Pre-Owned Aircraft Values Climb Again

With the summer ending, kids are back in school and the aviation industry is back to work. It appears many people took the opportunity to travel this summer, resulting in the slowest 90- day period for business aircraft transactions since the pandemic started.

A benchmark year like 2021 can skew everyone's perception of ‘normal’, so it’s important to keep things in perspective and not to compare last year to this one.

While this summer felt a little slower than usual, and though the historically-low pre-owned inventory levels are partly to blame, other factors are at play, including inflation, higher interest rates, and stock market jitters.

The early part of Q2 2022 witnessed a massive spike in fuel prices, which momentarily stalled some potential buyers from acting in the piston markets – especially the twin-piston market.

When combined with numerous federal interest rate hikes, and uncertainty about the economy, it is easy to understand why some buyers chose to sit on the sidelines, waiting for a clearer picture on the direction that things are heading. However, most buyers have continued to purchase aircraft, and we still do not see a sign that a ceiling has been hit in terms of pre-owned aircraft values.

On the one hand, we have economic uncertainty with the Federal Reserve Chair Jerome Powell warning that economic growth will suffer as the central bank works to ease the decades-high inflation. There’s also the stock market decline. And the jobs market is showing signs of weakening.

On the other hand, aircraft continue to sell at a normal rate, and the values of many models continue to climb. If you’re looking for a correlation, it may just be that bonus depreciation and loathing of commercial carriers are enough to keep demand and ask prices at their current levels.

How Long Will the Bull-run on Values Last?

One glance at the Cessna Citation market, and you would think something has gone awry with the data. I can assure you the numbers are accurate, and the appetite of buyers for business jets remains at levels not seen in many years.

In most cases, the number of available business jets sold on- and off-market equaled less than 4% of the fleet. The number of aircraft for sale remains relatively flat but, in some cases, such as the twin-engine Beechcraft King Air 350i turboprop, availability has tightened, dropping to below 1% of the fleet for sale.

The number of aircraft for sale at any given time is still below normal – or at least what we considered normal ranges before Covid. With the demand still outpacing supply, the current interest from a consumer's perspective remains strong, and backlogs continue to increase.

Interest in General Aviation aircraft seems to be here to stay for a while, and that should allow values to remain stable while other asset classes continue to look for a footing.

The main reason is that the only competition General Aviation has is commercial aviation, and that is hardly a fair fight. The airlines have massive overhead and labor shortages, offering an underwhelming experience at best. Even for those flying first class, the entire airport experience is less than exhilarating.

It seems that no matter what happens with the price of other assets, private aircraft have demonstrated just how valuable they are, especially if you are a business traveler attempting to complete a round trip the same day.

While it seems unlikely the airlines will be able to overcome their current shortcomings any time soon, I do expect several to attempt to lure the jetsetters back with white glove offerings, private cabins, and other services passengers should already be receiving, and didn’t have to pay for thirty years ago.

Each aircraft class faces its own set of pros and cons, and it is worth mentioning that ready-to-fly, thoroughly modernized aircraft are still clearly leading the charge for acquisitions across all classes.

For piston aircraft, engines coming up on TBO are facing obstacles never seen before, from locating a shop with room to service your engine, to finding cylinders for sale.

One thing you can count on is that these obstacles are here to stay for the foreseeable future, so I’m expecting a fair number of aircraft to come out of service as engine overhauls and new engines continue to increase in price, forcing owners to make the difficult decision to scrap their airframes.

The attrition rate may be severe enough that buyers will face even more difficulty locating an aircraft for sale. Still, there may be hope as GAMA recently reported new delivery numbers were up 10% year-to-date, and it will be interesting to see how the aircraft OEMs continue to ramp up production in the wake of Covid.

For business aircraft, the issues are two-fold: Finding one legitimately for sale, and then getting it through pre-buy before another buyer swoops in, or, worse, the seller changes their mind.

Nevertheless, through all the ups and downs over the past 24 months, aviation has done remarkably well despite all the flack owners have taken. Truly, there is no substitute for a personal aircraft, whether a high-wing Cessna or a cutting-edge Ultra-Long-Range business jet. Being able to go where you want, when you want, and without risk to you or your passengers’ safety won’t be falling off anyone’s checklists any time soon.

Without further ado, here are the latest market trends from VREF:

Market Trend Report

Heading into Q3 2022, the market supply is below typical for single-engine pistons, single- engine turboprops, twin turboprops, and business jets.

There has been an uptick in available aircraft for sale in all cabin classes, and model-to-model inventory levels range from 1-6%.

Average days on the market prior to a sale remain unchanged, and while there are fewer transactions compared to earlier in the year, we’re still on par for a typical year if we remove the abnormal benchmark of 2021 from the equation.

For the most part, piston aircraft and older/vintage business jet values remain unchanged. VREF continues to carefully monitor the transactions, and the data coming in every day from our research department.

Business Jet Market Highlights

Demand continues to outpace supply, although we may finally be hitting the apex for asking prices. For the first time in more than a year, sellers are being forced to lower asking prices to find a buyer.

• The interest in Cessna products continues to soar, with the Citation Bravo up 60% since last quarter as the model continues to draw buyers who lack the budget for a Citation CJ3.
• The Citation Encore and Encore + are up 25%.
• The Latitude is up on average 10% since last quarter.
• The Citation Sovereign and Sovereign+ are up another 4% since last quarter.
• Citation V is up 2% since last quarter.
• The Citation X and X+ remain at the top of many buyers’ lists, which has witnessed another spike in value, up 20% since last quarter.
• Citation Excel values are up another 2% since last quarter.
• The Citation XLS remains one of the most popular models, and values are up 16% on average from last quarter.

Turboprop Market Highlights

• The Piper Meridian remains one of the more popular choices for the owner/operator segment, attracting buyers with more sensitive operating budgets who are unable (or unwilling) to pay for a jet acquisition.
• The Pilatus PC-12 market is also tight, and the backlog for a new aircraft is roughly 18-24 months.
• The King Air 350i inventory remains extremely tight, and values may see another spike before year-end.

Single- and Twin- Engine Piston Market Highlights

• The Cessna 182 market is up 5%, and has room to go higher as the fleet continues to shrink.
• Likewise, the Cessna 185 market is up another 2% as taildraggers and backcountry aircraft continue to entice more buyers.
• The Beech Baron B55 has risen 7% as buyers recognized the twin-piston market was one of the few places to go looking for a deal. Now the twin market is also suffering from a lack of turnkey, modernized aircraft availability. As more buyers are priced out of other models, the twin market should further benefit, assuming fuel doesn't spike again.

• Still, those with expensive turbocharged engines to maintain will continue to see dwindling interest as overhaul expenses have doubled in cost and buyers are left with underfunded engine maintenance budgets. Consequently, for example, the Beech Duke market is down 6% as sellers have reduced asking prices to lure buyers.
• The Cessna 177 Cardinal was up 15% from a quarter ago as buyers are looking for alternatives to the 172 and Piper Cherokee, which had also spiked in value.
• The Cirrus SR22 could not maintain another quarter of value increases, and older models are down slightly. It’s not all bad, though. Newer model years still under factory warranty rose another 5-7% as premiums are being paid as opposed to joining the line and waiting for a new aircraft delivery slot.
• The Cirrus SR20 spiked, and demand quickly outpaced supply resulting in values going up 5-12%.
• The Cirrus market is critical to track as it’s not only the number one selling performance single, but also a crucial driver that other manufacturers look at to funnel Cirrus pilots into larger aircraft. Many owners trade up regularly, whether it be to a single-engine turboprop, the Vision Jet, or another, newer Cirrus.

Helicopter Market Highlights

The helicopter market is also relatively unchanged, with the pre-owned inventory at its lowest levels in years for the single, light, and medium classes.

The heavy twin market remains unchanged, and the Values for single and light aircraft are flat. Models like the Airbus H125, H130, Bell 407, and Leonardo AW119 variants remain flat from last quarter.

Interest continues to climb in oil, timber, EMS, and Search and Rescue machines, which has resulted in several orders and should allow for growth in the helicopter market for some time.

More information from https://vref.com

Read the previous article Aircraft Values Climb Again, Despite Economic Jitters by Jason Zilberbrand

Jason Zilberbrand is the President and Chief Technical Officer of VREF.

He is an Accredited Senior Aircraft Appraiser with the American Society of Appraisers (ASA), and an Accredited Member of the Appraisers National Association (ANA), and he is also an Accredited Member of the International Society of Appraisers (ISA).

Jason is also an expert witness, broker, inventorying dealer, acquisition agent, aircraft owner, aircraft operator, contract negotiator, consultant, teacher, conference speaker, and author.