Market Uncertainty—But Also Cause for Optimism

The global pandemic has made assessing and predicting the preowned market’s state of health particularly daunting this year.

“The near-term outlook for business aviation is perhaps more difficult to discern than at any other time in recent memory,” says consultant and JetNet IQ creator Roland Vincent.

But reasons exist for holiday cheer—especially if you assume that increasing demand and pricing stability are on the way—as the preowned market digests what appears to be an entire economic cycle of activity and changes in the course of half a year. 

First, the business has likely exorcised any ghosts of 2008’s market meltdown that had been haunting owners, shoppers, or sellers. Despite the collapse in market activity in March and April, as COVID-19 compromised the ability to move, view, or inspect merchandise, no desperation pricing or evaporation of buyers occurred, and transactions have since recovered smartly. After reporting 100 total preowned sales in April and May, members of the International Aircraft Dealers Association registered 177 in June and July. Market-wide, transactions in June through August were up 5 percent year-over-year, according to JetNet.

No glut in available inventory—which had been hovering between 10.1 and 10.3 percent in pre-COVID months—occurred, either: 10.7 percent of the business jet fleet (2,264 aircraft) were for sale at August’s end. In contrast, in the wake of the 2008 market meltdown, inventory bloated from similar pre-crisis levels to some 18 percent of the fleet.

The passing decade has also brought acceptance that—irrational exuberance aside—preowned aircraft, like other capital equipment, declines in value. That lesson was made all the more brutal by the annual value declines of some 20 to 25 percent that many models endured in the immediate post-crash years. Though today’s value declines are greater than those in pre-crash times, the intervening shock made drops of recent years easier to plan for and bear. 

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From the beginning of this year (which was forecast to be a sales dud before the pandemic began) to the end of the third quarter, the average value of late-model midsize jets (including Challenger 300 and 605, Citation XLS+ and Sovereign, and Gulfstream G150), declined 7.6 percent, from $6.6 million to $6.1 million. That’s according to Amstat, the business aviation market information service.

Large-cabin jets’ average value (including Falcon 7X and 900EX, Global 5000, and Gulfstream 450 and G550) declined 10.4 percent over the three quarters, from $16.3 million to $14.6 million. Light jets’ average value (Beechjet 400A, CitationJet, Citation II and V, Bombardier Falcon 10, and Learjet 31A) also fell 10.4 percent, from $546,000 to $489,000.

With personal health and safety an air transportation issue, longer-term market prospects hold significant upside. Aircraft brokers as well as charter, jet card, and fractional program professionals all report unprecedented interest from business aviation first-timers.

Meanwhile, a possible inventory shortage looms. Aircraft changing hands are getting older. The composite profile of a preowned business jet sold in the first half of 2019 was a 2004 model priced at $4.4 million; for the first half of this year, the aircraft was a 2002 vintage, sold for $3.7 million, according to JetNet. (The data service derived the figures from sales of the 236 business jet models it tracks.) 

With a shortage of newer pedigrees, older airframes including early Citations, Hawker 700/800s, Bombardier Challengers, and Falcons and Gulfstreams into the vintage 900 and GIV series remain in demand, if they’ve been well maintained, refurbished, and upgraded, and are cosmetically appealing. Concurrently, lesser examples of these same models are being sold for the value of salvageable resale parts.

“A turnkey older business jet ready for operations will attract a substantial number of [cash] buyers,” says Jason Zilberbrand, president of aircraft valuation and appraisal service Vref.

Yet even as demand for late-model preowned aircraft grows, new business jet shipments will shrink about 22 to 25 percent this year, JetNet forecasts. A decline in new aircraft sales, of course, creates more squeeze in the preowned market.

“The largest segment of buyers for business jets in the U.S. is those looking for a sub-$5 million aircraft that can seat eight and travel over 2,500 nautical miles,” Zilberbrand says. “Until one of the manufacturers can build a midsize jet that doesn't breach the $15 million sales price, the preowned market will continue to attract buyers.”