Strategies for Aircraft Buyers in a Low-inventory Market

Plunging inventory levels and rising prices continue setting records in the preowned market, and prospective buyers need to adapt and embrace, rather than resist the new normal—an environment where only 6.2 percent of the business jet fleet was for sale at the start of the third quarter, according to JetNet. That’s the lowest level since its surveys began. Furthermore, only 3 percent of jets under seven years old are on the market, research firm Jefferies says. Meanwhile, the concomitant rising valuations for preowned aircraft are “just absolutely off the scale,” Bob Zuskin, CEO of appraisal firm Jet Perspectives, said in September at the JetNet Summit, an annual powwow of C-suite bizav executives.

Fleet operators are further pressuring inventories by searching for aircraft to meet their own historically high demand for charter lift—often looking for the vintage airframes that are among the few remaining in any numbers on the market. Major fleet operator FlyExclusive has been buying early 21^st-century Citations and Gulfstreams for its quickly growing fleet (average airframe age, 15 years). Ajax Jets buys 1990s-vintage Falcons and upgrades them into branded refurbs for its fractional ownership programs. And airframers are now dipping into preowned inventory. Bombardier in September introduced a Certified Preowned program, selling jets that it manufactured years ago and now plucks from the preowned ranks and refurbishes. 

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The consensus advice for shoppers serious about buying despite these challenges: start early, gather an acquisition team, and give its members a heads up the moment you start thinking about buying. Steve Gade, aircraft sales director at Duncan Aviation, says customers may retain the firm “six months before they’re going to get serious about the purchase,” to begin watching the market for target aircraft.

Keep your wallet full, and be prepared to open it fast, says Brad Harris, founder and CEO of brokerage Dallas Jet. “I'm advising my customers totally differently than I ever have before,” he says, including having them put a hefty deposit in escrow or “be ready to have it in an hour,” and be “prepared to pay full price because five other buyers want it, and if we don’t commit now, we’re lost.”

The profound shift isn’t confined to the red-hot U.S. “The term ‘seller’s market’ is simplistic” in the nuanced markets of Asia, says Nadav Kessler, vice president of sales and business development at Hong Kong–based Asian Sky Group, but “gone are the days when buyers could stall.” He cited an acquisition client who recently took his time choosing between 10 options and lost all of them because they disappeared.

Says Bryan Comstock, founding partner of brokerage Jeteffect, “Brokers love to get their buyers a ‘deal,’ but in this market, the deal is buying any aircraft—period. 

“The strategy today is very simple,” Comstock continues. “You have to either wait or be willing to be the highest bidder among multiple bidders and have total disregard for an aircraft’s asking price. The winner today is the buyer who comes away with the aircraft, which will likely appreciate in value over the foreseeable future.”

If you’ve never used a broker to buy an airplane because you enjoy the hunt and negotiating yourself, or because you have your pilot handle the search, professionals advise that you do things differently today. “You just won't find [the airplane you want], because a good one is going to sell before it makes it to [the open] market,” Brad Harris at Dallas Jet says.

Recent searches of global markets undertaken by Duncan Aviation for client acquisition mandates revealed that the number of available aircraft was three or four times greater than the market showed, says Tim Barber, Duncan’s aircraft sales rep for Europe, the Middle East, and Africa.

Explains Todd Jackson, vice president of acquisitions at Elliott Jet, “Professional brokers are in the market every day, so we have access to inventory long before it ever hits the market.” 

Elliott is confident enough in its acquisitions capabilities to now offer a money-back guarantee to retail buyers: hire the company to purchase a jet that meets mutually agreed upon specs, make a down payment, and if you are not under contract within 120 days, Elliott will refund the deposit. 

Meanwhile, some of the fleets vying for jets in the preowned market offer them for sale or fractional ownership following refurbishment, under plans that allow the fleets continued access to the jets for their lift. (See “Rising Demand for Charter Puts Jet Owners in the Driver’s Seat.”) Shoppers might consider these aircraft, if suitable, in their searches, as well.

Sellers, meanwhile, have the opportunity to capitalize on recent value increases, especially if they have a clean, late-model jet. Your profit could fund a fractional share, jet cards, or other access option to get you through the next couple of years when perhaps a new jolt will send preowned prices back down. Brokers report making that pitch to client owners, but few take them up on it. That’s not surprising, with brokers such as Duncan sales rep Doug Roth advising them, “Don't cash out of an aircraft until you have a replacement solution identified and locked in.”

Meanwhile, the ghost of 2008 and the subsequent residual-value collapse haunts all these assessments of continued shortages, though the term “bubble” is typically mentioned only when paired with a qualifying “not there yet” declaration. But “the bubble will burst,” Jet Perspectives’ Zuskin declared at the JetNet confab. 

When? “Nobody in this room could even remotely come close” to predicting such a market turn accurately, Zuskin’s colleague Joe Zulueta, managing partner and appraiser at Aeronautical Systems, said at the same presentation. “We’re all throwing something at a dart board in the dark.”