A softening market is nothing to be afraid of, unless…
Playing devil’s advocate is rarely popular, often darkening an otherwise optimistic viewpoint. Pre-owned aircraft sales in North America are a case in point. Is the increasing supply of pre-owned aircraft a good thing or does it signal falling demand to come?
Everyone agrees the supply of pre-owned aircraft is outgrowing demand for the first time since the pandemic. Proof came recently in the shape of the latest report from International Aircraft Dealers Association (IADA). So, the market is softening, but this was long overdue and is nothing to be afraid of, according to some industry experts consulted by Corporate Jet Investor (CJI). This would be comforting if everyone agreed. But some business aviation insiders are more cautious about a future downturn.
Don Dwyer, managing partner, Guardian Jet remains optimistic. “Demand is still very strong in the charter and fractional business, as well as in our first-time whole aircraft buyer segment,” he tells CJI. He thinks this could be a short-term blip. “The fact that there are fewer transactions in the short term reflects some uneasiness in the economy, which is natural, but we haven’t seen prices falling,” he says. Covid may have been the accelerator of new entrants in the past two years, but “these buyers also came on from the power of a 10-plus year bull run” and, as a result, “softening is inevitable.” He adds: “I can’t predict what happens in the global economy, but from an aircraft point of view, I think we’re fine. Better than fine.”
David Monacell, executive vice president, CFS Jets is also hopeful. He says that while factors such as the war in Ukraine and inflationary pressures are creating some market challenges, they are outweighed by the unprecedented numbers of new entrants interested in entering the market. “The OEMs have current manufacturing production rates that aren’t meeting their demand. Also, ultra-thin pre-owned inventory levels are being further supported by fractional or jet card operations with robust charter activity,” he says.
Plus, a softening market has a significant upside, according to Paul Kirby, executive vice president, QS Partners and IADA chairman. It is likely to bring welcome relief and a softening is long overdue: “Any softening that has occurred since March has simply removed some of the froth, irrational behaviour and hysteria from the markets.”
It could also encourage new entrants who have previously been hesitant. “For the first time in three quarters, many buyers who have been waiting for some semblance of normalcy to return to the market now have [aircraft] options from which to choose,” he says. “The recent increase in supply has also provided many buyers with the confidence necessary to enter the market and execute long-planned transactions.”
Jay Mesinger, CEO and president, Mesinger Jet Sales highlights reasons for doubt. He welcomes a “more balanced market” that would allow sellers more due diligence but isn’t sure the industry will be able to predict a downturn until it’s too late. “Although we are still seeing demand, with such a short supply, we do not really know if the demand is as great as it has been,” he says. “My sense is there are fewer buyers today and we just may not, as an industry, be able to notice that yet.”
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