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Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

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Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

Private aircraft: a buyer’s market

Perspectives

Private aircraft: a buyer’s market

Ford von Weise

By Ford von Weise

Global Head of Aircraft Finance

August 15, 2016Posted InWealth Advisory

These are tough times for business aircraft manufacturers. Seven years into a global economic recovery and the business aviation industry is still suffering, without experiencing any semblance of a recovery since the Great Recession. The pricing of used aircraft continue to decline and new aircraft deliveries are forecast to fall by as much as one-quarter over the coming decade.* Having overproduced for years, manufacturers continue to have too many models and are competing fiercely against each other for fewer customers. So, what is really going on and what does it mean for buyers?

To hear the latest industry intelligence, we on the Aircraft Finance team recently attended the European Business Aviation Convention and Exposition (EBACE) in Geneva. We held private meetings with senior managers from the aircraft manufacturers, top consultants, as well as key clients. We came away with some candid insights into the state of the aviation industry.

The biggest take-away from the conference is that the laws of supply and demand still reign supreme. Simply put, there’s an ongoing glut of new and used aircraft and too few buyers for them. As an example of this, JetNet – an aviation market intelligence provider – estimates that there are currently 3,800 excess jets in North America. This figure includes many older jets that would previously have been retired by now. However, thanks to low oil prices, running these older planes remains economically viable and are once again effectively competing with newer aircraft. 

The state of the economy also matters. Both Bombardier – a manufacturer – and JetNet presented data to the conference suggesting that a true – and sustained – business aviation recovery will only be realized once the US GDP grows for more than two or three quarters at 3% or above.  That said, though, virtually everyone at the conference – from the heads of the manufacturers to financiers and brokers – said that economic conditions were not the sole limiting factor in a recovery of both new and used aircraft sales.

The main concern for the aviation industry – as well as a key variable to watch going forward – is the falling prices of used aircraft. Persistently falling prices are understandably impacting buyers’ behavior. More than half of respondents to JetNet’s recent survey said that falling used values had led them to delay purchasing either a new or a used aircraft. As result, likely buyers are simply sitting on the fence to see when prices stabilize.

What needs to happen, therefore, is for used prices to stabilize – and for there to be widespread recognition that they have stabilized. Once the fence sitters start buying, this should lead to falling used inventories and more new sales. Only then is a business aviation recovery likely to occur. For now, though, there’s precious little sign of this much-needed stabilization. Inventories of both used and new aircraft have risen, as have the lengths of time they are listed for sale.

Whereas persistently falling prices are wholly detrimental to the manufacturers of business aircraft, they clearly present potential opportunities both for existing owners wanting to upgrade and for new buyers to take advantage of weak pricing. Although the possibility of further price-falls may encourage some potential buyers to hold off purchasing, price is far from the only factor for buyers. The ability to save large amounts of time, greatly enhanced comfort, security and discretion are also key considerations. With appropriate guidance and financing throughout the process, there is still a case for acquiring business aircraft, even if prices have yet to fully bottom out.

*JetNet iQ lowered its new jet 10 year delivery forecast by 25%