A salesman’s eternal conflict: “I have lots of inventory, but no one wants to buy,” contrasted with the other side of the coin: “My phone keeps ringing; but I have no inventory to sell.” The latter is certainly the case today with pre-owned business jets—if not all aircraft from top to bottom of the food chain.
The generally accepted status quo for the used business jet market is that 10 percent of the per-model fleet being available for sale is “normal.” A significant number higher or lower represents an unbalance in The Force. Even that 10 percent represents lots of wiggle room. It’s accepted, for example, that a number of “for sale” jets might be priced well above market value, meaning that the board of directors is saying, “Sell the airplane,” while the management team (knowing that the bottom-line value of the company jet is far greater than what they could get for it) is saying, “We have it on the market, but damn! No one wants to pay our price!”
Currently, pre-owned inventory sits at between 3 and 4 percent, according to analyses by the General Aviation Manufacturers Association, Barclay’s Bank and others. Numbers that far out of skew raise concern—unless, of course, you have a hot jet for sale.
Ed Bolen, president and CEO of the National Business Aviation Association, said during the recent webinar, Business Aviation’s Elephant in the Room – Buying Aircraft, “We all know the new entrants coming into business aviation are interested in the efficiency, flexibility and safety that this mode of transportation has to offer. However, we must ask ourselves, do they have the right aircraft at the right price and for the right mission? At a time when inventories are at an all-time low, I’d say the importance of these questions is at an all-time high.”
Bolen was addressing the issue of cash-rich companies and high-net-worth individuals with capital burning holes in their pockets, driven by the COVID-led debacle of airline scheduling woes, discovering the advantages of private aviation, and being tempted to jump blindly into the deep end of the pool. Also, with a seismic shift to working remotely, entrepreneurs and other business executives are reevaluating their long-term residence priorities—and looking to private aviation as a means to keep them connected.
Just as with real estate pricing, this has created volatility in pricing that can be good for sellers—but only if they have someplace else to go to meet their needs. The cost of replacing what you have is also on the precipitous rise.
The NBAA webinar, sponsored by Mesinger Jet Sales, also noted supply chain issues with maintenance repair and overhaul (MRO) services. Todd Duncan, chairman of business jet service provider Duncan Aviation, said during the webinar, “These issues do not just affect parts; it can manifest in things like software upgrades, because we don’t have enough people to conduct the modification.” And for those who think “buying factory-new” is a simple—if expensive—way around the speed bump, Duncan said, “This is not just an MRO issue; manufacturers are also facing certain issues in meeting delivery times.”
Mr Bolen is being very diplomatic in saying “COVID – led debacle of airline scheduling woes”. People with money burning holes in their pockets are tired of the airline and TSA hassles and are getting into buying their own jet. The aircraft management company I fly for just had a record amount of business, revenue, and flight hours last year, and business this year so far looks just as busy. We have been adding planes and personnel even though COVID has put a large dent in the pt121 airline business. And yes, getting replacement parts for certain planes is beginning to be a real challenge. I think the CEO of Southwest is starting to realize this with his recent comments on the mask mandate on airliners.
Just to be clear, those words are not a direct quote from Mr. Bolen.
To add to what you said, the airline experience has always been one of business aviation’s best marketing tools. As you observed, the current challenges they face have amplified that tool’s effectiveness.