FXSolutions Private Aircraft Market Analysis – Q1 Recap/Q2 Outlook
With the first quarter behind us and the second well underway, I am encouraged by the activity we are seeing from both aircraft buyers and sellers. In the meantime, we can take a closer look at some of the signs that have emerged thus far and draw some conclusions about where things stand presently.
The most noticeable characteristic so far in 2024 is the continual return to a more balanced market. In 2022, we faced a historically low inventory of only 2.6% of the overall installed fleet. This has improved markedly and currently sits at just over 6%, showing signs of a slow but continued climb back towards the pre-pandemic norms of 10-12%. This bodes well as it continues to be paired with sustained high demand from both buyers and sellers.
We are continuing to see progress away from the market-distorting frenzy that occurred coming out of the pandemic when buyers were happy to find an available aircraft with little concern for price or pedigree. As the urgency has weakened and inventory has increased, there’s been a shift toward more thoughtful and considered purchasing. Buyers who might have overlooked impending inspections, dated interiors and obsolete avionics are now taking a more discriminating approach to their aircraft purchases.
The increase in inventory levels can be partially attributed to the return of the corporate buyer. During the pandemic, most corporate flight departments suspended fleet enhancements, while new, first-time buyers bought up inventory without bringing an aircraft to trade. This resulted in a disproportionate number of aircraft being taken out of the pre-owned market, with few being added.
With the return of the flight department buyers, we are now seeing more high-pedigree, late-model aircraft becoming available. Bolstered in part by Gulfstream’s clearance to begin delivery of more than 50 of the recently FAA-certified Gulfstream G700s, many factory-new aircraft are finally being delivered. Critically, they are being delivered to customers, many of them corporate flight departments, who are replacing very well-maintained aircraft – just the sort of pre-owned aircraft that will bring engaged buyers off the sideline that may have been holding off until such levels of quality reemerged.
This continues to contribute to a healthy rebalance, bringing us closer to the kind of inventory that sparks buyer engagement. The quality of this new inventory will put some downward pricing pressure on existing inventory, creating favorable conditions for buyers.
It’s important to remember that while we’re seeing a return to a more rational market, demand continues to be robust. There are more buyers in the current market than there ever have been, and due to lingering supply chain issues and workforce shortages, manufacturing rates can’t accommodate the demand we’re seeing in the short term. For a buyer that needs a quality aircraft today and cannot wait out an OEM delivery backlog of many months or years in some instances, the pre-owned market is advantageously positioned.
With a reality that perhaps doesn’t reflect past expectations, some first-time whole aircraft owners are exploring ways to continue enjoying the benefits of private aviation with a more easily predictable and consistent cost structure, while others are looking to graduate to a larger aircraft to support their increasing missions. Given our position within a family of companies that includes fractional provider Flexjet, jet card provider Sentient Jet and on-demand charter provider FXAIR, we are uniquely positioned for those looking to transition into a new whole aircraft or right-sizing into a program offering. Among the major factors explained here, some ancillary factors are also emerging this year that could end up affecting the current market:
- Election years have historically impacted the market to varying degrees. Traditionally, we have seen some stagnation with regard to large capital expenditures in general, and private aviation has not been an exception. While historical trends have been upended in recent years, this is nevertheless something we’ll be monitoring closely.
- Interest rates: We typically see serious buyers make purchasing decisions with little regard to the current rates, understanding that there either is or isn’t a need for a significant deployment of their capital on an aircraft. Nevertheless, any easing of rates may cause additional buyers to become active market participants.
- Bonus depreciation: We will monitor trends of purported IRS bullishness towards a more proactive approach to the auditing of private aircraft owners and organizations who make use of bonus depreciation.
Overall, the market is in a healthy and rational state. Incoming inventory is of a higher quality than ever before with strong pedigrees. The wait time for prepurchase inspections has dropped from months to weeks, and perhaps most importantly, vastly overinflated values are returning to normal, appropriate levels. As always, please do not hesitate to reach out if FXSolutions can be of any assistance, or if you simply want to gain a better feel for the aircraft transaction landscape. Here’s to a successful remainder of your Q2!
-Matthew Doyle
Managing Partner, FXSolutions
