The used business jet inventory has been declining for the past decade. The pool of available aircraft for sale could soon be replenished though. Dave Higdon looks at some possible contributing factors to this reversal...
The American economy hit so many milestones in the past decade. Unemployment dropped so low since 2008 that analysts wonder from where new workers will come.
The stock market tripled between 2008 and 2016, and then accelerated further (though it's recently hovered at the same general level within a range of volatility).
Even in Business Aviation we see some remarkable numbers. For example, at the peak of the Great Recession's hammering of business aircraft sales the used inventory stood at about one aircraft in five of the world’s fleet, with a resulting dive in residual values.
In the years since, the used inventory has experienced a steady decline falling by half to a little under 9%, but without the upward pressure on prices one might expect.
Today's inventory still boasts a good variety of aircraft (though not necessarily much by way of like-new) but buying hasn't exactly surged.
And now, according to some forecasters, we should stand by for another swing in the pool of used business aircraft for sale. Murmurings started last fall, around the time of the 2018 NBAA-BACE.
The most explicit in this market view, however, is business aircraft market analyst Brian Foley.
Bounce in Slow-Motion
In a report he produced, Foley notes that the percentage of the fleet of business jets for sale have fallen as low as they’ve been for 20 years, but that the trend appears ready to reverse.
“It’s always a risk to call the high or low of any market, but after nearly a decade of tightening inventory I feel we're at a bottom and used business jet inventory will begin edging upwards into the foreseeable future,” Foley predicts, citing three key reasons for a growing inventory.
The US Economy:The first reason according to Foley is that the US economy is showing early signs of fatigue. In the largest market for used business jets, this will have the effect of causing inventory to rise as market confidence ebbs.
Simple Analytics:What he labels ‘simple analytics’, Foley cites the 1990s and 2000s, previous periods of declining inventory – each of which lasted for periods of 7 and 6 years respectively. This, he notes, “suggests statistically that a correction is overdue in this cyclical business”.
Equipment Mandates:Observers expect pending equipment mandates to force the retirement or parting out of more aircraft than usual, further feeding the pool of pre-owned business-turbine aircraft for sale.
The mandates for ADS-B, CPDLC and PBN will temporarily apply some price pressure on aircraft in compliance while feeding undesirable aircraft into the pool of available aircraft.
Though Foley doesn’t expect these aircraft to sell any time soon, once they decline enough in value, there is certainly the potential for bargain hunters to viably scoop up those for which equipment solutions exist for both mandates. So, if you’ve been considering an aircraft purchase lately, perhaps this is not a bad time to start sharpening your shopping plans.
Read More About: