3.6 million cycles. That drop represents the lowest level of utilization since 2008, following more than a decade of steady growth in the aftermath of the Great Recession. “These things tend to bounce back pretty quickly, and in fact we are already starting to see that in the data,” said Vincent

As 2020 headed into the home stretch, JetNet expected last year’s business aircraft deliveries to be off by 29 percent from 2019’s tallies. Overall, the company estimates 511 business jets to be delivered in 2020, for a year-over-year decrease of 29 percent.

“That is what it is,” noted Vincent, “the factories were slowed for many reasons back in Q1 and Q2 obviously with the pandemic onset.” While OEMs are reporting few order cancellations, some customers have elected to defer their deliveries until 2021, leaving aircraft available. “That’s created some near-term opportunities and we’re going to see a pretty strong Q4,” said Vincent.

As a result, JetNet has revised its 10-year new business jet delivery forecast downward to 6,362 aircraft with a total value of $204.4 billion by 2029.

For the past several years, business jet OEM backlogs had seen a gradually declining trend, which was snapped in 2019 when the five major manufacturers posted an increase of 9 percent from the previous year, to $33 billion combined. Through the first three quarters of 2020, that backlog eroded to $28.5 billion.

The third-quarter iQ survey also gave some insight into the purchase expectations for the respondents. Nearly 43 percent said they believe large-cabin aircraft purchases would decrease, representing the limited usage such aircraft are currently facing with Covid-fueled airspace and border closures and strict quarantines, while 40 percent indicated that small jet purchases would increase. “The owner/operator community is telling us that the small jet business is kind of the place to be for the next while,” said Vincent.

In terms of preowned sales, October’s 286 preowned jet transactions (retail sales and leases) represented a 5 percent increase year-over-year. With approximately 2,100 jets on market, the current level of inventory is approximately 9.4 percent, having come down from more than 10 percent a few months ago. That stands in comparison to the last major downturn during the financial crisis of 2008/2009 when it reached 18 percent.

“We’re not seeing any big rush of inventory. I think that’s been the big story of this year even though we’ve had all of this crazy economic, health, and other concerns,” Vincent said.