In its Business Aviation Market Brief, GJC finds that in Q2 2024, flight operations declined and inventory levels increased year-over-year. The economy also faced a variety of factors impacting growth yet despite these challenges, the business jet market remained resilient. Transactions stabilised after declines in Q1; OEMs reported strong order intake and modest backlog growth; flight operations remained above pre-COVID levels; and inventory remained low, especially for younger, more desirable aircraft. As things stand, the industry is well positioned to weather any future economic downturn.

This highlights from Q2 show that:

- The global economy continues to grow, and central banks have begun to discuss interest rate cuts.

- Flight operations declined two per cent yoy, but were six per cent higher than Q1 and 14 per cent above Q2 2019 pre-COVID levels, reflecting an enduring expansion in the user base for business aviation.

- OEM book-to-bill ratios were 1:1 and there was a 28 per cent yoy increase in revenue.

- Transactions were stable through the end of the quarter as OEMs continued to work towards resolving supply chain and labour constraints, and activity began to pick up in the pre-owned market.

- Total aircraft inventory increased, driven by older aircraft. Younger aircraft remained in demand; therefore inventory of younger aircraft was more stable.

- Most aircraft models continued to experience depreciation in line with historical norms. However, younger aircraft were more stable than older aircraft.

Globally, economic growth is expected to slow slightly from a surprisingly strong 2023. Many of the headwinds that affected the economy last year remain, including the conflicts in Ukraine and Israel/Gaza, as well as high interest rates. Other factors that may negatively affect economic growth this year include continued de-globalisation, trade conflicts, major elections in countries making up 38.1 per cent of global GDP, and structural growth challenges in China.

Most economists do not expect a recession in 2024 and point to several strong points in the global economy. Central banks are now comfortable with inflation levels and have begun to discuss lowering interest rates. The European Central Bank lowered rates in Q2 and others, including the US Federal Reserve, are expected to lower rates this year. Other notable tailwinds include strengthening economies in East Asia, South Asia, and Central America; recovery in the Eurozone from slow growth at the end of 2023; and resilience in China despite the challenges mentioned above.

Flight operations declined 2.3 per cent from a year earlier, with declines evenly spread around the world. In the US and Europe, continued normalisation of usage drove declines, while geopolitical threats drove declines in Europe, the Middle East and Africa. Fractional operators remained the strongest segment in the market and continued to demonstrate modest growth and sustained demand.

However, even as departures declined yoy, flights increased 6.4 per cent from Q1 and demand remained above pre-COVID levels. Departures were 14 per cent higher than in Q2 2019, continuing a trend that began in 2023 when departures were 15.1 per cent higher than in 2019. In 2023 and early 2024, some passengers who utilised business jets in the post-COVID recovery period returned to commercial airlines; a trend that was widely anticipated. However, due to the industry’s inherent value proposition, there has been a systemic expansion of the user base with a substantial proportion of these new users continuing to utilise business aviation this year. As such, flight operations were lower than the peak witnessed in 2022, but higher than pre-pandemic levels, with steady and sustainable growth expected going forward.

OEM backlogs increased 1.7 per cent yoy to $51.2 billion. While industry-wide orders in Q2 were lower than the highest levels of 2022, they were 6 per cent above Q2 2023. Strong orders were driven by high demand for business jets and continued low inventory of young pre-owned aircraft. At the same time, revenues (largely driven by deliveries) increased 27.9 per cent yoy. After years of slow increases, OEMs experienced strong revenue growth due to increased deliveries and strong service revenue. To be sure, OEMs still have work to do to fully resolve supply chain and labour constraints, but results indicate that they are finally making progress toward increasing production rates. With revenue increasing at a faster rate than deliveries, the industry-wide book-to-bill ratio declined from 1.3:1 in Q1 to 1:1 in Q2. Going forward, OEMs expect book-to-bill ratios to remain around 1-to-1 this year.

After declining in 2023 and early 2024, total transactions stabilised and increased when measured by dollar volume. While OEMs continued to work towards resolving the issues of supply chain and labour constraints following disruptions caused by the pandemic, and delays in new aircraft certification, they were able to increase deliveries this quarter. With certification achieved for several new aircraft models, deliveries should continue to increase throughout 2024.

The total number of pre-owned transactions was down yoy through the end of Q2. Transaction volume was hampered by economic uncertainty (despite stronger than expected GDP growth) as well as inertia between sellers looking to maintain post-pandemic value gains and buyers waiting for values to return closer to historical levels. However, the market began to show signs of picking up. There was a high degree of activity early in the year that began to translate into sales as the market returned to its historical level of liquidity. Newly certified models making their way into service later this year may result in incremental supply of desirable aircraft, driving up transactions through the remainder of the year.

Continuing a trend that started in the latter half of 2022, aircraft sale listings increased. Although the trend has remained consistent, its underlying causes have shifted over time. During the post-pandemic period of rapid growth, many transactions involved unlisted aircraft which artificially lowered public listings and inventory. As the market normalised in late 2022 and 2023, listings increased. In 2024, the increase in aircraft listings has been driven by listings of older aircraft. Through the end of Q2, listings of 13 year old and older aircraft rose 11.9 per cent, compared to 5.1 per cent for 12 year old and younger aircraft. With the increase, aircraft 13 years old and older represented 71 per cent of all listings.

Inventory levels ended at 7.7 per cent of the total fleet. Inventory levels were higher than historical lows reached in 2022 but still below average levels of approximately 10 per cent over the last decade. As with aircraft listings, the increase in inventory was largely driven by older aircraft. Inventory of 12 year old and newer aircraft increased 5.3 per cent YTD and ended Q2 at 5.2 per cent of the fleet, while inventory of older aircraft increased 14.6 per cent YTD and ended the quarter at nine per cent of the fleet.

Inventory is expected to continue to increase for the balance of 2024 due to additional listings of older aircraft. However, continued demand for newer, high-quality aircraft should keep overall inventory numbers relatively consistent in the near term.

In conclusion, Q2 2024 saw the business jet market continue to normalise from a period of rapid growth following the pandemic. Flight operations slowed from all-time highs but remained above pre-COVID levels. Transactions stabilised after a period of declines. Inventory and values have experienced a shift over the past few quarters. During the post-COVID expansion, older aircraft became very popular due to their wide availability. However, as the market normalised, demand for these aircraft declined. As a result, aircraft listings and inventory for aircraft older than 12 years increased, while values for this segment declined. At the same time, inventories for 12 year old and younger aircraft increased at a much slower rate and values were stable. OEMs continued to report strong order intake and modestly rising backlogs. As a result, the business jet market remained resilient and is expected to remain active in the second half of 2024.