Originally published as a blog for AINsight for Aviation International News on 9/2/22
We are approaching the end of the second year of record purchases by first-time buyers. Some entered this orbit being frustrated or even scared by commercial airlines and public airports because of Covid, some entered being lured by the ability of capturing 100% bonus depreciation on not only new but also pre-owned aircraft. Regardless of the reason for entering they all came with certain expectations of what private aircraft ownership would mean to them and what steps had to be taken to achieve their goal.
Over these 24 months, we have had our fair share of first-time buyers also come to us to achieve the dream. I took some time this week to circle back with a few of our clients to see how ownership was meeting their needs and/or their expectations. I also wanted to ask about the steps that had to be taken to prepare for ownership, and if the process was what they had expected. Just because we are ending the second year, we are by no means at the end of the line of people who are still considering or actually entering, this world.
One of the interesting byproducts of this massive market shift has been the effect of the demand on our market. We actually went through four or five months at the end of 2021 and into 2022 of prices going up as much as 10 percent a month. So, the barrier to entry based on price alone has changed the dynamics of the decision. Lenders have been scratching their heads about how to value planes based on their lending criteria and the quickly escalating values year over year. As a result of such high demand and transactions, our industry has been affected in many areas such as hangar space and pilot shortages caused by the increased utilization. New owners are finding in many cases a need for not just one, but sometimes two full-time crews to meet both their personal flying as well as high charter demand and the opportunity for increased revenue to offset their costs. However, there is a line between a healthy charter demand and the off-the-charts charter demand of the last two years, which can lead to increased maintenance events, crew exhaustion, and faster wear and tear on the aircraft. The increased costs may outweigh the increased revenue at the end of the day.
All this contributes to a more challenging entry into service for all these new entrants into aviation. In asking a couple of my first-time buyers how it is going for them they have first and foremost related how much they love this kind of freedom in their world, but also how complex the process was. They relate it to starting up a business and dealing with supply chain issues. They talk about if they are micro managers by nature how stressful this can all be and how they solved this stress by finding the right partners on the operational side to trust. This included the right skilled broker, experienced management companies, good crews, and smart legal and tax partners. Creating a great environment is critical for the new owners to attract and retain crews and other operational partners.
One of the areas of frustration for many is the long lead time for FAA and other 135 conformity. This is new based on the high transactional demand on our system. Maintenance shop delays are also troublesome and create longer than expected return to service timelines.
Most new entrants are joyous to be able to travel with their families and pets and make lasting memories. They are learning what we have known all along. Once bitten by this bug it is hard to shake the habit. We are a proud industry and operate with a high degree of professionalism and safety. Welcome to all the newcomers and our hope for you all is a long enjoyable experience.