CORPORATE JET INSIDER
Acquiring or Selling a Private Jet? Get to Know the Business Jet Market
Global economic growth in 2017 was at its strongest since 2011. As consumers continue to grow more confident and more have expendable income, the number of commercial airline passengers is also likely to increase. In fact, the International Air Transport Association (IATA) expects a nearly 6% rise in passenger numbers to 4.3 billion in 2018. This will, in turn, drive demand for private jets, and those in the private aviation industry will need about 21,000 jets to keep up. This is good news for business and private aviation growth, but what do these numbers mean for individuals or company leaders looking to purchase or sell jets?
More people flying private
The first thing to note is that more individuals are choosing to fly private. Argus International TRAQPak data showed business aircraft activity in the U.S. and Canada continuing to increase year over year in March 2018. Activity for large-cabin jets was up 4.7%, and midsize jets also saw a 4.4% year-over-year increase. In addition, charter activity also increased by 7.7%. These increases are due, in part, to a significant surge in first-time private flyers, including more first-time jet owners. Another factor that’s spurred this increase is charter companies offering more flexible pricing and scheduling models, leading industry analysts to predict a future rise in the number of individuals who want to fly privately but can’t afford to purchase.
Pre-owned versus new markets — and their caveats
This upswing in private and business aviation is good news for manufacturers — and those in the pre-owned market. With aircraft demand up overall, more jet buyers are looking at pre-owned models rather than waiting for new aircraft deliveries that are still years away. The 100% expensing option for used aircraft under the federal tax overhaul will likely give the market a boost as well.
However, as pre-owned aircraft sales climb, jet brokers’ inventories are also falling off and were down to 9.4% of the business jet fleet in March 2018. Although the market swung to favor sellers in February of the same year, market prices have now stabilized, giving buyers reason to purchase. With such limited inventories and a stable market, those who are holding off in hopes of further price reductions may want to rethink their plans — or end up risking a very long wait.
Of course, those who are ready to buy but not finding what they’re looking for can search off market. Off-market aircraft includes inventory that owners are not actively listing or advertising but may be willing to sell for the right price. However, this “off-market” definition could apply to 99% of the pre-owned business jet fleet. Although buyers may be pleased about the increase in the pool of aircraft potentially available for sale, off-market transactions very often lack transparency. Without listings, it’s difficult for potential buyers to know their options or compare aircraft features and prices. Therefore, in off-market deals, it’s important to involve a broker who can invest time investigating the aircraft to avoid problems during or, worse, after the transaction.
ADS-B Out complianceADS-B Out compliance deadline. With approximately 46% of the pre-owned business jets available on the market being more than 20 years old and the deadline fast approaching, installing ADS-B equipment can be time- and cost-prohibitive for many would-be buyers. This will likely leave many owners of aging aircraft grounded unless they purchase already-upgraded jets or buy new. And for those still planning to buy used, ADS-B homework will be necessary to acquire an aircraft that has the mandated upgrades to fly after 2020.
Today’s private and business jet market is a tricky landscape with so many factors affecting both new and pre-owned jets. Those wanting to purchase or sell jets should take heed and seek help from a professional who understands and knows how to navigate the market — and is willing to go the extra mile to get the best deal.