NBAA-BACE: Analysts Expect Continued Shift from Aircraft Ownership to Fractional Use
Oct. 24, 2024
With multiple factors conspiring against the use of business aircraft – from IRS audits and new fuel taxes to cyberstalking operator movements – it may seem the market for such aircraft is poised for a slip in demand.
That would be wrong, noted Brian Foley of Brian Foley Associates, moderator of a panel on the Flight Deck at the 2024 NBAA Business Aviation Convention & Exhibition (NBAA-BACE) discussing trends in the current market. But the industry shouldn’t expect a radical surge, either.
“Back in 2007-2008, [we] set an all-time record of around 1,300 deliveries worldwide,” he noted. “But we’ve been stuck in quicksand since 2012 at around 700 units a year. You could be a rocket scientist by predicting it’ll be 700 units two years from now.”
What has changed, he continued, is who’s buying and flying on those jets. Part 91 flight movements in September 2024 were down 4% compared to the same period in 2019, while Part 135 charter was up seven percent and fractional operations by a notable 56%.
That marks continuation of a shift that began during COVID, when “people discovered fractional ownership and they liked it,” said Ronald Epstein, managing director for aerospace and defense for Bank of America Global Research. “It’s not a huge commitment. It’s not a flight department. It seems like a secular shift in the industry.”
AeroDynamic Advisory Managing Director Richard Aboulafia doesn’t expect that shift from ownership to charter and fractional use to ebb anytime soon, in part because the latter options shield the identities of those traveling onboard.
“It’s not just anonymity that’s a virtue,” he added. “You also deal with a lot less oversight from pesky activist investors or government regulators who might be inclined to put an end to your business jet use. I’m hard pressed to think of what would move us away from these trends and quite a lot that would keep us going along this path.”
“Business aviation is an easy target, right?” added Laurence Vigeant-Langlois, managing director for AE Industrial Partners. “But business aviation is [also] a productivity tool for many who [don’t want to] appear ‘on the radar.'”
Supply constraints continue to weigh down the market, she continued, with the “silver tsunami” of experienced worker retirements further hampering aircraft production. “There’s a lack of transfer of skill set,” Vigeant-Langlois added. “It’s a long cycle I think we’re facing for the next few years, if not in the next decade.”
That said, Epstein pointed to one benefit of such limitations. “It’s forcing industry to be very disciplined about delivering airplanes,” he said. “With very few exceptions, every airplane going down those lines has owners today,” versus producing unsold ‘white tails.’”
Reported shortages of pilots, maintenance personnel and others across the industry also limit the potential for growing business jet deliveries, although Aboulafia took a slightly contrarian view on the issue.
“There are no shortages. There are markets set by demand and price,” he said. “If you accept the thesis we’re going to have a better and more sustainable recovery, partly due to the discipline brought by supply chain snafus and whatever, then I think we’ve got a really good runway ahead.”
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