You’re reading the the 2nd issue of Bizjet Buzz, the business aviation newsletter that educates and entertains in equal doses.

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You’re about to learn about new jet deliveries - who makes them and how many.

But let’s talk about ‘Delivery’ for a sec.

You can have the best story in the world, but if you can’t tell it well, don’t tell it at all. You’ll only bore everyone and embarrass yourself.

I don’t have much time for things that bore me. Therefore, I don’t expect you to read boring things.

I want you to learning everything I’ve learned as a jet salesman and enjoy the process, not be bored by it.

Bizjet Buzz should be dishing out dopamine hits like you’ve just found $100 in a pair of shorts not worn in a while.

Then another hit when you realise it’s the Benjie you won from your buddy playing golf last year.

That’s where I’m aiming…

Buckle up! Time to deliver…

What two words come to mind when you hear Market?

No really… close your eyes and think… MARKET.

The law of SUPPLY and DEMAND combines two fundamental economic principles that describe how changes in the price of goods, affect their supply and demand.

The three are interdependent - Supply - Price - Demand

Remember your Dad gave you 10p for the shop? Delighted with yourself, you could buy 10 penny jellies. When the shopkeeper increased the price to 2p, you only got 5 jellies.

Price up, demand down. And vice versa. This is the Law of Demand.

With penny jellies now 2p, the guy making jello decides the penny jelly game is where it’s at… as the price just doubled!

Price up, supply up. And vice versa. This is the Law of Supply.

Everyone has a price they’ll sell an asset at. Even when you don’t want to sell, if the price goes up and up and up, eventually it reaches the offer you can’t refuse and becomes supply.

Let’s continue with supply but talk about jets ’n’ not jellies.

Recycling in the aviation industry is nothing new. Pre-owned jets are simply recycled inventory.

For the origin of supply, we must look to The Gods of the industry. Supply originates from the Original Equipment Manufacturers. The OEMs.

Alphabetically, so I’m not accused of favouritism: Airbus, Boeing, Bombardier, Cessna (Textron), Cirrus, Dassault, Embraer, Gulfstream, Honda and Pilatus.

These days they’re producing around 700 brand new jets a year, collecting revenues of around $30+ billion. Note the automotive industry bring in $1.9 trillion. Biz Av is a very niche industry.

I refer to the OEMS as The Gods for a number reasons…

And the fourth reason, born in the most defining characteristics of The Gods - Power and Control.

Supply is a delicate balance between producing enough to meet market demand, selling as many as you can to maximise revenue, but not producing too much to where you have excess supply in the system.

Excess supply hurts price and therefore profit.

Enzo worded this a lot better than I just did:

So… have The Gods listened to Enzo? Are they being smart with supply?

What did you observe about the Figure 2.1 above? Take a look again.

Big spike in deliveries in ‘08.

The three periods with the highest jet demand in history were:

1996/7 - The Dotcom Boom

2006/7 - The Housing Market Boom

2021/2 - The Great Pandemic-Induced Bizjet Boom

In Figure 2.1 above, you can see that supply got a little crazy leading up to 2009.

So, why wasn’t there more supply? Why was there no spike in output? Why didn’t the OEMs dial up production like they did in 2007?

Some say supply chain challenges prevented increases in production. Certainly some of the reason but I don’t think it’s the full story.

There’s an element of smart business being played - to which I applaud!

It’s damaging to an organization to dial up a highly complex production line one year, to then dial down the next. Constantly hiring and firing to suit short term demand fluctuations. The race is long and requires consistency and discipline.

There’s another reason - Jet Value Retention.

A reputation for poor value retention should be a real concern for an OEM. We know aircraft depreciate. But if your aircraft depreciate faster than your competitors, you have a problem.

As I’m in aircraft sales, I think of the sales team in action.

The meeting’s going great. You’ve presented every reason why your jet is the best money can buy. The conversation leads to price… and the prospect brings up ‘poor value retention’.

Too many aircraft in the system puts pressure downward pressure on residual values.

This pressure eventually makes it all the way to the top line, becoming the sales team’s problem. This problem can be solved by discounting price.

A reputation for poor value retention is sticky. It’s difficult to shake. However, by consistently making certain choices, it’s possible.

It’s safe to say that Enzo Ferrari would be proud of the Gods.

Despite the recent record demand and bursting order books, output from all of them has been relatively smooth.

History did not repeat itself. There was no spike in deliveries during the recent market boom.

Based on this, I predict:

Output from the OEMs going forward will be a lot smoother than we witnessed in the much younger business aviation industry pre-2008.

That was Supply. Now learn about the other tiny word you had to squint to see - Demand.

Live the buzz! 🐝

Colin

I'm Colin, I help jet owners and corporates upgrade, sell or find the perfect jet as part of a global team of aviation experts.

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DISCLAIMER: This newsletter is strictly educational and not advice for investments or financial decisions. Any and all opinions herein are the personal opinions of the author, Colin Dunne, unless stated otherwise.