Flat may be optimistic

COVID-19, the market had been fairly static for several years, with large cabin decent but flat, while the mid/light segments were bouncing along a seemingly endless bottom. Most suppliers now recognize that a recovery to the heyday of 2007 is not only delayed but also unlikely, agreeing that the 2007 peak was uniquely stimulated.

For the last decade, order activity has been weak in part owing to flight shaming after the global financial crisis, ESG concerns, and the increased adoption of fractionals. On the last point, fleet operators tend to use aircraft more efficiently than typical whole aircraft owners.

Still, the fleet remains in a state of oversupply as fleet expansion appears to have far outpaced growth in cycle/traffic activity. As noted above, a meaningful increase in the use of shared aircraft has improved utilization and has significantly absorbed incremental demand that otherwise might have been directed at new aircraft.

There is some optimism for a mid/light recovery as high net worth individuals migrate to entry-level private travel from commercial airlines. Meanwhile, large cabin production rates are adjusting lower due to soft bookings in recen quarters, new product transitions, and lower corporate profits due to Covid.

While availability of used inventory has improved (as a % of the installed fleet), absolute inventory levels remain near all-time highs, and prices also remain depressed (for both used and new aircraft). Significant absorption of the idle fleet is required before demand and prices firm.