Photo: Barry Ambrose

Jaws Drop as Prices Rise

New-to-bizav buyers have upended the market.

The preowned aircraft market’s current inventory shortage hasn’t simply slowed the cratering of business jet values that began with the Great Recession. Instead—following the laws of supply and demand that the market has often flouted—prices of preowned aircraft have actually risen. 

Average sale prices through July were perhaps 1 percent above the previous year’s figures, according to Aircraft Post founder and president Dennis Rousseau, but since then prices have risen about 7 percent on average. They’re up as much as 20 to 30 percent from the third to fourth quarter, according to some reports, though preemptive off-market sales, bidding wars, and ever-new benchmarks make the increases difficult to quantify. 

Market watchers see no end to the increased demand, diminished supply, or resulting upending of protocols, even after the fourth quarter and its traditional rush to conclude deals by year’s end. If you’re struggling to make sense of the situation, you have lots of company. 

A Pivotal Period for Preowned Aircraft Sales

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A Pivotal Period for Preowned Aircraft Sales

Here comes what could be the market’s most critical fourth quarter ever.

A few stable points might allow you to maintain a sense of balance, however.

First, despite claims that the market has already been picked clean, retail transactions through October this year totaled 2,340, whereas last year through November they reached 1,808—a 29 percent bump in 2021 with a month to go, says Mesinger Jet Sales CEO Jay Mesinger. (The 2020 figure was itself 7.7 percent ahead of 2019’s transaction count.)

Notably, unlike during the 2008 economic meltdown, preowned values didn’t tank during the pandemic, and there was no rush to the exits. The virus clearly rattled nerves, however, with asking prices lowered across all makes, models, and categories in the weeks surrounding the World Health Organization’s 2020 pandemic declaration, as seen in the weekly market changes tracked by Aircraft Post: a Cessna Citation X+ dropped from $10.25 million to $8.99 million, for example, while a 2005 Bombardier Challenger 604 went from $5.8 million to $5.65 million and a Gulfstream 650 declined from $39.95 million to $37.5 million. 

Making apples-to-apples comparisons with the values of aircraft on the market today is difficult, but an older CL604 came to market this November with an asking price of $6.5 million; and the six G650s available today—representing just 1 percent of the in-service fleet—are priced between $43.9 million and $54.5 million. Additionally, values of aircraft already for sale are being revised upward, according to Aircraft Post. The price of a Dassault Falcon 2000 rose from $3.3 million to $3.99 million, a CJ2 went from $2.3 million to 2.59 million, and an Embraer Phenom 100 jumped from $2.69 million to $2.89 million. Many new listings come to market at “make offer,” providing sellers with maximum flexibility on the bidding war battlefield.

A Growing Market

Like all segments of the access business—including charter, jet cards, club memberships, fractional ownership, and new jet sales—prices in the preowned market are today being driven by consumers with no prior exposure to private aviation who have come to embrace it as an ideal travel and lifestyle solution. While the industry has been serving a devoted but small congregation of some 100,000 consumers, a McKinsey analysis in 2020 estimated that 1.5 million U.S. households are sufficiently affluent to afford business aviation, and the virus and its variants have provided compelling reasons for making the switch from airline travel.

One can almost hear the sound of dropping jaws and scratching heads among industry professionals as they observe the market changes and the willingness of these new entrants to open their checkbooks. But consider what has happened to this pool of prospects since the pandemic began.

The World Wealth Report 2021 from Paris-based global consultancy Capgemini found that during the past year, the number of individuals with $30 million-plus in investable assets increased almost 9.6 percent and their average wealth rose 9.1 percent. These 225,000-plus ultra-high-net-worth consumers control some $27 trillion worldwide, or an average of about $120 million each. Do a little back-of-the envelope calculating and you’ll see that these individuals likely earned more on their investments during the lockdown than the cost of a preowned jet.

The preowned market doesn’t know much about the behavior of this group, their attitudes about spending on business aviation, the value they put on it, or what may make them different from or similar to long-time users besides their financial wherewithal. Forecasting the long-term future of the preowned market may be difficult in that information’s absence. 

This is in stark contrast to the in-depth data regarding traditional buyers—for example, the information JetNet IQ gleans from its ongoing surveys of flight departments, fleet operators, owners, and others about fleet-replenishment strategies and timetables. When it comes to new market entrants, “This is not an area that we have any data on,” says business aviation consultant and JetNet IQ partner Rolland Vincent. 

Perhaps more striking is the behavior of some aggressive buyers and sellers in this market. In November, at CJI Miami 2021, a panel of financiers from the world’s leading business aircraft lending institutions— including Global Jet Capital, PNC Aviation Finance, and Stonebriar Commercial Finance—said they’re concerned about deals being pushed through without prepurchase inspections, logbook reviews, or other formerly essential due-diligence requirements. The reason: customers are demanding to get deals done.

Meanwhile, if you are ponying up your money in today’s frenzied market, you should understand that some of what you’re spending is simply “the cost of the opportunity,” Mesinger says. “That’s not the value of the asset—opportunity costs do not come back when the asset is sold.”