Q3 Market Report

Contrary to what more than a few had predicted, the aircraft market held strong through Q2 and is showing very few signs of slowing down. One market analyst we spoke to pointed out that a lot of buyers are putting cash into depreciating assets as a shield against inflation, and we can’t disagree. While there has been some inventory introduced over the last few weeks, values continue to remain strong while inventories continue to stay tight.

On an conference call with Michael Almafitano, president and CEO of Embraer Executive Aviation, he noted that due to lingering supply chain issues and long lead times on new aircraft coming off the assembly line, that if you were lucky enough to take delivery of a new aircraft, you could still turn right around and sell it at a substantial profit. This obviously bodes well for sellers, especially of newer low-time aircraft, but we are also seeing more inventory of mid-time legacy aircraft come to market. As of May, 3.2% of the legacy fleet was on-market. Industry metrics place stasis at around 6%, so while it still has a ways to go, it’s a far cry from the <2% we saw at in Q4 2021 and Q1 2022.

Our tea leaves are telling us to expect more inventory to come to market over the next couple of months leading into Q4, but that record profits seen by many in the oil and other related industries may lead to another feeding frenzy on midsize jets in the latter part of Q4 as those needing to find tax shelters do so under the umbrella of an aircraft.

We are also seeing that banks and other lending institutions are eager to lend on aircraft. While some risk may be mitigated by banks offering shorter loan terms, despite the dark skies being peddled by the media, banks are in a much stronger position than they were before or during other downturns over the past two decades. Interest rates may be higher and terms may be shorter, but money is still relatively cheap compared to other past lending eras and financing is easy to find if you have a strong relationship with your regular banker or work with an institution that specializes in aircraft lending.

Still, higher interest rates may lead to an increase in forecasted inventory if those who were waiting to enter the game were doing so betting on historically cheap money. Also, there remains a possibility that among the glut of new jet owners who entered the fray in Q4 of 2021, some may find themselves with an asset they simply can’t afford and may place them back on the market at a discount for quick sales.

All in all, we fully expect prices to stay strong. While other high-end items such as second homes and yachts have seen a decline in value over the past few months, corporate aircraft, generally categorized as luxury items to be sure, are also viewed as a necessity and are much more easily justified within a portfolio so long as they are utilized correctly, especially in this season of airline chaos, and with more aircraft expected to come to market, finding an aircraft should be a much less abstruse endeavor.

If you’re kicking tires and would like us to research any models for you, please reach out to Clayton Corn at clayton@apexflightsolutions.com.