Business Jets: Market Dynamics Support Continued Growth

Exploring positive demand trends and long-term opportunities and challenges for the business jet industry.

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By Walter Spracklin, Ken Herbert & James McGarragle
Published August 15, 2024 | 3 min read

Key Points

  • An in-depth analysis on the business jet market increases our analysts’ conviction in the long-term demand trends and opportunities for leading business jet manufacturers
  • Business jets became much more popular during and following the COVID-19 pandemic, and there are several positive trends in higher utilization, supportive demographics, and mix shift to larger jets
  • Supply chain challenges remain a key risk to build rates, though we believe improvements are likely to take hold by 2025
  • Supply/demand analysis indicates that the industry is relatively under-supplied
  • Emissions from private air travel are a key concern from an ESG perspective; sustainable aviation fuel, carbon offset programs and cleaner technologies are being pursued to diminish the environmental impact

In this episode of RBC’s Industries in Motion, Ken Herbert (Aerospace & Defense Analyst) and James McGarragle (Canadian Airlines & Aerospace and Diversified Industrials Analyst) discuss with Walter Spracklin (Canadian Research Management and Co-Head of Global Industrials Research) their positive outlook for the business jet industry, including an overview of the market and leading manufacturers, the increase in demand for business jets resulting from the COVID-19 pandemic, current positive demand trends and supply chain constraints, and ESG considerations.

An intro to the business jet market

The global fleet of business jets consists of approximately 22,000 aircraft, with roughly two thirds of these in the United States. The business jet industry is therefore largely concentrated in North America, which leads in deliveries at 64%, followed by Europe at 14%, and Asia Pacific at 11%.

James McGarragle, Canadian Airlines & Aerospace Analysts, points out significant sustained demand for private aviation from high-net-worth individuals and corporations. He explains, “Looking at deliveries, over the past three decades, the business jet industry has seen an average of approximately 720 aircraft deliveries each year. Customers who purchase business jets typically have an average net worth of around $1.1 billion.”

Ken Herbert, Aerospace & Defense Analyst, notes that the largest original equipment manufacturers (OEMs) in the business jet market are Bombardier, Textron Aviation (including the Cessna brand), Embraer, Dassault Aviation (known for the Falcon jets) and Gulfstream Aerospace.

Business jets have become much more popular following the COVID-19 pandemic

McGarragle explains that before the COVID-19 pandemic, only about 10% of high-net-worth individuals used business jets regularly. During the pandemic, amid concerns about the virus and reduced availability of business and first-class commercial flights, people who had not previously thought about flying privately began to do so. McGarragle adds that “During the pandemic, there was a 25% increase in the absolute number of billionaires, which meant even more wealthy individuals wanting to use business jets. Also, options like sharing a jet or buying a membership with a jet card became popular. This drove exceptional business jet demand in 2021 and 2022.”

Importantly, while business and first-class capacity has come back online post-pandemic, business jet utilization has settled at an elevated level compared to pre-pandemic levels, and there is a large order backlog. McGarragle explains that this should help support pricing in the industry, especially given that the supply chain is currently impacting the number of jets that are being produced each year.

Positive supply/demand dynamics 

Our examination of supply and demand dynamics suggests that the industry is experiencing a relative shortfall in supply.

Herbert explains that between 2020 and 2023, the expansion of the business jet fleet failed to match the significant rise in the number of global billionaires and the growth of the global economy. Looking forward, “we are of the opinion that forecasts for business jet deliveries up to 2026 are justifiable based on the need to compensate for the current supply deficiency and the cautious projections for the increase in the world's billionaires and the global economic output”, he adds.

In addition, McGarragle notes that the current fleet of business jets is currently the most aged it has been in over 20 years, underpinning the need for new jet acquisitions and the anticipated uptick in production rates. “We expect the market to experience strong, continued demand and price stability for business jets, particularly the larger models that are experiencing the most significant scarcity across the three primary jet categories.”

“We expect the market to experience strong, continued demand and price stability for business jets, particularly the larger models that are experiencing the most significant scarcity across the three primary jet categories.”

James McGarragle, Canadian Airlines & Aerospace and Diversified Industrials Analyst, RBC Capital Markets

Although business jet demand has begun to stabilize, thereby reducing some of the strains on the supply chain, the ongoing scarcity of technicians and components still constrains the pace of production. Shortages in engines, parts and avionics persist largely due to complications like the worldwide shortage of semiconductors, disruptions among suppliers and a surge in demand. Labor deficits also remain a primary concern, resulting in quality assurance problems at certain supplier sites.

Significant growth opportunity in business jet maintenance services

Herbert and McGarragle say that business jet manufacturers are expanding their internal service departments to capture a bigger piece of the maintenance, repair, and overhaul market for their aircraft. This strategy is driven by tougher and more expensive requirements for certification, which cause airplanes to stay in use longer, increasing the need for upkeep.

McGarragle says “sales of replacement parts and aftermarket services are not just crucial for keeping older planes in good condition, they're also very profitable. Given that the average business jet is just above 18 years old, there's potential for more comprehensive maintenance work and the larger invoices that typically accompany the upkeep of these aging planes.”

Strategies being pursued to lessen the environmental impact of private aviation

Emissions from private aviation are a key consideration from an ESG perspective. According to McGarragle, business jets contribute only 0.04% of global emissions, but they do generate significantly higher emissions per passenger – five to 14 times greater – than commercial aviation. Strides in sustainable aviation fuel, investment in carbon offset programs and innovation in cleaner technologies are being pursued to diminish the environmental impact of private air travel.

On the policy front, governments have begun to take action to curb business jet usage in favor of more sustainable transportation options.

Herbert explains that “to really make progress, a lot of money needs to go into researching and creating new technology as this will lead to big steps forward in making the industry less harmful to the environment.”

“At the recent 2024 European Business Aviation Convention and Exhibition, experts agreed that sustainable aviation fuel is essential to making flying more eco-friendly, and we're seeing better ways to make and use it. At the same time, the industry is working on greener engines, like hybrid electric, but there are still some technical challenges to solve before these can be become the industry standard.”

Ken Herbert, Aerospace & Defense Analyst, RBC Capital Markets

View audio transcript

Our Experts

Walter Spracklin
Walter Spracklin
Canadian Research Management and Co-Head of Global Industrials Research, RBC Capital Markets
Ken Herbert
Ken Herbert
Aerospace & Defense Analyst, RBC Capital Markets
James McGarragle
James McGarragle
Canadian Airlines & Aerospace and Diversified Industrials Analyst, RBC Capital Markets

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