What was common knowledge last year, that big jet sales were booming but small and midsize jet sales were in the doldrums, must now be reset. Analyst Brian Foley says there is still positive growth among smaller jet models, but the pace of decline in large jet sales is accelerating.
“The market for these intercontinental aircraft with seating for 15-plus and price tags in the $35-75 million range were barely fazed by the 2009 worldwide financial crisis,” Foley said. “Conversely, sales of smaller, more modest jets declined by two-thirds forcing planemakers in that segment to halve staffing and in one case fold. The split personality between big and small is showing objective evidence of change, and is in fact reversing.”
Foley noted that while overall deliveries in 2014 were up 6.5 percent over 2013, small and medium jets drove that growth and were up 11.8 percent whereas big cabin jets sank 2.8 percent. The trend is even more pronounced when comparing the first half of 2015 with 2014, which indicates 3.4 percent more small and medium jet deliveries but 12.7 percent fewer big cabin jets.
Foley noted that Bombardier slowed production of its large Global 5000 and 6000 business jets idling 1,750 employees, and then delayed their new (even bigger) Global 7000 and 8000 jets by two years. Dassault reports just five net Falcon Jet sales in the first half due to weaker global demand and a large fleet order cancellation. Foley said Flexjet is now able to get two Gulfstream G450 jets sooner than anticipated due to cancellation of customers who had earlier delivery positions.
Foley attributes the slowdown in the upper echelons to a combination of factors, including an economic decline in emerging markets that geographically have a need for ultra-long-range jets, a strengthening U.S. dollar making them cost more overseas, and declining commodity prices. “Oil-related companies and regions like their big-cabin jets, but that sector now sees oil prices that are less than half what they were a year ago,” he said.
While Foley believes total 2015 business jet unit deliveries will match or exceed 2014 levels, he expects overall delivery values to fall due to a change in mix that has fewer high-value big cabin jets and more of the less-expensive smaller ones. “There’s now clear evidence of change,” he said, “but the industry’s muscle memory of big jets always outperforming small will be tough to overcome.”