This is an exciting time for business aviation in Europe, as echoed this month at EBACE 2017. Europe has quality aircraft priced correctly and good market conditions that are attracting the western buyer—great news for the European seller. Last year, the best fiscal year in our company’s 55-year history, Europe accounted for approximately 20% of our annual transactions.
The recent election of a new president in France is beginning to chip away at some of the uncertainty surrounding the European business aviation sector’s longevity. In addition, the recent German, French and United Kingdom high stock markets results are also paving the way for transactions. These conditions, along with the euro increasing while the U.S. dollar continues to fall, has flushed Europe with motivated sellers. What this means is Europe has plenty of sellers with aircraft that are attractive to buyers in the region and in North America, and sellers that can benefit from the current currency situation.
We continue to look to Europe for supply for the short term, but long term all indicators (including our Market Forecast) point to it remaining the sector’s second largest market overall. Our 2016 Market Forecast predicts that 15% of new aircraft deliveries will be headed to Europe between 2016 – 2025 (1,182 units).
Pre-owned Transactions Driving Much of the Activity
Jetcraft continues to see strong business transactions occurring for pre-owned aircraft. This bodes well for Europe as it continues to have a healthy inventory of aircraft that meet the desired specifications of buyers. The majority of the demand for European aircraft is coming from North America at the moment.
The inventory from Europe is strong – young, well-equipped, well managed aircraft with good infrastructure for support. In addition, there are still adequate levels of selection in most models. Overall, aircraft eight years and younger are moving quicker than others, and tend to be in favor primarily because there is an attractive price difference from a new aircraft, making them the more efficient buyer’s choice. In addition, buyer’s European aircraft sweet spot is being fueled by mid-size and super mid-size jets that are just coming out of warranty.
It is hard to predict the impact Brexit will have, as it still is bit premature to fully recognize how it will influence Europe’s business aviation industry. However, since the announcement of Brexit, Britain has seen an increase in the number of billionaires with 14 more in the UK alone than in 2016 – bringing the total number to 134. This in turn, contributes toward an increase in the region’s potential customer base.
We are seeing HNW buyers in their 30s and 40s executing many transactions. This is good news for the sector, as younger buyers will most likely execute future trades and aircraft upgrades. This also spotlights the ongoing integrity of business aviation and the type of experience private aviation provides its clients. Flying private is resonating with this generation, keeping our industry and its offerings very relevant.
Time to Take ADS-B Seriously
There is an increasing urgency for private aircraft owners to comply with what looks to be the final and firm deadline of January 1, 2020. Waiting until 2019 will put most owners on the back side of a power curve. Aircraft for sale will most likely fulfill their obligation to ensure a market-compliant asset. For older aircraft (10+years), moving from ground radar and navigational aids to the expensive equipment able to execute precise tracking using satellite signals may turn out to be the catalyst for retiring these fleets as they have reached their economic useful life.
Despite our strong FY 2016, the market bounce back has not yet occurred in Europe. Jetcraft continues to establish resources in the region, and make investments in aircraft and personnel as our roots in Europe are deep. Overall, what we can say is that the global business aviation market today is much more predictable than it recently has been. The question is not if, but when Europe will become a strong demand market again.