Q4 Market Report

Overall, the bizjet market continues a strong trend that started in the latter half of 2020. Driven by new and returning customers, flight ops continue to increase on a year-over-year basis. Aircraft listings have accelerated, but pricing remains relatively stable as overall inventory stays low. The biggest question going forward is the overall health of the global economy with inflation and supply chain issues continuing. Due to expiring tax incentives and only slightly weakening demand, the business jet market remains resilient.

Inflation continues to be the major economic story in late 2022. Persistent inflation forces central banks around the world to continue to raise interest rates, lowering stock prices and reducing wealth, however, perhaps we’re seeing the light at the end of the tunnel in this regard as signaled by the Fed’s move to ease its stance and increase interest rates by only .5% at their most recent meeting. Other events that affected the global economy included the war in Ukraine, which created energy instability in Europe, and slowing growth in China.

The macroeconomic environment remains resilient, especially in the U.S., where payrolls and the service sector continue to grow. Still, economists are now forecasting many economies will enter recession at some point in 2023 as rising interest rates increase borrowing costs with the intended effect of slow spending and investing. Those same economists, however, expect the recession to be short and shallow.

Flight operations remain a bright spot for the business aviation market in late 2022. Despite a 2.7% decline between Q2 and Q3, flight operations were almost 20% above levels in the same period pre-pandemic and 1% above year-ago levels.

The entry of new customers into the market is increasing overall demand for business jet travel. Several factors are driving the heightened demand. Those customers who entered the market during the COVID-19 pandemic continue to utilize business aviation while disruptions to commercial travel in Europe over the summer further bolstered business jet usage.

Charter and fractional operators are leading the way in the COVID-19 recovery, however, many of these operators have reached full capacity, especially in North America. At the same time, a return to normal is driving an increase in private and business travel. As such, through the first three quarters of 2022, the largest increase in flight operations was the use of wholly-owned aircraft by businesses and high-net-worth individuals.

With the addition of new users and the return of historical users following the pandemic, flight operations are expected to remain robust. Industry analysts believe the volume of flight operations should stabilize in the coming months, but at a new and higher plateau.

Throughout 2022, new and pre-owned transaction dollar volume increased 10% compared to the same period last year. Driven by an increase in value and a continued shift toward heavier aircraft, pre-owned dollar volume increased 16% from a year earlier, while new delivery dollar volume increased by almost 4%.

Current trends show unit volume leveling off in the new delivery market and declining in the pre-owned market even as dollar volume continues to increase. The decline in pre-owned transactions is a normalization in market dynamics following a very active 2021. Despite strong demand, the slow growth in new deliveries is the result of supply chain issues that are slowing production.

 After declining throughout 2020 and 2021, aircraft listings were 14% higher through Q3 2022 than a year ago—although it should be noted that listings were on par with levels seen pre-pandemic. Reports from industry observers indicate that some aircraft owners may have been motivated to sell their aircraft to take advantage of the pricing environment. In addition, a high volume of aircraft sales in 2021 involved unlisted aircraft, while aircraft sellers in 2022 are again publicly listing their aircraft for sale. Listings may also increase when new deliveries begin to pick up, with owners marketing their current aircraft after taking delivery of new aircraft.

As aircraft listings increased, inventory levels also began to gradually build. By the end of Q3, inventory stood at 4% of the total fleet, higher than the 3% seen in Q1 2022, but still well below levels experienced over the last decade. Inventory of aircraft younger than 13 years old (typically seen as more desirable) stood at 2.7% of the global fleet, an increase from the 1.8% seen at the end of Q1.

Inventory rates typically decrease in the fourth quarter when a high number of year-end transactions clears out listings that built up over the middle of the year. This year’s sustained strong aircraft listings, coupled with an increase in OEM production rates, will likely result in a gradual increase in inventory despite quarterly fluctuations.

With demand high and supply remaining at low levels (despite gradual increases), business jet bluebook values have increased throughout 2022. Average bluebook values have climbed 37% compared to a year ago, with prices appreciating even more in some cases. On a model-by-model basis, values vary, with some aircraft outperforming others in the market.

Although some price increases were evident in Q4 2021, overall values were still depressed at that time due to COVID-19 disruptions. It is against that backdrop that the increase is measured and therefore in some cases, the increase represents a reversion to long-term norms. Still, the strong market conditions described above are driving a significant increase and many aircraft bluebook values exceed pre-COVID-19 levels.

There are signs that values are beginning to stabilize. The significant increases reported in Q3 data are largely the result of trades that occurred earlier in the year when buyers were extremely motivated to acquire aircraft. While current listings are still high, the rate of increase has begun to slow as more inventory has been added to the market. It’s worth noting that business jets are depreciating assets and a steady decline in the price of an aircraft over its lifespan is normal. The consensus among industry players is that a stable pricing environment will reemerge as demand and supply come into balance.