Asian Sky Quarterly 2021Q1
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Q4 2020 - GLOBAL MARKET UPDATE<br />
— Commentary by Global Jet Capital<br />
The COVID-19 global pandemic presented business aviation with its biggest pressure test since the Great<br />
Recession, and to date the industry has demonstrated remarkable resilience. During the early stages of<br />
the pandemic, some worried that business aviation would face the same difficulties it did following the<br />
financial crisis: overproduction, swelling inventories, and broad-based aircraft devaluation. However, the industry<br />
developed a new level of production discipline, maturity, and stability over the past decade that has enabled it to<br />
remain healthy through this trying period. While transactions were down overall when comparing 2020 to 2019, Q4<br />
was the best quarter seen in at least three years, driven by strong pre-owned sales. Inventory levels as a percent<br />
of the total fleet are at the lowest levels ever seen, pointing to broad-based stability in aircraft values going into<br />
2021. Furthermore, charter, jet card, and fractional operators are reporting record 2020 performance driven to a<br />
large extent by new clients. While some of those new to the business aviation value proposition – random access,<br />
productivity, security, and health safety – may return to the airlines one day, we know from experience that many<br />
will remain in the industry, potentially moving into whole aircraft ownership.<br />
• Vaccine rollout and government stimulus are expected to drive<br />
economic growth in 2021.<br />
• In Q4 2020, business jet flight operations continued the gradual<br />
improvement seen in Q3. The nearly 987,000 flights recorded were 14<br />
percent below Q4 2019 levels. We expect this level of activity to continue<br />
until pandemic-related business and societal restrictions are lifted.<br />
• While backlogs at major business jet manufacturers declined yearover-year,<br />
OEMs indicate that increasing flight operations, low inventory<br />
levels, and new business jet models will drive demand for new business<br />
jets going forward.<br />
• Following a low in April and May, transaction activity gradually improved<br />
through the rest of the year, culminating in a very active Q4. In Q4, unit<br />
volume increased 6 percent year-over-year, while dollar volume increased<br />
2 percent. Pre-owned transactions, which proved easier than new<br />
production to restart, led the growth.<br />
• Increasing pre-owned transactions in H2 2020 led inventory levels<br />
to fall to 8 percent by December 2020, one of the lowest levels in<br />
recent memory.<br />
• While uncertainty remains, a few residual value trends have emerged.<br />
Some larger aircraft models have experienced value declines, while values<br />
of certain newer, small, and medium aircraft models have been more<br />
stable. With that said, the inventory of quality large and super-midsize<br />
aircraft is substantially depleted, and this is likely to drive stability and<br />
lead to improvement over 2021.<br />
The global outlook will be greatly influenced by the course of COVID-19.<br />
That being said, there is reason for cautious optimism within the business<br />
jet market due to the resiliency of the industry in 2020.<br />
46 | ASIAN SKY QUARTERLY — FIRST QUARTER 2021