"Make no mistake, the market for business aircraft is under stress and this crisis is not helping"
JETNET LLC, purveyor of aircraft fleet and market intelligence, has released its review of the market for business aircraft in the first half of 2020 and amidst the global COVID-19 crisis. To add context to these findings, Paul Cardarelli, JETNET Vice President of Sales, offered these comments.
“Make no mistake, the market for business aircraft is under stress and this crisis is not helping. But many of the underlying reasons for this stress were in place prior to the crisis. So far this year brokers, dealers and sellers of business aircraft are showing restraint to not over-react to the negative stimuli that now surround the market. They are taking a short-term position on the crisis – a temporary anomaly that can be waited out. As a result of this discipline many key market metrics have yet to turn exceedingly negative.
Inventory – There are at the time of this writing 2264 business jets offered for sale, 10.07% of the
in-service fleet. This is technically a buyer’s market but just barely so and has held steady between 10.1% to 10.3% since April. While there has been an increase of aircraft coming to market in 2020 it has not been so much as to move market into gross over supply and it is nowhere near the recessionary days of ten years ago when the inventory of business jets for sale swelled to nearly 18%.
Pricing – Although softer than in 2019, there is no wholesale degradation of prices for aircraft listed for sale on JETNET in 2020.
Retail Sales – Down 19% (from 1169 to 947) for pre-owned business jets sold and leased in the first six months January to June YoY 2019 vs 2020. Certainly, that is substantial. But brokers and dealers report that phones have been ringing with calls from buyers. Therefore, the reduction in sales seems less about declining demand and more about sellers not yet capitulating to distressed market offers.
What has changed this year is the composition of what’s selling–a bit older, a bit larger, and less expensive than last year. For January to June of 2019 the composite of pre-owned business jets sold was a 2004 model priced at $4.4M USD with the Light/Super Light jet category leading the market with nearly a 30% share of all pre-owned business jets sold. In 2020 the composite is two years older, a 2002 model priced at $3.7M with Mid/Super Mid-size jets as market leader at 27.25% of all jet sales, up 2% YoY. The Light/Super Light and Large/Long categories are off in market share this year by 2.7% and ½% respectively.
Bear in mind that the trajectory of the market today was in place going back to last fall, well before COVID. 2019 was itself a year in decline. Compared to 2018, pre-owned sales were off last year by 12% and inventory trended upward ultimately up by 6% YoY. Demand softened because so much post-recession pent-up demand had been satiated in 2017-2018. We launched into 2020 already facing the headwinds of a market in cool down. To that was added two former market depressants becoming relevant again: 1) BREXIT was ratified in January. 2) Another contentious US presidential election set for November. In this sense 2020 looks much like 2016 when inventory for sale and retail sales both trended unfavorably.”