Driving a bargain


Aircraft supplies are running out

The skills needed to trade second-hand cars and business jets are very different. Getting a complicated aircraft transaction to close is very different to convincing a forecourt visitor to commit. This is not to diminish what successful car dealers do (especially as a significant number are business aircraft owners). But despite these differences, both groups are starting to face the same issue. A shortage of product.

“It is a wild ride right now,” says Kevin White, president, Jet Edge Partners. “From electric scooters to G650s and everything in between, demand is high. In some markets there are no aircraft for sale.”

Car dealerships around the world are struggling for inventory. Strong pent-up demand has outstripped supply. This is due to delays with new cars – partly caused by Covid-related supply chain issues, and fewer sales from rental companies which slashed fleets in 2020.  Car rental prices have also shot up. Cox Automotive, which helps dealers sell cars, says that there were nearly 1.1m fewer cars in inventory at US dealerships in April 2021 compared with the same month in 2020.

The numbers for aircraft are obviously a lot smaller. But the drop is just as significant. AMSTAT says that just 252 heavy jets are for the sale. This is 6.4% of the fleet. Medium jets (6.43%) and light jet (7.9%) inventories are similar. Since 2010 the number of aircraft for sale has averaged between 10% and 12% of the fleet for sale – down from a high of 17% in 2009.

‘Demand is strong in all areas’

“Demand is strong in all areas of the market – small, medium and large aircraft – and there is less choice particularly for aircraft under five years and 10 years,” says Chad Anderson, president of Jetcraft. “It is no longer a case of picking the best from the litter but taking opportunities when you find them.”

Of the 252 heavy jets for sale identified by AMSTAT, just 20 are less than five years old.

“It is getting a lot harder to find aircraft,” says Brad Harris, founder and CEO, Dallas Jet International. “The last five airplanes we sold did not even go officially on the market. We sold them straight away. We are getting calls all day from people asking if we have aircraft.”

Harris stresses that buyers should not panic but will benefit from using the most connected brokers. Jay Mesinger, president and CEO of Mesinger Jet Sales agrees. “Demand is strong, but I would still say that the market is still pretty balanced,” says Mesinger. “We are still able to find aircraft for buyers but they need to patient. It might take 30 days to find the right aircraft but they also need to be ready to act immediately if we find it on day one.”

Anderson agrees that buyers need to stay calm. “There is definitely a shortage of some models. But customers have to be patient. We are saying ‘Don’t panic, if we don’t get this one it will not be the last one on the planet.’ We know others are coming and there will be another round of aircraft.”

Mesinger is also confident that inventory will be replenished. “Last year saw a lot of demand from US buyers,” he says. “There were – and still are – real problems with moving and inspecting aircraft overseas, so the focus was very much on aircraft in the US. The best got picked out first and, to some extent, still are. But we should have the international aircraft opening up soon.*”

It is important to stress that prices are not out of control. None of the brokers are seeing sudden increases, but aircraft are typically trading at close or above asking price.

“One of the problems we have is buyers talking to their friends who bought jets during lockdowns last year,” says White. “Values have moved on from there and it is a different market.”

Anderson agrees. “Values are definitely firming up. But prices are pretty much where they were before Covid. Buyers do not need to go crazy, but they do need to pay a respectable price for aircraft now.”

Most buyers are still individuals. As corporates return demand could get even stronger.

‘Move up to bigger aircraft’

“As well as new buyers we are seeing a lot of people looking to move up to bigger aircraft. But it’s a Catch-22, as they are not looking to sell their aircraft until they have found the next one,” says White.

This can also be an opportunity for dealers. “Buyers looking for replacements are turning to trade-ins because they know they have to act quickly when they find an airplane,” says Anderson.

All of this is great news for aircraft manufacturers. Buyers who cannot find young pre-owned aircraft are increasingly looking to buy new. Manufacturers saw strong demand in the first three months of the year. This has historically been their quietest quarter but, if you exclude the launch of the G700, it was Gulfstream’s best sales quarter for two years.

Demand for new aircraft has increased during April and May. OEMs are looking at increasing production rates for some models, but it takes six to nine months to speed up the supply chain.

Buyers need to be patient and use professionals. “You should always have one advising you on both sides of the deal, but this is one of those times when a well-respected knowledgeable broker is really key,” says Harris. “You need someone who has the connections to find you the right deal and get it signed up quickly.”

The same is true for if you are looking for a car this week.

Reflecting on the market:A well-respected knowledgeable broker is really key,” says Brad Harris,

founder and CEO, Dallas Jet International.  The company is offering this 2000 Learjet 60 for sale.



Subscribe to our free newsletter

For more opinions from Corporate Jet Investor, subscribe to our One Minute Week newsletter.

Subscribe here


Leave a Reply

Your email address will not be published. Required fields are marked *