- 04 Feb 2022
- Brian Foley
- Market Insight
Pre-owned business jet transactions set a new sales record – even before the final tally was announced. Brian Foley reviews the situation…Back to Articles
At the time of writing, the final numbers hadn’t even been published, but from the data that was available, 2021 had already significantly outpaced any previous year for the number of pre-owned business jet sales.
The typical lag in 2021 transaction paperwork still being collected from all corners of the earth would only ensure that the number continues to climb for the rest of this year. Doing a data grab from AMSTAT already revealed almost 3,000 worldwide transactions in 2021, easily surpassing the previous record set in 2020 by 27%, when ‘only’ 2,319 units were sold.
Further supporting the strength of 2021 was the year-end report issued by the International Aircraft Dealers Association (IADA), whose Accredited Dealer members reported a 20% increase in closed deals in 2021, compared to 2020.
Sales by Category/Region
The market was evenly split between Light, Mid-Size and Large Jets sales (see Table A, below), with no clear winner. That is a change from 2020 when Large Jets accounted for a much smaller portion of overall sales, due, in part, to closed international borders which normally require long-range aircraft to get there.
North America once again accounted for the vast majority of sales, claiming more than threequarters of the volume (see Table B). That said, it wasn’t the highest growth area in the world. North America’s 24% growth in transactions between 2020 and 2021 were far lower than in Asia (+131%), the Middle East/Africa (+78%), Western Europe (+62%), and South America (+38%). While those are indeed high growth rates, they’re from a relatively small number of transactions.
Regardless, clearly the rest of the world is recovering and buying business jets again, helping to diversify the industry from too much dependence on North America.
One interesting dynamic in 2021 was the setting of a new transaction volume record despite pre-owned inventory plummeting from the typical 10-12% of the fleet, to just 3- 4%. This would suggest that the excellent networking skills of the dealer/broker community was able to locate owners willing to sell, even before those aircraft hit the open market.
This capability will be further tested in 2022, since the year began with just 2.5% of the fleet for sale (versus 5.8% in January 2021). Regardless, I feel we are near the low water mark for inventory, which should start trending upwards, albeit slowly, very soon.
The Year to Come…
So how will 2022 shape up for preowned business jet sales? I’ll defer that to the IADA dealers, who on a scale of 0 (worst-ever) to 5 (best-ever) predict sales activity over the next 6 months will be 3.8. (Keep in mind that this is the same group who, back in 2020, forecast that 2021 would only be a 3.7).
While I feel 2021 will be a tough, if not improbable act to follow, it will be a rather respectable one, nonetheless.
Global BizAv Flight Activity - January
January 2022 represented the busiest start to a year on record for global Business Aviation activity, says WingX Advance. Compared to locked-down January 2021, business jet sectors were up by 35%.
In January 2020 there was little impact from coronavirus, yet this January, with many countries still heavily restricted, business jet flights were 19% higher. January 2019 was as busy as any January in the previous decade, and January 2022 has seen 15% more activity.
Business jet activity in Europe eclipsed previous January records, recording 38,000 sectors, up 56% compared to January 2021, and up 10% and 13% compared to January 2020 and 2019, respectively. Naturally, the pace varied by country, with Spain (for example) slightly ahead, France on trend, and the UK and Germany well behind.
When it comes to business jets, France was the busiest business jet market in January, with 43% more demand than in January 2021, and 9% more than 2020. The UK leapfrogged Germany to rank as the second busiest market (flights within Germany trailed 13% behind January 2021).
Elsewhere, flights within Russia were down compared to January 2021, but were still up 52% compared to January 2019.
The current preference to fly smaller business aircraft remains, within Europe, currently, and the largest types – Bizliners and Ultra-Long-Range Jets – flew 46%, and 11% less than in January 2019, respectively.
Demand for Business Aviation aircraft in North America during January also beat records. Over 321,000 business jet and turboprop sectors were flown, up 26% compared to January 2021, up 14% versus January 2020, and up 8% over January 2019.
The lighter end of the fleet was furthest ahead of pre-pandemic levels, with the Pilatus fleet 13% busier; Embraer aircraft 28% busier; Honda and Cirrus flight activity up by more than 200% compared with January 2019.
The larger aircraft fleets also flew more than ever, with January’s activity for Bombardier jets up 9% on pre-pandemic levels, and Gulfstream jets flying 17% more.
Rest of the World
Business jet activity outside the busiest markets in North America and Europe was 11% higher than in January 2021. Most of the impetus came from aircraft owners, with private flights up 21% over last year.
By comparison, Charter activity was up 7% on pre-pandemic levels, but had cooled off since January 2021. Government activity was up 44% in January, compared to January 2019.
The busiest markets of China, Brazil, India, and UAE all saw more activity than in January 2019 but less than in January 2021. Business jet demand in China has been eroding for much of the last year, with this January 30% down on January 2019.
“Business jet demand was well ahead of the normal January low-point of the year, and the record margin increased towards the end of the month,” Richard Koe, Managing Director, WingX Advance summarized.
“This may reflect the remaining big gap in airline connectivity, and the ongoing concerns around Omicron. More than ever, wealthy travelers are prepared to pay a big premium to have the flexibility and autonomy offered by business jet operators.”
In-Service Aircraft Maintenance Condition & Marketability
January ended with a 16.1% reduction (142 units) to Asset Insight’s tracked business aircraft inventory. The 134 models that are tracked dropped to only 742 units for sale. The change equated to a 55.8% decrease from the peak number of assets listed for sale in June 2020…
Ask Prices for the listed fleet increased 5.8% in January as jet values climbed, even though the average remains down 12.3% year-over-year (YoY). The YoY average price decrease is not surprising if you keep in mind that availability consists of a heavily picked-over fleet.
Younger, lower-time aircraft (whenever they are listed for sale – many are selling without a formal listing), are capturing high transaction values thanks to numerous buyers competing for such limited assets.
Inventory Fleet Maintenance Condition
Buyers clearly focused on aircraft carrying low Maintenance Exposure in January.
Maintenance Exposure to Ask Price (ETP) Ratio
For January 2022, the ETP Ratio posted a second, consecutive all-time high (worst) figure, 82.1%. Keeping in mind the 12- month high Maintenance Exposure, that result is not surprising.
Not all groups were negatively affected, but the figure statistically explains why the inventory fleet’s average Days on Market rose 11% during Q4 to a record-high 452. Clearly, some listed aircraft will continue to be operated by their current owners, absent a buyer who is seeking a disposable asset.
For anyone not familiar with the ETP Ratio, the statistic is a useful indicator of an aircraft’s marketability. It is computed by dividing the asset's Maintenance Exposure (the financial liability accrued with respect to future scheduled maintenance events) by its Ask Price. ‘Days on Market’ (DoM) analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s time on the market increases, usually by more than 30%.
During Q4 2021, assets whose ETP Ratio was 40% or higher were listed for sale more than 59% longer (on average) than aircraft whose Ratio was below 40% (340 versus 541 Days on Market). Nearly 52% of our tracked models, and 64% of all aircraft posted an ETP Ratio above the 40% mark.
Asset Insight’s tracked fleet posted a new record-low inventory figure in January, at 3.5%. If last January’s figure of 8.3% created selection problems for buyers, the latest figure is bound to exacerbate them. From the June 2020 peak, inventory has now decreased for nineteen consecutive months, and nearly 56%.
As we noted last month, overall demand ended the year at a record-high 4.40, on our scale of 0.00 (lowest) to 5.00 (highest). Airframe OEMs have stated their intent to increase production, but increases will be cautious, and will not truly impact total deliveries until 2023.
We expect demand to remain strong for the foreseeable future, keeping pre-owned availability low, and pricing higher – especially for younger, lower-time models.
Large Jets: Only 2.9% of the tracked 43-model fleet (an average of 2.21 aircraft per tracked model) was listed for sale at the end of January, compared to 6.9% in January 2021. That represented a 12.5% inventory decrease for the month (-21 units), and a 60.8% decrease since the June 2020 peak.
As with all groups in January, the Quality Rating for Large Jets improved, but the 1.2% increase was still below the 12-month average, and also 2.7% lower YoY.
The group’s 5.491 Rating remained within the ‘Excellent’ range, although one should not confuse this figure, which focuses on maintenance, to mean that listed assets are excellent acquisition candidates. As we’ve stated many times, maintenance status is not directly related to aircraft age, nor does it account for the asset’s specification.
Maintenance Exposure increased 3.6% to a figure worse (higher) than the 12-month average, and it was also 10.8% higher (worse) YoY.
After climbing 14.5% during Q4, Ask Price climbed another 15% in January to a 12-month high that was also 30.9% higher YoY. These pricing figures might seem impressive, but they were insufficient to overcome the Maintenance Exposure degradation, thereby raising the ETP Ratio to 67.4% from December’s 65.7%.
Mid-Size Jets: Availability for Asset Insight’s 45-model tracked fleet decreased 22.5% (-52 units) during January 2022, receding more than 64% since the group’s 2020 peak figure. Inventory rested at 4.4% of the active fleet (3.13 aircraft per tracked model) compared to last January’s 10.1%.
Demand has been very strong for this group, and by January’s end the inventory mix raised the Quality Rating 2.1% (although that was 4.5% lower YoY). Scoring 5.117, the Rating kept the group squarely in the ‘Very Good’ range. With buyers opting for assets with lower Maintenance Exposure, that figure climbed (worsened) 2.2% to post a 12-month high number that was also 5.1% worse YoY.
After closing out the year with a record-low Ask Price, the group’s figure improved 17.8% in January, but that was still 16.5% lower YoY, as well as below the 12-month average for Mid-Size Jets. And after closing out the year at a 12-month high of 83.6%, the group’s ETP Ratio for January improved to 82%, making the majority of listed assets far from sellable at a value-based price.
Light Jets: On average, approximately eight aircraft units were available for each of Asset Insight’s 29 tracked models when January ended, and the listed assets amounted to only 3.4% of the active fleet (less than half of the 8.9% accessible this time last year).
The month saw total availability drop 10.1% (-27 units) bringing the figure nearly 56% below the June 2020 peak.
The group’s Quality Rating improved a nominal 0.6% but, at 5.052, remained just within ‘Very Good’ range, but was also 3.1% worse YoY. Maintenance Exposure increased (worsened) 2.2% to equal the group’s 12-month average, but the good news was a YoY improvement (decrease) of 1.9%. Following December’s 12-month low figure, Ask Price rose a mere 0.3%, leaving it 22.2% lower YoY.
The overall impact to the ETP Ratio was positive, but at 111.6% the figure equates to $1.5m of embedded maintenance (Maintenance Exposure) per aircraft, based the group’s $1.34m average Ask Price. Such figures are unlikely to generate enthusiasm among savvy buyers.
Turboprops: Offering more than 9.7 aircraft for each of the 17 tracked models, availability might appear to be good in the Turboprop category, but that figure equates to only 3.1% of the active fleet (it stood at 6.3% in January 2021). December saw listed assets decrease 19.3% (-42 units), equating to a 32.8% drop from the June 2020 peak.
Sales of higher quality units were patently evidenced by both the Quality Rating and Maintenance Exposure figure worsening. The former decreased 1.5% (3.3% YoY) to a figure below the 12-month average, but, at 5.046, managed to remain within ‘Very Good’ territory.
Maintenance Exposure increased (worsened) 2.9% for the month, and 11.7% YoY, to a value that closed in on the 12-month high (worst) figure. As preferred assets continued to vacate availability, Ask Price for the remaining listings decreased 8.6% to a 12-month low that equated to a 7.9% drop YoY.
Not surprisingly, all these changes negatively impacted an ETP Ratio that had, for months, barely exceeded the 40% excessive demarcation point. January’s 49.1% Ratio was the group’s 12-month high figure, and considerably worse than December’s 42.7%, but still poses limited concern for most sellers, who continue to hold the better hand.