2,500 and counting

Alasdair Whyte
By Alasdair Whyte July 24, 2017 08:51

2,500 and counting

Yesterday Dassault delivered a Falcon 900LX to a US customer. It is the 2,500th Falcon Jet the French manufacturer has delivered since the first one in 1965.

“Over the half century it has been in operation, the Falcon fleet has amassed an amazing 17.8 million hours of flight time with some 1230 operators in 90 countries around the world,” said Eric Trappier, chairman and CEO of Dassault Aviation. “Moreover, of the 2,500 Falcons delivered to date, more than 2,100 are still flying – which is a clear testimony to the high quality and robustness of our Falcon aircraft and the dedication of those that support them.”

The fact that more than 85% of all Falcons ever built are still flying is amazing. But Dassault is not alone. This week Gulfstream delivered its 550th G550 and more than 90% of all Gulfstream aircraft that were built are still flying.

Using AMSTAT figures, more than 47% of the total business jet fleet is older than 15 years old and this figure is set to keep rising.

Business jet manufacturers have always built aircraft to last far longer than their first owner. There have been occasional regulatory changes that have sped up retirements – Stage Three noise regulations for example but even then technology like hushkits kept many flying.

The same is likely to be true with new next-generation air traffic control ADS-B technology. Duncan Aviation says that 75% of the US fleet – or 10,000 business class aircraft – still need ADS-B-out technology. The deadline is January 2020. It looks likely that not all aircraft will be converted by then – and some of these may leave the US and keep flying – but a high percentage will.

Even if ADS-B leads to aircraft being scrapped, the cut in production since 2008 means that by 2028 more than half of the total fleet will be older than 20 years.

The same thing is happening with automobiles. Buying an older second hand car used to be risky. But quality – thanks to better manufacturing and technology – has improved. In 2003 the average age of a US light vehicle was 9.7 years according to IHS Markit. In 2016 it hit 11.6 years having steadily risen every year. A fall in car sales in 2008 and 2010 means the car fleet is also set to keep getting older.

Manufacturers track their fleet obsessively and know that the average aircraft age is rising. This is one of the reasons that almost all of them are investing in services.

Supporting owners has always been key for manufacturers looking to build loyalty and get new aircraft sales. But it is also rising as a percentage of manufacturer’s total revenue. Providing maintenance is less volatile than selling new aircraft, gives manufacturers diversity and often offers better margins. Hawker Beechcraft managed to grow its aftermarket sales even when it was in Chapter 11 bankruptcy protection.

It is not just manufacturers, of course, that can benefit from the ageing fleet. It offers huge opportunities to independent maintenance companies and others that provide new interiors and other services.

Maintenance will also become even more important when selling older aircraft. Asset Insight, which tracks the maintenance condition of every business jet for sale, says the average Maintenance Exposure to Ask Price Ratio (ETP Ratio) of the aircraft for sale increased by 1.7 points in June 2017 to 54.8%. It says that any ratio over 40% represents excessive exposure in relation to ask price. The ratio also affects selling time. “Aircraft whose ETP Ratio exceeded 40% this past quarter were listed for sale 52% longer on average than aircraft whose Ratio was below 40%,” says Anthony Kioussis, founder of Asset Insight. “This works out at 211 days versus 319 days on the market.”

There could be disruptive technology that changes everything before then. But if the last 50 years are a guide, it is quite likely that the Falcon 900LX that delivered yesterday will still be flying in 2067. That is amazing.

Alasdair Whyte
By Alasdair Whyte July 24, 2017 08:51