Aircraft consultancy Altea has published its pre-owned jet market analysis for 2022 and identifies those trends that are likely to emerge during the coming year.

“Immediately after the very first lockdowns, the COVID pandemic acted as a dynamic catalyst for the entire business aviation sector. Demand and pre-owned business jet transactions were at an all time high in 2021, resulting in only 700 or so pre-owned business jets listed for sale at the end of Q1 2022, a record low in more than 20 years,” says partner Jean Sémiramoth. “Since then, the global inventory of business jets for sale has been on a constant upward trajectory with over 1,175 units available at the end of last month. This is an indicator of a market shift in 2022.”

Altea estimates there were roughly 15 to 20 per cent fewer pre-owned business jet transactions in 2022 than in 2021, likely due to a combination of low inventory levels as well as less demand; probably another indicator that the market started to shift in the second half of last year.

“There's a question mark as to what will happen with demand,” continues Sémiramoth. “There's a consensus in the industry that demand will continue to slow down due to several underlying factors. Namely volatile stock markets, rising interest rates, energy price hikes, rising commodity prices, troubling inflation and the shadow of an impending economic downturn combined with continued inflation, or even stagflation, continuing trade tensions, geopolitical unrest, plus the end of the 100 per cent bonus tax depreciation in the US, as well as the rise of environmental concerns and flight shaming.”

On the supply side, he reckons the market needs to factor in production backlogs: “With the pandemic, business jet manufacturers saw their book-to-bill ratio grow to 2:1 or even more in some cases, enabling them to sell near or at list price. While rising order backlogs have led to production increases at most business jet manufacturers, supply chain issues and labour shortages have kept them rather modest and will continue to impede a significant production ramp up. As a result, new buyers must wait 18 to 24 months to take delivery of a new aircraft; a real incentive to look for alternatives on the pre-owned market.”

In these changing market conditions, Altea expects that, on the supply side, more pre-owned business jets will come to market while on the demand side, with the potential shadow of an impending economic downturn, some of the newcomers to business aviation may cut their travel expenses and return to airlines as they restore service to pre-COVID levels or even higher. With inventories on an upward trajectory, buyers will benefit from a greater choice of comparable aircraft. Overall, buyers will feel less pressure to close purchases quickly, and the market may even see buyers deciding to wait and see what happens in case they 'over pay', or they may simply wait for a downturn and the opportunity to buy for less than the current asking price. The company thinks the average number of days on the market will rise and more sellers will lower their asking prices.

Sémiramoth also notes that buyers may be more fastidious about the condition of aircraft, damage history, complete records and delivery conditions, all things that could incur more costs for sellers. “Before listing aircraft for sale, sellers would be wise to engage an appraiser like Altea not only to get a realistic estimate of what their aircraft is worth in the prevailing market conditions, but also to be aware of the issues and concerns that prospective buyers are likely to point out, and which could ultimately impede the prospect of a successful resale,” he says. “Financiers would be wise to do likewise to mitigate their risk exposure, or simply to monitor aircraft value trends in what may be a pivotal year.”

As to whether there is a shift to a soft market, the company questions whether we should worry. “No, not yet," he answers. "After all, while it's undoubtedly narrowing, there remains a gap between supply and demand for now. So rather than a disruption, we're seeing a mild shift whereby, to the benefit of buyers, market conditions favour sellers a little less without moving to a buyer's market, at least in the short term.”

The market is not back to normal. "It's a new normal,” says partner Andrew Butler. “This shift away from a heavily biased, demand-driven market is a blessing for most brokers given the rather extreme market conditions that existed post COVID. Quality pre-owned aircraft did not come on to the open market very often, being snapped up before many discerning buyers even knew they were for sale.

“A new normal is to be expected simply because the old normal had seen our industry plunge since the worldwide financial collapse of 2007/8. Inventory levels post the financial crisis reached nearly three times the inventory level of today. While admittedly that was a short-lived experience, inventory levels remained at nearly twice today's number right up until the pandemic of early 2020. Evidence shows that the business aircraft market had an oversupply of inventory for more than 10 years.”

The move to overheating was rapid post COVID. But overall, Altea expects a cooling, which could result in a more balanced market towards the end of 2023 and beyond. The company has already seen a number of newly ordered aircraft become quietly available, some with deliveries due in Q3 and Q4 2023. It believes this is another sign that the market is cooling. One factor is certainly in the industry's favour; a difficult supply chain has resulted in the OEMs being unable to build aircraft as quickly as they might like. “That is a real advantage," says Butler. "And it will also help us to end the doldrums that we will all be happy to see the back of.”