Pre-Owned Aircraft Sales: 2022 Market Recap

Usually, Year-End is a frantic time with a flurry of aircraft transactions being squeezed into a short time frame, all aiming for completion by the time the clocks chime in a New Year. For Business Aviation, Q4 is always the busiest time of year. But 2022 is anything but a typical year. As it turns out, Q4 2022 was relatively quiet.

Whether we talk about the weather, politics, the economy, interest rates, or alternative investments like crypto, the year that just ended was anything but ‘normal’. Coming off a benchmark year like 2021 makes it even more difficult to quantify, as it's only natural to believe the markets have more room to grow, coupled with the desire to outdo ourselves.

In the first half (H1) of 2022 it appeared as if that could be possible. Transactions continued to close and inventory dropped. Demand for aircraft was at an all-time high. The appetite and demand were beyond satisfying. While other high-end markets for cars, watches, and more began to tail off, somehow, even with the aggressive interest rate hikes and the highest inflation in over forty years, aviation remained clear of a downturn. The reason for this is multifaceted:

• First, unlike previous downturns, financing an aircraft post-2008 required significant skin in the game. Downpayments of 25% or more were – and still are – typical, assuming your jet is not older than 15 years of age. This will tend to help in the event of a significant downturn, as defaults and repossessions may be avoided.
• Second, the number of people with substantial disposable income is at the highest level in the history of the United States, with more millionaires than assets to go around. This is evidenced by the utilization of aircraft and the charter markets. The insatiable appetite for private air travel doesn't seem to be impacted by interest rates or global economic concerns.
• Third (and possibly most crucially), scheduled airlines are the best competitors for private aircraft. Flying with the airlines is anything but fun, and certainly not something anyone I know looks forward to anymore. Whether it’s due to civil unrest on flights, lost baggage, rerouted connections, delayed or canceled flights, or the impossibility of flying a round trip on the same day, the business traveler has no choice but to use a private aircraft when time is of the essence.

Admittedly, not everyone has the budget for a turbine aircraft, but now more than ever the thought of giving up your private plane even as the economic outlook starts to look dim seems like the worst possible move.

Most aircraft owners have reaped the rewards of the past few years, watching their aircraft increase in value while paying historically low-interest rates (assuming they borrowed) with payments being half of what they would be today for an equivalent replacement.

In fact, it is because we have seen a slowdown that trading-in or trading up yields little to no upside unless you’re paying cash or writing off the transaction.

On the other hand, flipping aircraft (or watches, houses, cars, or whiskey for that matter) requires capital, knowledge, and patience. There’s no free lunch. Ask any inventory aircraft dealer how much it really costs to buy and hold aircraft for resale, and you’ll quickly learn that those who have the knack and have been around the longest are not just lucky – there’s a lot of skill involved.

Still, things can go only up for only so long, and it appears that we’ve finally peaked on aircraft values on the piston side of the market (where buyers tend to rely more heavily on financing and are certainly more sensitive to interest rate hikes).

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