Pre-Owned Market Hotter Than New Sales (One Minute EBACE 2017 – Day 2)
The only things in Geneva that are not overpriced are the views.
This year with the sun shining, the mountains are providing a stunning backdrop to the static display at EBACE. Whilst there have been fewer new aircraft sales than some past shows – the most high profile one being Air Hamburg’s order for three Embraer Legacy 650Es – a lot of the focus is on pre-owned aircraft. And there are some fantastic deals on offer.
Brokers – particularly US ones – had a strong start to the year. “The big question is it a bump or is it a trend,” says Johnny Foster, CEO, OGARAJETS. “The first quarter was phenomenal but things have maybe quietened down in the last few weeks but it typically gets quieter in the summer. We are all waiting to see if demand continues.”
But despite lots of transactions and occasional rises, prices are not rising for long periods. Different models are seeing short upticks and then falling as demand weakens. “Each market is acting independently and all of them are very value driven. Once a clear point is reached buyers move in rapidly and take all the better aircraft,” says Brian Proctor, CEO, Mente Group. “It is like when an animal falls into a piranha invested river. There is a frenzy at first but eventually the carcass sinks to the bottom.”
Maintenance and interiors are key drivers of what sells (especially as values fall making maintenance exposure of even greater importance) and what does not. There is a lot more focus on the 2020 NextGen mandate where aircraft need to be upgraded to fly in the US. It may not have yet hit transactions yet but people are talking about it a lot more.
It is not just brokers who are benefiting from the increase in transactions. Many buyers are investing in interiors and upgrades after buying. Aviation Partners Boeing is seeing owners add winglets after acquiring aircraft.
“Lower price points are bringing in new owners which is great for the industry,” says Neil Book, President and CEO of JSSI. “It is also great for us as people typically join programme sales after a major maintenance event or a purchase.”
The availability of so many pre-owned aircraft is making selling new ones harder, so everyone is keen that the bump keeps going.
This originally appeared as the editorial in our Corporate Jet Investor One Minute Week newsletter. To find out more, and sign up for free, please click here.