Inventories of used jets and turboprops have risen dramatically. As depicted in the graph below (Jets/Turboprops for Sale 2019 v. 2023), the number of these aircraft for sale has increased by 25 percent since the beginning of 2023. The subsequent graph (Percentage of Jets/Turboprops for Sale) shows an increase from 4.2 percent of the in-service fleet to more than 5.1 percent now for sale.
Significant increases in inventories in such a short period could potentially be cause for alarm and signify a downturn or a buyer’s market. But before we conclude that the market has collapsed, let’s check back to pre-Covid 2019 as a point of comparison. The graphs also show that in 2019, the market had more than 3,000 jets and turboprops for sale, representing over 8 percent of the in-service fleet. Today, we have only a little more than 2,000 jets and turboprops for sale.
The 2019 inventory was on average 78 percent higher than the inventory in 2023. And despite having so much more inventory, 2019 managed only 14 percent more transactions than the aircraft market has completed in 2023. (See Retail Transactions of Jets/Turboprops graph below.)
Another important factor is aircraft values. Research conducted on one select aircraft type in each category showed that pricing has increased and remained high in each category. (See Select Jet/Turboprop Values by Category graph.) Aircraft are typically depreciating assets, but this research found that on average, the value of these select aircraft types in each category increased 22 percent over four years. The graph, however, also shows that pricing has leveled off and started to decline again.
The Market Is Sending Mixed Messages
Is it a buyer's or a seller's market? The answer is somewhere in between. Inventory has been increasing significantly. Some aircraft types have seen an increase of more than 50 percent in the number of aircraft for sale since January. The time required to sell has also increased significantly. However, the number of transactions in 2023 is down by only 14 percent when compared with the number in 2019. Additionally, the transactions in 2023 were completed with significantly less inventory to choose from.
The aircraft market is sending mixed messages, with inventories rising but remaining well below the average levels of years past. Prices remain higher than in 2019 but that situation is being challenged with every new deal. The time on the market for aircraft is increasing, and sellers are becoming concerned that the global economy will go into recession.
The Domestic and Global Economy
The global economy is indeed showing signs of a potential pullback or even a recession. The slowdown in the Chinese economy, the war in Ukraine, skyrocketing inflation, and rising interest rates are all causes for concern. Bank failures in the U.S. and the downgrading of the ratings on many companies and banks have made investors uneasy about what may lurk around the next corner.
Despite the low overall inventory and higher prices than in the past, many more economic indicators point to this quickly becoming or already having become a buyer’s market. If an aircraft owner is considering selling, now may be the right time. Buyers may find some bargains in the marketplace as prices continue to decline.
Kevin O’Leary, Ph.D., is the CEO and founder of Jet Advisors, an aircraft acquisition, brokerage, consulting, fleet planning, and insurance firm.
The opinions expressed in this column are those of the author and are not necessarily endorsed by AIN Media Group.