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The bizav bubble didn't burst but where did it go? - Breaking down numbers from Global Jet Capital

While a bubble swelled in business aviation in 2022, with increased demand for private jets after the pandemic, what has followed has not been a bursting of that bubble but rather a soft flattening of it. The latest market report from Global Jet Capital, covering the final quarter of 2023 shows a return to normalcy but resembles nothing near an all-out plummet. Business flight activity worldwide sunk by around 100,000 flights in 2023; the 3.6 million logged last year was 2.8% lower than in 2022. However, the fourth quarter year to year dipped only 0.9% and finished 17% from 2019. "While the economy proved resilient in 2023, many consumers, businesses, and economists remained uncertain about the future," the report states. "Still, the business jet market had a positive finish to 2023: Flight operations were strong; backlogs and lead times at major (aircraft manufacturers) were up and inventory remained low, leaving the industry well positioned to weather any future economic downturn." Book-to-bill ratios for Bombardier, Gulfstream and Cessna were around 1-to-1 in the fourth quarter, as backlogs remain lengthy. The report concludes that even if the economy turns south the aircraft makers are in a good position to weather such a storm. While the backlog values did not change much year to year for the fourth quarter, the subtle rise now puts its combined value of nearly $41 billion between the three manufacturers at 41.4% higher than it was in the final quarter of 2021, a gain of nearly $8.8 billion, according to the report. Meanwhile, the market witnessed something not seen on the preowned side of the business jet market in quite some time - the aircraft value actually dipped in the fourth quarter, ever so slightly.Fourth quarter values of preowned aircraft slipped 0.2% year to year in 2023 compared to Q4 of 2022, driven by a 2.9% drop in values of planes 13 years and older. While it's the first time that has happened since the pandemic, it caps off a gradual trend since things peaked at the end of 2022 - where jets overall were bringing in nearly 21% more than they had a year beforehand, and older jets were up in price by 58%. "As more sellers publicly listed their aircraft, business jet inventory levels increased in 2023, although levels for the overall fleet remained below historical averages," the report states. "Most aircraft models reverted to historical depreciation profiles in Q4 2023, albeit from a higher starting point following a firming in values over 2021-22." Here, the bubble is quite visible. The number of dollars spent on preowned business aircraft purchased rocketed up by 21.6% in 2022 from the prior year, only to fall back to Earth, dipping 19.3% last year. However, that number is not final, the report notes, as some late-year deals have yet to hit the books. Further, the parabola does not exist across all metrics. Throughout 2021, 3,243 units were sold at $16.7 billion, for an average transaction of just over $5.1 million. As we all know, 2022 saw a steep drop in the number of planes that sold - 2,851 - but they commanded a combined $20.3 billion, or $7.1 million on average. The preliminary numbers for 2023 show even fewer jets changing hands, a total of 2,304 units, raking in $16.4 billion - an unchanged average of $7.1 million. The fewer transactions come as more planes have hit the bizav sales market. A total of 436 more aircraft were listed in 2023, according to Global Jet Capital's report, a 19% gain from 2022. In short, the gears are grinding more slowly as stakeholders adjust to the change in business climate. "Inertia between sellers looking to maintain post-pandemic value gains and buyers waiting for values to return to historical depreciation levels slowed transaction volume in the preowned market," the report states. "Relatively steep inclines in interest rates also suppressed demand."RELATED STORIES: The business aircraft market is normalizing and that might be good Forecasting the business jet market for an unpredictable 2024 - here are the latest insights from JETNET A first look at the 2024 bizav market - what earnings, flight activity andamp; a preowned report show so farSo while the bubble might have deflated a bit, the cabin remains pressurized and the terrain warning has been avoided thus far. All said and done, a different bubble is probably a much better scenario than a ruptured one. And that's what Global Jet Capital and others expect in the coming year - a year that, in some sort, is still anyone's guess even seven weeks in."Heading into 2024, new deliveries may increase with the certification of new aircraft models while pre-owned transactions should remain largely stable," the report states, "as buyers and sellers continue to acclimate to a new market dynamic." In other words, take a breath and expect more change, but don't bet too swiftly on a rapid descent. Click here to view the complete market report from Global Jet Capital.
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