Pre-Owned Aircraft Market Update – Q1 2023

VREF’s Jason Zilberbrand provides an overview of the pre-owned aircraft sales market in Q1 2023, revealing a landscape of mixed values and active buyers.

Jason Zilberbrand  |  12th April 2023
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    Jason Zilberbrand
    Jason Zilberbrand

    Jason Zilberbrand is the President and Chief Technical Officer of VREF. He is an Accredited Senior...

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    Which private jets did well on the pre-owned market in Q1 2023?

    After experiencing one of the slowest fourth quarters (Q4) in over a decade, I wondered whether we had seen the end to the bull run on pre-owned aircraft values. The typical rush to purchase aircraft that we had become accustomed to in 2021 eased.

    Airplanes were sitting on the pre-owned market  for longer than they were six months prior. Yet here we are towards the end of Q1 2023 and (dare I say?) it's busier than usual for this time of year...

    The quiet Q4 last year compared to one of the busiest Q1s is perplexing and is not something I was expecting. As it became clear that the average consumer has been going about business as usual, we should recognize that the market is complex, and predicting it is not easy.

    The consumer is carrying the brunt of the economy, and even with an enormous amount of debt added to the collective balance sheets of borrowers, consumers keep spending.

    Purchasing an aircraft one year ago required more than just money – it required timing, luck, and some connections with access to off-market aircraft. Today, buyers are being rewarded for their patience. Watching the market, including the aircraft that are failing to find a buyer, will provide more payoff than the immediate gratification of purchasing an overpriced plane.

    A busy start to 2023 is good news, no matter what your opinion of the market is. Whether your glass is half full or half empty, the appetite for General Aviation, business aircraft, and utility rotor and fixed-wing aircraft cannot be met in the United States.

    While it is only a matter of time until corporate layoffs, tightening budgets, and missed financial targets send people back to the airlines, until then Business Aviation seems to be benefiting from a substantial amount of positive attention in the post-Covid world.

    Things are different outside the US where mounting economic pressure in Europe and public shaming of private jet owners have stymied the same growth. With the war in Ukraine entering its second year, Europe is a fragile market.

    Even with all these obstacles, some aircraft models are still increasing in value, and available inventory plays a critical role in that: A quick look at the Bell 407, Gulfstream G450, Cessna Citation XLS, Embraer Phenom 300, or Beechcraft King Air B200 markets would make you do a double take: there is less than 3% availability globally on the open market. But this is where the good news stops and reality sets in...

    No Reason for Panic

    Several aircraft models have dropped in price since last quarter, and it remains to be seen if this is simply a correction to the market or the start of a new cycle. Either way, there’s no reason to worry just yet. Aviation is in a much different place than in the mid-2000s or the dot-com bust of the late 1990s.

    Aircraft owners have built up substantial equity and have skin in the game, which will be one of the main reasons we should be able to avoid massive numbers of foreclosures and repossessions. And there are several reasons why aircraft values can weather the storm, even amid a looming recession. Some of these are...

    The operational fleet continues to shrink: Any chance of offsetting the attrition with new aircraft is delusional at best. The backlog is, however, good news for an industry that lost a decade of growth post the Great Recession of 2008/09.

    Global supply chain issues, higher-than-justified expenses on several older aircraft, and modernization requirements will force much older aircraft to the scrap yard and assist in hedging values on the remaining fleet. The pre-owned and new aircraft markets are different, having very different financing requirements. 

    Buyers reward sellers of well-maintained, modernized aircraft: Sellers offering an actual ‘turnkey’ transaction will be rewarded because the supply chain is often so messed-up that a simple part for an engine overhaul could lead to a four-to-six month wait. And you may struggle to find a service facility with room for a business jet for 60 days, much less with any sense of urgency to assist in a pre-buy inspection.

    Although it's not quite like renovating a kitchen and bathroom for resale, it's not that much different either. Many sellers will testify that a modern cockpit may not bring massive profits, but it will help bring a buyer to the table.

    The post-Covid world is still very much strained: This is especially the case regarding logistics and manufacturing. We are not expecting this to change for some time. The issues manufacturers face today are challenging at best and, at worst, a problem can ground a fleet (more on Cirrus later).

    It will be many years before aircraft manufacturers are at the delivery levels of pre-Covid, and backlogs will continue to grow.

    To read this article in the AvBuyer April digital edition, click the button below. Alternatively, continue reading online by clicking 'Page 2' below...

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