Aviation Business

Fos­ter­ing novel op­por­tu­ni­ties

Scott Glenn, di­rec­tor of Sales at Em­pire Avi­a­tion Group, ex­plains the global busi­ness jet mar­ket’s cur­rent state of equi­lib­rium and the op­por­tu­ni­ties this has for the Mid­dle East

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When it comes to global busi­ness jet sales, we have reached a mar­ket equi­lib­rium and some might even de­scribe it as a sell­ers’ mar­ket. In some air­craft seg­ments, val­ues have in­creased; this could also be viewed as a mar­ket cor­rec­tion af­ter years of over-de­pre­ci­at­ing val­ues.

For the first time in a decade, the busi­ness jet mar­ket has hit a new equi­lib­rium be­tween sup­ply and de­mand. A new mar­ket for busi­ness jets is emerg­ing, with a more even bal­ance be­tween buy­ers and sell­ers that is cre­at­ing new op­por­tu­ni­ties in the global air­craft mar­ket.

Mar­ket statis­tics show that the per­cent­age of the global op­er­at­ing fleet of air­craft cur­rently for sale, across a num­ber of the most pop­u­lar mod­els, is at its low­est level in a decade.

The US is by far the largest busi­ness jet mar­ket in the world — home to 50% of the world’s busi­ness jet fleet — and yet US buy­ers are still hav­ing to look be­yond their bor­ders as air­craft sales in­ven­to­ries shrink rapidly across all the ma­jor man­u­fac­tur­ers and the most pop­u­lar mod­els.

As with all dy­namic mar­kets, there are still op­por­tu­ni­ties for buy­ers and sell­ers who have ac­cess to the mar­ket, fi­nance and the right pro­fes­sional ex­per­tise. As al­ways, it’s a case of ‘caveat emp­tor’ for buy­ers es­pe­cially when they are look­ing at air­craft which may be based out­side their home mar­ket.

Busi­ness jet mar­ket – cross­ing bor­der

The busi­ness avi­a­tion in­dus­try tran­scends na­tional bor­ders and con­nects peo­ple glob­ally. The mar­ket for busi­ness jets re­flects this and is truly global – this

means that what hap­pens in the United States, Brazil, or Mex­ico will have an im­pact on the re­gional mar­kets here in the Mid­dle East, the Far East, and in Africa.

For those of us out­side of North Amer­ica, what does this new mar­ket equi­lib­rium mean?

If you’re an air­craft seller, it means that the shrink­ing air­craft in­ven­tory in the North Amer­i­can mar­ket is re­duc­ing the choices for US buy­ers in their own back­yard. So, buy­ers in­creas­ingly have to look over­seas for good qual­ity air­craft. In the past, a US buyer would only have ven­tured across the At­lantic if there was a sub­stan­tial price in­cen­tive. To­day, US buy­ers may not have much choice even out­side their own bor­ders, and the best avail­able op­tion could be right here in Dubai.

If you are an air­craft buyer, there are still plenty of op­por­tu­ni­ties but you will need to be re­al­is­tic about price, terms, and ex­pec­ta­tions. The buyer in to­day’s mar­ket can­not dom­i­nate the seller be­cause sell­ers can sim­ply say ‘no thanks’ and move on to the next prospec­tive cus­tomer.

It’s a del­i­cate bal­ance to strike be­tween tough ne­go­ti­at­ing and not push­ing a deal too hard and pos­si­bly los­ing the sale.

This is where it re­ally pays to have an avi­a­tion pro­fes­sional work­ing along­side you, who knows the mar­kets, val­ues, and air­plane char­ac­ter­is­tics.

Our own ex­pe­ri­ence this year sup­ports the view that the global mar­ket is be­com­ing more ac­tive — 2018 has been our best year for air­craft sales in the last sev­eral years, with a lot of ac­tiv­ity in air­craft re­place­ment for our ex­ist­ing own­ers, who have taken the op­por­tu­nity to up­grade their air­craft, from a Fal­con 2000 to a Fal­con 7X or mov­ing from a Le­gacy to a Lin­eage, for ex­am­ple.

Own­ers may not nec­es­sar­ily be very loyal to a par­tic­u­lar air­craft model but they do tend to move around within man­u­fac­turer brands. Depend­ing on owner re­quire­ments and pref­er­ences, they may move to newer pre-owned, cer­tainly larger pre-owned, or larger new mod­els.

Our sales pipe­line for 2019 looks equally strong and there is a strong shift by buy­ers to­wards air­craft that are big and bright. Look­ing back over the last 10 years, Em­pire was pre­dom­i­nantly a mid­size busi­ness jet op­er­a­tor. Now we have only one mid­size on the man­aged fleet — ev­ery­thing else is su­per-mid­size or big­ger.

Why does size mat­ter? Busi­ness jets have grown big­ger to meet the needs of own­ers who want longer range - in­clud­ing those in the Mid­dle East who may be fly­ing reg­u­lar in­tercon­ti­nen­tal mis­sions and who al­ways pre­fer larger cab­ins and bag­gage holds. The fur­ther you want to fly, the big­ger the air­plane has to be so if we have an owner or char­ter client who needs to go from Dubai to Bei­jing or Tokyo non-stop, they will fly in a big­ger air­craft.

For the first time in a decade, the busi­ness jet mar­ket has hit a new equi­lib­rium be­tween sup­ply and de­mand.”

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