What Will Drive Pre-Owned Aircraft Sales in 2024?

With a New Year on the horizon, Rebecca Applegarth checks in with some of the industry’s leading experts to learn how the pre-owned aircraft sales market could play out for prospective buyers and sellers...

Rebecca Applegarth  |  04th December 2023
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    Rebecca Applegarth
    Rebecca Applegarth

    Rebecca Applegarth has been brought up around Aviation for as long as she can remember. As a current...

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    What factors will impact pre-owned private jet sales in 2024?

    As we prepare to ring in 2024, what can buyers and sellers of pre-owned aircraft expect the New Year to bring? What is likely to be different, and what will carry-over from 2023 in terms of marketplace characteristics? We asked some experts in the used aircraft sales market...

    This past year has been notable for the lower volume of pre-owned aircraft sales transactions taking place, as compared with the heady days of 2021 and 2022. But the consensus among the industry’s leading brokers is that it would be a mistake to interpret that as a 'stuttering'.

    “OGARA and many of our contemporaries are experiencing significant transaction pace that is very similar to Q4 2022,” Johnny Foster, President and CEO of OGARAJETS highlights.

    Janine Iannarelli, President at Par Avion Ltd, agrees. “I have not seen a slowdown in the pace of transactions as we enter Q4 2023, but rather a continuation of the stagnation that has already been evidenced by the reduced number of sales starting as far back as Q1," she explains.

    According to Duncan Aviation, what has unfolded in 2023 has been less of a slowdown and more of a reverting to a normal market.

    “We would not have been able to support the level of sales of aircraft that we saw in late 2021 and early 2022, as there would not have been the inventory to sell,” Rene Cardona, an Aircraft Sales and Acquisitions expert at Duncan Aviation, notes.

    “Supply of pre-owned jets for sale is up over the last 12 months, and in some specific markets the available supply has doubled,” Foster continues. “However, supply still remains at roughly 50% of the pre-pandemic levels.”

    The most significant supply build is isolated to the ‘legacy’ markets – namely aircraft older than 25 years of age, he adds. “Since 2020, these markets experienced the most dramatic (upward) price moves, yet are challenged for finance, support, supply chain, and rising operational cost.”

    Iannarelli reckons the real question is what is contributing to would-be aircraft buyers’ reluctance to jump into the market. “I feel the answer has been the uncertain economic outlook that has caused buyers to adopt a wait-and-see approach,” she suggests.

    Could ‘Buyer Regret’ Adversely Impact the Aircraft for Sale Market?

    One of the impacts of the Covid pandemic was the rush of first-time buyers seeking out business aircraft as a safe way to travel. According to Foster, first-time buyers accounted for approximately 5% of annual pre-owned aircraft purchases prior to Covid – a number that swelled to 35% in the years following.

    Some market observers felt many first-time buyers would face a rude awakening when the reality of aircraft operating costs bit. Despite some speculation that an exodus could occur as those buyers sought to return to business class travel once the airlines recovered sufficiently, or would turn instead to private charter, as opposed to ownership, Iannarelli says this hasn’t happened – certainly not to the extent some had feared.

    “I have heard of some first-time buyers jumping into the market without fully realizing the carrying costs of owning an aircraft,” she admits. “But the segment of the market that I believe might have been most impacted is likely small jets where the initial price point was relatively low.

    “Personally, I did not have any experience with first-time buyers who made a compulsive purchase or otherwise were influenced to invest in a business jet.”

    “OGARA has not had any of their 2020-2023 first-time clients seek an exit,” Foster confirms. “That said, I believe first-time buyers may represent a soft spot in our market as they perhaps are not fully prepared for the total costs of ownership, a significant maintenance surprise, or major disruption caused by a pilot departure.”

    The key lies in the number of reputable aircraft brokers in the market who are less concerned about making a quick buck while demand is hot than ensuring a client enters the market with their eyes wide open.

    “I counselled the few first-time buyers I encountered who were led to believe that we were in a consistently rising market, and that the aircraft would cash flow, that this was an unrealistic outlook,” Iannarelli reveals. “That advice actually prevented a couple from making huge mistakes.

    “To be honest, those that I have helped to reverse their purchase either have sold at a profit or come out whole. There's a good chance anyone who bought from mid-2020 through early 2022 are realizing a gain as opposed to a loss,” she notes.

    “An aircraft is a piece of equipment, and equipment depreciates over time and use,” Foster adds. “We saw the high point of market prices in 2022 and all markets are slowly depreciating while supply tries to return to a more balanced market.

    “An annualized depreciation of value is normal; there just may be some that experience a more accelerated pace of depreciation over the coming year or two.”

    With inventory building and prices returning to more normal levels, Cardona says if buyers who purchased their jets at the height of the market in 2022 seek to sell now, they will likely need to accept a loss.

    “Nevertheless, there are certain segments that are doing better than others,” he adds. “If you purchased an aircraft in a segment that is strong today, then the value is more likely to hold.”

    Thus, without a clear volume of first-time buyers hurrying to exit the market, 2024 doesn’t look like it will be noted as the year of the ‘fire sale’. 

    “For an aircraft owner to be distressed, there generally must be other financial issues occurring leading to the need to sell the asset at a ‘distressed’ price,” Cardona highlights.

    “All in all, as we head into 2024 the market remains very healthy with marginally rising supply (as we expected) and prices remaining firm,” Foster says. “We expect to see a continued slow build of supply into 2024 and a correlated dilution of values and prices as supply levels begin to return to the 6-8% range. Overall, I believe this is a positive position for the market.”

    “The inventory is still so low among the vast majority of models of aircraft that technically it is still a seller's market, though not yet behaving as such,” Iannarelli adds. 

    Pre-Owned Aircraft Sales Market Influences in 2024

    It’s difficult to look at the year ahead without accounting for the US Presidential election, which traditionally impacts the US domestic resale market.

    “Activity tends to slow down in an election year while everyone waits to figure out who will be the greatest influencer in the administration the following year,” Iannarelli notes. “Given the dramatic change in the aircraft marketplace since the last election, it will be interesting to see if 2024 will follow the historical pattern.”

    Cardona agrees. “Around August/September time [in a Presidential election year], people begin to take a ‘wait and see’ attitude, as to who wins the election.” But he quickly adds whichever party wins does not tend to have too much of an impact, as the economy is ultimately much larger than the Presidential outcome.

    “No doubt there remains a lot of uncertainty on the horizon – perhaps more rolling into 2024 than in a very long time,” Foster adds. “With that said, private aviation will forever deliver the most significant return in time, creating a space of efficiency, safety, and privacy for its users. This will never change.”

    Keeping the Pre-Owned Aircraft Market Healthy in 2024

    As 2023 ends, the market is in a pretty good place, with supply creeping back up and at least some availability on most models. Cardona believes that – barring an unforeseen exogenous event (akin to Covid in 2020, the financial crisis of 2008, or 9/11 in 2001) – the market will continue to correct itself, moving in a positive direction.

    “A sense of parity between buyer and seller is healthy for the market,” Foster highlights. “Unless something negative occurs on the geopolitical front, we expect to see total supply creep back towards 8% of fleet in 2024, heavily weighted by older legacy aircraft, with newer, modern aircraft settling in at 5-6%.”

    Moving into the New Year, “we’re coming into more of a balanced market, which is good,” Cardona says. “Hopefully we will find a happier balance between buyers and sellers.”

    “You need buyers to have a healthy exchange, not just sellers,” Iannarelli agrees. In keeping with that ideal, she expects to see asking prices correct, slowly settling at levels that more accurately reflect value.

    “However, to make aircraft more attractive to those buyers sitting on the fence, it could mean interest rates need to decline, even just a bit,” she adds.

    “Ultimately, while other factors such as global events can disrupt the market in 2024, the largest bizjet market here in the US can weather those storms.”

    New Year, Same Aircraft Buyer & Seller Advice

    Though the year may change, some things stay the same, including the timeless advice of the industry’s foremost experts for buyers and sellers of pre-owned aircraft to seek out professionals to assist them in their transactions.

    According to Foster, “A broker with significant resources in data analytics can help guide sellers towards proper expectations founded in objective data.

    “Understanding the total supply picture, along with complete and accurate pricing, and predictive trends affords a seller significant knowledge in properly pricing to ensure the aircraft is sold,” he adds.

    “Time works against all sellers, as supply builds (providing more choice to buyers) and prices adjust downward, both eroding consumer/buyer confidence, which in turn creates more time in the cycle.”

    “Put together your team early,” Iannarelli stresses, “starting with the aircraft sales professional who should be able to provide you with the market data you need before you make a commitment to the purchase or sale of an aircraft.

    Cardona agrees. “Buyers and sellers ought to associate themselves with someone who is an expert in the market, and who can advise on things that may creep up unexpectedly, helping navigate through the purchase.”

    Indeed, Cardona thinks the fact the market will continue to do well in 2024 makes it all the more important to have an expert at your side since there is going to be a certain level of demand.

    “As well as helping to decide if now is the right time to buy, [your sales professional can help you identify] what aircraft are presenting the best value purchase on the market at the time.”

    More information from:

    Duncan Aviation: www.duncanaviation.aero

    OGARAJETS: https://ogarajets.com

    Par Avion Ltd: www.paravionltd.com

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