- 04 Apr 2023
- Matt Harris
- BizAv Market Insight
With some big-name BizAv charter and fractional operators currently experiencing financial weakness, what ripple effects could wash up in the pre-owned aircraft sales market? Brian Foley takes a look...Back to Articles
There are a lot of alarm bells going off in the aircraft charter and fractional ownership industry right now. In just over a month, it became evident that large fleet operators Wheels Up, VistaJet and Jet It all had weak financials. While the first two are currently in damage control mode, it was too late for Jet It, who ceased operations.
Never before has the Business Aviation industry been faced with the possibility of such a sizeable fleet divestiture hitting the pre-owned aircraft sales market. Typically, a healthy, large fleet operator such as NetJets slowly and responsibly releases older aircraft coming off program, without causing a noticeable change in inventory and pricing dynamics.
Some time ago Avantair, a large fleet operator of 56 Piaggio Avanti turboprop aircraft, went out of business. However, much of the fleet had already been cannibalized to keep a few of their remaining aircraft flying, making them undesirable and in some cases unsaleable on the used market.
In Jet It’s case, other management companies invited owners to ‘onboard their aircraft’ with them, which will hopefully keep most of the 21 HondaJets off market. In addition, Honda Aircraft stepped in to provide interim support to the fractional owners of these jets. As such, any outsized impact on the pre-owned market should be minimal.
An outright Jet It divesture would have been potentially catastrophic to the HondaJet pre-owned market as there are 226 active aircraft worldwide with 17 (8%) of the fleet already available for sale, per AMSTAT. Twenty-one more units flooding the market would have ballooned that to 17%, causing damage to the model’s resale values and making it more difficult for Honda Aircraft to sell new jets.
The bigger concerns are Wheels Up and VistaJet whose fleets are much larger. The former owns or leases over 200 business aircraft with the fleet’s center of gravity weighted towards the lower end of the market (King Air turboprops, Cessna Citations and smaller Hawker Beechcraft jets).
Should all, or a portion, of this fleet hit the pre-owned market, results would be particularly impactful to the King Air model which makes up the majority of Wheels Up’s fleet.
Resale values would be severely impacted as the supply far outweighs demand. Textron delivered 69 new King Airs last year, a number that would drop significantly if an outsized supply of cheap, pre-owned alternatives suddenly appeared on the market.
VistaJet, meanwhile, owns over 240 aircraft consisting primarily of Super Mid-Size and Large Cabin Jets, with the majority centered on Bombardier and out-of-production Cessna Citation models, with a smattering of older Embraers, Falcons and Gulfstreams.
The impact of any of these aircraft hitting the used market would be most felt at Bombardier as the Challenger 350 and Global 7500 jets owned by VistaJet are still in production and would directly impact new sales for the manufacturer.
Clearly, lenders or lessors should be similarly concerned about depressed residual values in an oversupplied market.
Fortunately, today’s pre-owned inventory quantity is only half of what it has been historically and would be able to absorb a number of extra units if done so in a controlled manner.
However, a sudden fleet dump would be a completely different matter, and cause consternation in the areas of aircraft values, days on market, and new aircraft sales while quickly swinging the pendulum firmly into buyers’ market territory.
So, how can business aircraft buyers and sellers protect themselves from any potential outfall? Find out, and read about the latest trends in the market in the AvBuyer July Digital Edition by clicking the button below…