The business aviation community should expect another end-of-year rush to buy aircraft during the upcoming fourth quarter, which will keep prices high and restrict inventory, although a transformation may occur in the new year.
Experts considered the permanency of business jet buying trends from 2020 and 2021 that were once seen as an anomaly, as well as the continued absence of aircraft from corporate fleets on the supply side and how that is impacting the size and quality of used inventory.
The latest Thought Leadership NBAA News Hour: “Turning Into the 4th Quarter; A Look into the Near-Term Future,” was moderated by Jay Mesinger, president and CEO of Mesinger Jet Sales, which sponsored the session.
For Joan Roberts, vice president and escrow agent at Oklahoma City, OK-based Insured Aircraft Title Service, current indicators show that the massive spike in aircraft transactions recorded in the past two fourth quarters is likely to happen again this year, despite a dip in sales during the summer months.
“[Last year] was just a crazy year; the numbers were off the charts,” she said. “This continued up to May this year until we saw dips in June, July and August, but even these months saw levels that would have been seen as average for the years prior to the pandemic.”
“However, September has started with a boom, and if these numbers continue, we’re going to be right back to 2021 numbers for the end of this year,” she added.
There are some minor shifts in behavior, Roberts continued, with deals taking slightly longer to close than during the height of the pandemic and more sales unraveling, but she still expects high activity from buyers in the last three months of the year.
Jeffrey A. Carrithers, president and CEO of GlobalAir.com, said he saw similar trends through his online service BrokerNet.
“Our client base is from the aircraft broker world and aircraft buyers, and it’s still a very active market out there, if a little bit slower than at this time last year,” Carrithers explained. “September looks like ‘Here we go again,’ and while we’re seeing more aircraft inventory in the marketplace, I would say it’s still a tight market.”
This continued demand for business jets, despite the lack of availability and the reduced quality of used inventory, tells Alex Mesinger, director of business development at Mesinger Jet Sales, that there is a permanent shift in the industry.
“COVID was a shock to the system that changed how the wealthy view their privacy. There is a lot of wealth in the system, and demand for yachts, private jets and ranches has exploded contrary to economic indicators. There are 23,000 private jets in the world, and there are a lot of people in the world who can afford that choice,” Mesinger noted. “I don’t see the demand slowing any time soon.”
This systemic shift in demand, compounded by global supply chain issues, is keeping used aircraft prices artificially high, Mesinger added, and that will continue until business flight departments release their aircraft into the used market. Carrithers expects that to happen in 2023, as older fleets are replaced by new aircraft from the OEMs. “For anybody looking for a price adjustment, I really think it’s going to be later in Q1 of 2023,” he noted.
Stability is needed after two years of manic demand, said Jay Mesinger.
“It would be nice if we could get back to a place where we have normal depreciation of 5-7% a year with used equipment prices going down instead of up. Then we could get rid of some of the sellers who come to the market strictly from the opportunistic standpoint,” he said. “We also need more good quality aircraft to come to market.”