- 07 May 2021
- Matt Harris
- Market Insight
What are the key issues driving today’s pre-owned business jet marketplace? How can buyers and sellers extract maximum value? AvBuyer’s Matt Harris asks Chris Ellis, Managing Partner at Avpro…Back to Articles
Celebrating 30 years in business this year, Avpro exclusively represents clients seeking to buy, sell and trade new and pre-owned aircraft.
With a focus on business jets, Avpro specializes in Mid-Size and Large Cabin Jets in particular, but is also experienced in the Light Jet market. As a result, it has its finger on the pulse of dozens of makes and models from all of the major OEMs, including Bombardier, Cessna, Dassault, Embraer and Gulfstream, as well as out-of-production models from the likes of Hawker.
In an average year, the company completes approximately 100 transactions, with an estimated value of about $1.5 billion.
Avpro attributes its success to its ability to “navigate buyers and sellers through the intricacies of a complicated market while keeping our eyes on the big picture”.
“We overlay our knowledge of the market with a forecast of larger economic trends,” explains Chris Ellis, Avpro’s Managing Partner.
Mr. Ellis’s interest in aviation started back in his high school days, through a friend whose father worked in the aviation sector. Despite obtaining an engineering degree, he followed his passion for aviation into the aircraft sales industry in 1987, and, four years later, established Avpro as one of three founding partners.
Thirty years later, Ellis has seen most things in terms of market cycles in pre-owned aircraft sales, including the impacts of two Gulf wars; the dot.com boom and bust; the feverish pace of the market and its subsequent collapse in the Great Recession; and now a global pandemic.
Chris took time out of his busy day recently to share some of his market insights and perspectives with AvBuyer…
AvBuyer: We’re almost half way through 2021 already. Tell us about the pre-owned aircraft sales market in 2021 as you see it…
Ellis: It’s robust – very robust. Currently there’s a very limited supply of inventory available. The trajectory to where we are now pretty much started in August 2020, continued for the better part of Q3 and Q4, and into Q1 2021. And Q2 doesn’t seem to be letting up either.
We’re seeing record sales going on right now. A ready and available supply of buyers is not the issue – it’s the supply of available aircraft that’s the problem.
We’ve seen tight inventory similar to this before. Prior to the financial crisis, the market supply became very tight in 2006 and 2007. But back then, the OEMs had much less production capacity.
Today, they’re still producing plenty of aircraft which keeps a supply line going, so today’s market is slightly different.
AvBuyer: Is there anything about the aircraft sales market that has surprised you this year?
Ellis: I wouldn’t say there are any real surprises about 2021 – so far – in terms of the pre-owned market. It’s more what happened last year that surprises me still. A year ago last April and May, 96% of the public were in lock down – we’ve never had to deal with that kind of societal disruption before. The normal course of daily life stopped. It was a very bleak time.
So, the nature of the rebound was staggering.
If you’d asked me during the lock down how many people would be trying to buy jets in the second half of 2020, I’d have called it wrong. We didn’t see the demand of Q3 coming.
And Q4 was ‘gang busters’, partly due to the possibility of US tax laws (bonus depreciation) changing with a new Presidential Administration. People knew what the existing tax laws were, and that they needed to buy aircraft, so they were acting quickly to complete a transaction before any possible change came into effect.
The stock markets bounced back remarkably well, and that facilitated a lot of buyers being in a position to buy when they did.
AvBuyer: How would you expect to see the aircraft sales market play out in the second half of 2021? What (if anything) needs to happen to help facilitate this?
Ellis: I would see this year being equally as robust as last year – if the supply can be found. That would depend on there being no change in the tax laws concerning bonus depreciation. If that stays the same, then we have an economy where people are doing well, interest is cheap, loans cost very little – and that includes financing for business aircraft.
Just how robust 2021 proves to be is entirely related to the supply of aircraft. There is no shortage of demand.
AvBuyer: Is there a particular market – whether segment or specific model – that’s catching your eye right now? If so, what is it and why?
Ellis: It would be hard to single a market out. There’s a lot of demand across the board. Nothing is standing out dramatically more than something else right now. We’re even hearing that the Turboprop and Piston aircraft markets are strong.
Whether you’re shopping for a Large Jet, Medium Jet, or a Light Jet, the market supply is super tight. Aircraft that are 15 years or newer are seeing lots of demand, and little supply, i.e. the CitationJet markets; the G150 market; the G650 market (you can’t find one) are all trading rapidly right now. So, having product to sell is a good thing.
Regarding price trends, it’s all about supply and demand. If supply dwindles, prices will rise. Currently the prices are still bouncing back from the decreases that happened at the start of the Covid pandemic.
The question is, at the end of this year, will we see prices rise above where they were at the start of the pandemic?
It’s hard to tell. We’re not seeing price increases on new jets from the OEMs, and if they aren’t rising, there’s nothing to keep the used prices up – so I’d argue the conditions aren’t necessarily in place to keep a price trend line rising. If they peak above the pre-Covid prices, it’s likely to be just a blip while supply is scarce.
AvBuyer: What is your number one piece of advice for both buyers and sellers who are considering entering the market today?
Ellis: For the buyer, the top advice today is to hire a reputable broker. They will have access to the full spectrum of aircraft available on the market. They will also have access to off-market aircraft opportunities. Your broker will help you understand where the market is, and where it is going.
In this market, once the buyer is educated, they will understand that the aircraft they’re looking for won’t be available for long. But it’s hard to identify what that aircraft is, and where to find it without professional guidance.
My advice is the same for sellers. A broker can maximize your aircraft’s price. They can help you understand where we are now, and where things are going. And you’ll be equipped with intelligence on how to maximize your jet to sell it quickly.
The broker’s fee in an aircraft acquisition or sale is insignificant in proportion to the value of the business jet and transaction.
More information from www.avprojets.com