The COVID-19 global pandemic presented business aviation with its biggest pressure test since the Great Recession, and to date the industry has demonstrated remarkable resilience. During the early stages of the pandemic, some worried that business aviation would face the same difficulties it did following the financial crisis: overproduction, swelling inventories, and broad-based aircraft devaluation. However, the industry developed a new level of production discipline, maturity, and stability over the past decade that has enabled it to remain healthy through this trying period. While transactions were down overall when comparing 2020 to 2019, Q4 was the best quarter seen in at least three years, driven by strong preowned sales. Inventory levels as a percent of the total fleet are at the lowest levels ever seen, pointing to broad-based stability in aircraft values going into 2021. Furthermore, charter, jet card, and fractional operators are reporting record 2020 performance driven to a large extent by new clients. While some of those new to the business aviation value proposition – random access, productivity, security, and health safety – may return to the airlines one day, we know from experience that many will remain in the industry, potentially moving into whole aircraft ownership.
This report includes the following insights:
- Vaccine rollout and government stimulus are expected to drive economic growth in 2021.
- In Q4 2020, business jet flight operations continued the gradual improvement seen in Q3. The nearly 987,000 flights recorded were 14 percent below Q4 2019 levels. We expect this level of activity to continue until pandemic-related business and societal restrictions are lifted.
- While backlogs at major business jet manufacturers declined year-over-year, OEMs indicate that increasing flight operations, low inventory levels, and new business jet models will drive demand for new business jets going forward.
- Following a low in April and May, transaction activity gradually improved through the rest of the year, culminating in a very active Q4. In Q4, unit volume increased 6 percent year-over-year, while dollar volume increased 2 percent. Pre-owned transactions, which proved easier than new production to restart, led the growth.
- Increasing pre-owned transactions in H2 2020 led inventory levels to fall to 8 percent by December 2020, one of the lowest levels in recent memory.
- While uncertainty remains, a few residual value trends have emerged. Some larger aircraft models have experienced value declines, while values of certain newer, small, and medium aircraft models have been more stable. With that said, the inventory of quality large and super-midsize aircraft is substantially depleted, and this is likely to drive stability and lead to improvement over 2021.