Pre-Owned BizJet Sales Trends to Watch This Year

Closing 58 transactions representing nearly $700m in asset value, 2023 proved to be another record year for OGARAJETS, and Johnny Foster remains bullish for 2024 business opportunities.

For those following developments at the Atlanta, Georgia-based aircraft broker, this is not a coincidence. Just prior to the Covid pandemic in 2020, OGARAJETS entered its 40th year of operations, and marked the milestone by flipping its family business model on its head to strategically grow its small, boutique firm into an enterprise business.

“We spent more than a year developing a refined business model along with an aggressive 10-year strategic plan, which included a significant expansion of both sales and sales support, along with an underlying operating platform that would serve as a ‘common basis’ for all of our divisions to operate in sync,” says Johnny Foster (pictured left), President and CEO of OGARAJETS.

“The onset of the pandemic allowed us the space to continue making investments and refinements without the interruption of transaction flow. However, by Q3 2020 the industry had made a complete 180-degree turn and has hardly looked back. With our new model fully deployed, we were well poised to take advantage of the skyrocketing market to come.”

Since 2019, OGARA has grown its team from seven to 20 professionals, seen its annual transaction flow increase from 22 to 58 closings, and increased top-line revenue threefold.

Specifically in 2023 around 10% of OGARAJETS engagements involved representing clients in the acquisition of factory-new aircraft, Foster shares, while approximately 55% of the company’s exclusive engagements last year came from previous clients. “That translates into new client growth of 45%, which is a very exciting measure for us.”

2024: Pre-Owned Aircraft Market Equilibrium Shift

Just about everyone with an opinion on the pre-owned aircraft sales market in 2024 predicts further gradual movement towards buyer and seller equilibrium, with inventory anticipated to continue to build from the record lows of 2022. This, in turn, should put some downward pressure on aircraft values.

While that is great news for aircraft buyers, it will give aircraft sellers a couple of things to consider if they’re wanting to position their aircraft at the top of buyers’ shopping lists this year.

Overall, the transaction pace has been slowing since mid-2022, Foster notes. “With the slowing pace comes a natural rise in supply, affording buyers more choice along with more time. This is a very healthy shift for the entirety of the industry. However, we are still not as close to ‘parity’ as perhaps might be remembered pre-pandemic,” he highlights.

“Overall, supply levels remain relatively low heading into 2024, especially in the newer, more modern business jet models and segments. Here, the seller still holds a solid edge and prices remain relatively strong.”

With that said, Foster is expecting the market to continue its shift towards greater equilibrium, with the caveat that, “outside our industry, the world is watching two major wars, with the potential for a third war to unfold.

“Domestically in the US there remains a lot of talk of inflation, a possible housing crisis, and what promises to be a heated Presidential election in November,” he adds.

“Any one of these ‘dominos’ could create a significant change to aircraft buyer and seller mindsets, and recast the health and behavior of the private aviation space almost overnight.”

What’s clear is that sellers no longer hold all the cards like they did at the peak of the white-hot market of 2022. Savvy aircraft sellers should use an experienced, professional broker to understand the market conditions for their aircraft both now, and over the next several months.

“Now, more than ever, sellers must recognize that the time to complete a sale in is increasing,” Foster highlights. “The value of their aircraft depreciates with each passing month. Greedy, unreasonable sellers will see their aircraft remain on the market for longer while their value continues to erode.

“Smart sellers operating with good advice and guidance, will price their jets for tomorrow, seizing the opportunity of a sale sooner rather than later.”

Will Used Jet Buyer Challenges Improve in 2024?

With the impact of supply chain issues across the industry combining with the higher than usual volume of pre-owned aircraft acquisitions and correlating demand for pre-purchase inspections, the shortage of available MRO shop space for booking pre-purchase inspections has been an ongoing challenge over the last couple of years.

“MROs continue to be challenged by ‘supply chain issues’ in 2024, which extends to parts as well as qualified technician labor,” Foster observes. “With more inspections occurring, and longer lead-times to completion, sourcing a space for scheduled and unscheduled inspections can be challenging.

“As pre-purchase inspections are unscheduled events, they offer little opportunity for advanced planning which can create issues around transaction timing.”

Nevertheless, Foster highlights one way in which aircraft sellers can be more proactive in tackling the problem in the year ahead. “Some sellers have taken a more proactive approach by completing a pre-purchase inspection ahead of the contract to sell, essentially then marketing a turnkey, ready-for-immediate-service aircraft option,” he shares.

“Even completing the logbook and record review ahead of time can create significant efficiencies for the selling process, which is attractive to buyers.”

Meanwhile, as the clocks chimed midnight on New Year’s Eve and 2023 became 2024, Bonus Depreciation available to qualifying aircraft buyers dropped from 80% to 60%. Bonus Depreciation has been a clear driver of pre-owned transaction activity since its introduction in 2017, says Foster.

“Following the pandemic, our industry saw a significant increase in the number of first-time business aircraft buyers, many of whom relied on Bonus Depreciation to help justify their purchase. And first-time buyers still represent a significant portion of the overall transaction base,” he explains.

Highlighting the value Bonus Depreciation still has, Foster points to the Q4 2023 transaction data. “For OGARA, more than 50% of our annual closings over the previous four years have come in Q4 – a significant weighting at year-end to assure the benefits [of Bonus Depreciation] are received.”

As to whether the reduction in Bonus Depreciation to 60% diminishes its attraction for aircraft buyers in 2024, “looking ahead to Q4 2024, I expect we will still see a strong push for year-end transactions,” he argues. “Sixty percent is still a very advantageous position for buyers to enjoy.”

But a buyer must still have the need for a business jet, first, he adds. Private aviation ultimately provides owners with the safest, most efficient method of transportation available. “This will never change and will always lie at the foundation of a purchase decision.

“With an annual growing base of aircraft produced, we will continue to see an increasing base of owners upgrading to more modern, more capable, and more comfortable platforms. Who knows... perhaps the new administration will extend Bonus Depreciation,” he speculates.

Trends to Watch in Business Aviation in 2024 and Beyond

As this year and indeed the next few years unfold, there are a couple of trends Foster reckons will be worth watching, including pre-owned aircraft supply and values.

“OGARA continues to make investments in our research, data analytics and technology in order to predict market trends more accurately and efficiently,” he says. “In a declining market, time is money if you’re a seller.

“We rely heavily on objective data to drive well informed buying and selling decisions. While we remain empathetic to our clients’ desires, subjectivity has very little space in the realm of transaction success.”

Second, and looking ahead long-term, Foster is excited for the continued push for more speed, and the promise of a mode of long-range transportation almost unimaginable today – shrinking the world. “I won’t be around for teleportation,” he quips, “but bet I get to witness Mach 3- plus capabilities within private aviation.”

And third, with the industry continuing its efforts towards achieving zero carbon emissions by 2050, Foster reckons now is an important time for Business Aviation to promote accurate data around the CO2 emissions it creates, standing behind the significant advances made within our industry over the last several decades.

“Private aviation is a force for good on so many different measures and should not be demonized for the convenient positions taken by certain environmental advocacy groups,” he concludes. “That’s a message everyone involved in owning, operating, and supporting business jets can get behind, starting in 2024...”

More information from: https://ogarajets.com/