- 12 Jan 2023
- René Armas Maes
- BizAv Market Insight
According to VREF’s Jason Zilberbrand, the pre-owned aircraft sales markets are showing signs of peaking as economic turbulence continues. As we head into the New Year, we take one final peek in the rear-view mirror at 2022...
Usually, Year-End is a frantic time with a flurry of aircraft transactions being squeezed into a short time frame, all aiming for completion by the time the clocks chime in a New Year. For Business Aviation, Q4 is always the busiest time of year. But 2022 is anything but a typical year. As it turns out, Q4 2022 was relatively quiet.
Whether we talk about the weather, politics, the economy, interest rates, or alternative investments like crypto, the year that just ended was anything but ‘normal’. Coming off a benchmark year like 2021 makes it even more difficult to quantify, as it's only natural to believe the markets have more room to grow, coupled with the desire to outdo ourselves.
In the first half (H1) of 2022 it appeared as if that could be possible. Transactions continued to close and inventory dropped. Demand for aircraft was at an all-time high. The appetite and demand were beyond satisfying. While other high-end markets for cars, watches, and more began to tail off, somehow, even with the aggressive interest rate hikes and the highest inflation in over forty years, aviation remained clear of a downturn. The reason for this is multifaceted:
Admittedly, not everyone has the budget for a turbine aircraft, but now more than ever the thought of giving up your private plane even as the economic outlook starts to look dim seems like the worst possible move.
Most aircraft owners have reaped the rewards of the past few years, watching their aircraft increase in value while paying historically low-interest rates (assuming they borrowed) with payments being half of what they would be today for an equivalent replacement.
In fact, it is because we have seen a slowdown that trading-in or trading up yields little to no upside unless you’re paying cash or writing off the transaction.
On the other hand, flipping aircraft (or watches, houses, cars, or whiskey for that matter) requires capital, knowledge, and patience. There’s no free lunch. Ask any inventory aircraft dealer how much it really costs to buy and hold aircraft for resale, and you’ll quickly learn that those who have the knack and have been around the longest are not just lucky – there’s a lot of skill involved.
Still, things can go only up for only so long, and it appears that we’ve finally peaked on aircraft values on the piston side of the market (where buyers tend to rely more heavily on financing and are certainly more sensitive to interest rate hikes).
Read the rest of this article in our digital edition by clicking on the button below...