The Preowned Aircraft Market Downshifts but Stays in Gear

A market shift that accelerated through the end of last year has continued into 2023, with declining sales, increasing inventory, and softening prices. More on what these trends mean for buyers and sellers in a moment, but first some data points illustrating the change, and the forces driving it.

Preowned business jet and turboprop transactions in the fourth quarter—historically the year’s busiest time—dropped from 1,021 in record-setting 2021 to 636 in 2022, according to Amstat, a 37 percent decline. Back in the fourth quarter of 2020, as post-COVID demand jumped, sales hit 979 units, also bettering the last quarter of 2022’s volume by more than a third.

Meanwhile, the number of business jets for sale rose from about 700 at the end of March 2022 to nearly 1,200 at year-end, reports London-based business aviation consultancy Altea. The increase is “an indicator of a market shift,” says partner Jean Sémiramoth.

“There is no doubt among those that watch this market daily that the supply of aircraft is increasing,” adds Jay Mesinger, president and CEO of Mesinger Jet Sales in Boulder, Colorado. The additions bring “some immediate balance to a once very unbalanced market,” he said, citing the rise in Challenger 604 inventory from 3 to 7 percent of the fleet since the beginning of this year. 

Farewell to the Frenzy

Perhaps more telling than such data is the current lack of the frenzy, as it was commonly termed, that characterized much of the past two years’ buying activity when bidding wars and purchases without inspections were the norm. 

Value-wise, “aircraft are not appreciating anymore at an unsustainable rate as they were for many quarters,” notes Zipporah Marmor, vice president, aircraft transactions, at Acass, a Montreal-based global brokerage and business aviation services provider, and chair of the International Aircraft Dealers Association (IADA).

By some measures, preowned values peaked last summer, and even amid the late-year buying rush, asking prices declined 3.6 percent between November and December, according to Sandhills Global, a business aviation classified advertising publisher. Yet market values remain far above their pre-pandemic figures: listing prices at the end of the last quarter were 17 percent higher year-over-year for business jets, and up 19 percent for turboprops, the Lincoln, Nebraska company says. But many in the market expect them to decline more.

IADA—whose members claim to handle 46 percent of all used business aircraft transactions—reported record sales volume in 2022, but that was due to the addition of several brokerages to the organization’s ranks. In a survey released with its annual sales data, members expressed “slightly more modest expectations” than a year ago for the market’s prospects over the next six months and a belief that most aircraft will begin to depreciate “at slightly higher than pre-pandemic levels,” with high-time and legacy aircraft values falling the most.

The end of 100 percent bonus depreciation for most business aircraft purchases, which began in 2017 and ended in 2022, further tempers pricing going forward. Those who wanted to take full advantage of the tax benefit (which will be phased out over five years at 20 percent annually) had to complete the transaction by year’s end—and be willing to pay the priced-in premium. 

That willingness dissipated in the last quarter, says Mesinger. “Buyers started to look at the economic landscape of the world and said, ‘A tax benefit isn’t so important that I need to overpay for an airplane.’ And they began to think prices were going to come down in 2023.”

Locking in Profits

Meanwhile, current elevated values and the prospect of locking in profits are responsible for some of the preowned inventory growth. “People are finding that the greatest way to make money with your airplane is selling it,” says Mesinger, who, in a recent opinion piece in BJT sister publication AIN, advised buyers to wait for lower prices in 2023. 

“The pendulum is beginning to swing from the seller's side to being pegged in the center of a balanced market,” he says. 

By whatever name you call it—normalization, balancing, or stabilization—the change doesn’t herald a reversal of the market’s overall direction. Among the observations offered by IADA members in their year-end survey: “Today’s market still very much favors the seller,” and, “The demand side of the market continues to do a good job absorbing the increasing amount of inventory hitting the market.” 

That means parties on both sides of today’s transactions can negotiate equitably without a ticking clock or rapidly changing values impacting their decisions. As for the swinging pendulum, “Anytime it’s pegged on one side or the other, people sit on a fence and wait it out,” Mesinger says. “The market works best when it’s in the center, and that’s where I think we are.”

His advice for sellers: “Be very keen to the quality of the offer, and the ability of the buyer to complete a transaction. Be willing to negotiate. Your airplane is not going to go back to pre-pandemic prices—it's still going to give you some [upside] benefit. But be smart. Don't be caught in a group of sellers that have no buyers. Pay attention to the market.”

A Challenge for Buyers

On the buy side, the market changes and building inventory are a reminder that even in normal times, finding a good preowned aircraft is a challenge. “There may be 24 or 34 of a category of aircraft on the market, but whatever it is, they've been operated differently, maintained differently, flown in different parts of the world, and have different equipment and pedigrees,” notes Mesinger. “So when you really pare that list down, you might have three or four decent ones to go after.”

The preceding market prognostications come with the usual caveats regarding potential disruptive factors including economic concerns, energy and commodity prices, and geopolitical crises, but particularly over the past year, an additional issue has joined the list: the environment.

“The environmental discussion certainly is a big factor in many acquisition decisions,” says Acass’s Marmor, and brokers are taking proactive steps to address the concerns. 

IADA recently partnered with 4AIR, the carbon offset and compliance provider, to create offset initiatives for members’ clients buying aircraft. Similarly, global business aircraft brokerage Jetcraft has partnered with offset compliance firm Azzera to achieve carbon-neutral operations through funding qualified environmental projects from North Carolina to Papua New Guinea. “We’re a global business and therefore our efforts must have a global impact,” president Peter Antonenko explains.