The 'New Normal' May Be Here to Stay

The preowned market’s “new normal” appears to be here for the foreseeable future. The transformation in values and demand isn’t just about the robust transaction numbers and rising prices but the trends driving them, as noted in three recent reports.

The bottom line for aircraft shoppers is that prices will remain high and selection limited, but whatever you buy—assuming you purchase wisely—is likely to retain its value. Additionally, your attitude about what constitutes a fair price is probably shifting. On the other side of the deal, if you own a jet that you’ve thought about selling but still haven’t, concerns in this market about its salability probably aren’t what’s holding you back. 

Supply remains limited, with inventory slowly building from record lows. Four percent of the business jet fleet is now for sale, while pricing and valuations remain strong, data specialist JetNet reported in October. As of September 30, an average of 950 business aircraft were available for sale during this year; in 2021, the average figure was 855. 

Those inventory averages are spread across 10 turbine categories that JetNet tracks, from personal jets to executive airliners. For 2022, the portion of the fleet for sale has ranged from 2.3 percent for very light jets to 7.3 percent for personal jets (e.g., the Cirrus Vision). Yes, those two small-jet categories comprise the extremes of inventory disparity but keep in mind that preowned activity figures are relatively low to begin with, and it doesn’t take many deals or listings to impact market data or category rankings, often rendering observed changes more a spurt than a trend. A year ago, for example, personal jets were the least available aircraft model, at under 2 percent of the fleet for sale.

Strong Sales Will Continue

JetNet forecasts sales to remain strong into the new year, though it predicts they will fall 6 percent below last year’s record-setting retail transaction total.

Global brokerage Jetcraft published similar results and projections in its “Pre-Owned Market Forecast 2022–2026,” which it released in September. The firm expects the number of transactions among the light, midsize, and large jets and executive airliners it tracks to fall 17 percent this year, after 2021’s meteoric 36 percent surge. Still, like JetNet’s projected total, Jetcraft’s estimate suggests that sales will outshine those in any earlier year. (Amstat and Vref provided Jetcraft’s transaction data.) For the rest of the forecast period, Jetcraft predicts steady, 3.8 percent annual growth in transaction totals. However, the total value is expected to drop 5 percent this year to $13.7 billion, and again next year to $13 billion, as more traditional depreciation rates return to the market, with transaction values then rising 1.3 percent annually through 2026.

Meanwhile, though focused on new aircraft sales, the annual Global Business Aviation Outlook that Honeywell Aerospace released in October also contains forecasts relevant to the preowned market. First, the outlook reports a “sharp” increase in the number of individuals and companies with an intent to purchase and boosts the company’s sales projections for new aircraft over the next decade by 15 percent (to 8,500 business jets) over last year’s numbers, underscoring a strengthening of the business aviation sector.

More directly, the outlook predicts that high demand will keep preowned inventory low and finds that five-year purchase plans for used jets (28 percent fleet-replacement expectation) match last year’s high pace.

JetNet, meanwhile, says that about 15 percent of owners and operators who take part in its surveys report being “very” or “highly” likely to buy a preowned aircraft within the next year.

First-timers Are a Factor

Underpinning the activity is “a wave of first-time users and buyers” who’ve discovered business aviation in the aftermath of the pandemic, according to Honeywell and others.

But how committed are business aviation’s new wave of post-COVID consumers, should the price of fuel spike or the airlines make a big return? Honeywell’s 2022 forecast surveyed first-time aircraft owners, and operators serving these new clientele, who already fly 10 percent more than the fleet average, according to the aerospace giant. About three-quarters of the new converts (just under 74 percent) expect to fly at least as much next year as they did in 2022; only 4 percent expect to fly less. Honeywell predicts strong market demand will continue “for several more years.”

JetNet’s survey found that 58 percent of business aviation users expect demand from new customers to increase over the next five years; fewer than 25 percent think demand will decline to some extent or aren’t sure.

A demographic shift is also altering the preowned market along with the rest of business aviation. “The standout trend we’ve seen over the past five years is the rising number of buyers under 45,” Jetcraft reports. This group of preowned buyers grew from 11.5 percent of the company’s customers in 2020 to 27 percent now. The brokerage also credits this cohort with spearheading a trend toward purchasing larger aircraft; buyers under 45 years of age spend an average of 31 percent more than older buyers, according to the firm.

Rising wealth is another expanding force. The global population of ultra-high-net-worth individuals (UHNWIs) is expected to increase by at least 21 percent over the next five years, according to the Wealth-X World Ultra Wealth Report 2021. Wealth among the under-50 age group of UHNWIs—the big business aviation spenders—grew by the largest margin in 2020. Business aviation is expected to be the UHNWIs’ long-distance travel option of choice.

High Prices Make Some Buyers Hesitate

In addition to trends shaping tomorrow’s market, the forecasts can provide insights into the attitude shifts accompanying the transformation today. 

Among the consumer-sentiment questions that JetNet poses to business jet owners and operators who aren’t shopping for another aircraft is: Why not? For almost every quarter going back to 2019, the most-cited reason has been the suitability of their current aircraft for the mission (17.6 percent currently), with five other reasons trading places of relative importance. 

Now in second place: prices are too high. That’s not a surprising concern, given the sharp post-COVID rise in values, but the trajectory of that sentiment is worth noting. In the second quarter of 2020, immediately after the pandemic was declared, high pricing ranked fourth, behind economic uncertainty and a decreasing need to fly; both of those latter concerns peaked in that quarter. At the time, fewer than 10 percent of respondents cited pricing as a reason to not buy. That concern rose steadily in lockstep with preowned pricing, until the first quarter of this year when it topped out near 18 percent, before turning downward to about 16 percent now, even as pricing, according to JetNet, has held firm. That suggests buyers are becoming resigned to or accepting new-era pricing—and the willingness of young customers to spend more, as noted by Jetcraft.

The least of the worries for those on the market sidelines today is concern that they’d be unable to sell their current ride, a factor now cited by less than 5 percent of owners. These owners have likely noted that almost anything with a pair of wings on it can draw bids today. Saleability concerns peaked at about 8 percent in that extraordinary COVID quarter of 2020, when nothing sold, and sank steadily from there, claiming last place a year ago from the previous biggest non-issue: a feeling that a better deal will be available in a year. A small but growing percentage believe a better deal awaits in the future, even as prices have continued to rise, though—mirroring the issue of purchase prices themselves—sentiment appears to be turning in a sign of capitulation.