Analysts say lower oil prices also are to blame for the business-jet malaise because some countries that would benefit from higher oil prices or energy-related corporations are cutting back on business-jet purchases. On the other hand, lower oil prices are helping the commercial aircraft space.
Overall, the number of used business jets on the secondary market as a percent of the active fleet in February reached levels not seen in roughly two years, Goldman Sachs reported last week. It also highlighted how "new business aircraft to market on a trailing 12-month basis are the highest they have been since 2009 — setting up supply/demand challenges."
Shares of two major U.S.-based business jet manufacturers — Gulfstream's General Dynamics and Cessna's Textron — are lagging the broad market this year. In the same period, Embraer SA also is underperforming, while Canada's Bombardier and France's Dassault Aviation are holding up better.
For Textron, the company earlier this year forecast 2016 earnings would fall short of Street estimates due in part to weakness in its aviation and Bell commercial helicopter segments. Textron's Cessna Aircraft business makes Citation jets, such as Latitude, a roughly $16 million mid-size business jet, and it has the newer Longitude business jet that has a longer range and is priced at around $25 million
Brazil's Embraer is facing tougher price competition in the regional jet business. Embraer is looking for margins to be down this year and they are competing with Bombardier, which itself is struggling. Bombardier's U.S.-listed stock price has lost nearly 50 percent in the last 12 months and has looked to Canada's government for financial help for the company's delayed C Series jets.
Meantime, Gulfstream is seeing more of its G650 going to the secondary market, meaning customers can essentially get the aircraft quicker and potentially pay a lower price, too. Gulfstream's strategy has been to slightly increase the production of the G650 while at the same time delivering fewer G450s and G550s, which are older planes with generally softer prices.
"Used G650 pricing has dropped back to in line with new after being well above," UBS analyst David Strauss said in a research note to clients on Monday. "We believe the used business jet market serves as a leading indicator of the new business jet market."
Gulfstream delivered its first G650 in 2012, and the product quickly earned a reputation as a new status symbol for corporate chieftains. Through mid-March, Gulfstream had reportedly handed over 158 of the aircraft. The long-range jet lists for between $65 million to $70 million. More than half of the orders for G650s last year were from North America.