Quarterly Insights
2022-11-09
2022 Q3 State of The Market
View our comprehensive analysis of recent market trends.
Market Highlights
- The modern pre-owned jet market continues to experience a steady, rising trend in the percentage of the fleet available for sale, now at 3.4%. Pre-owned inventory is up 64% from its all-time low in February of this year but remains less than half of the historic “balanced market” benchmark of 8%
- Despite more late-model, U.S.-pedigree aircraft available for sale, transaction activity slowed during the quarter, down 31% YOY and 22% from Q2
- While the market has persevered through every macroeconomic issue (rising rates, volatile and declining equity markets, etc.) that has historically influenced pricing and transaction volume, many buyers are watching patiently from the sidelines, waiting for the proverbial other shoe to drop
Market Value Trends
- Fleetwide, pre-owned values increased by 4% in Q3, influenced most heavily by aircraft that are popular with charter operators, all of whom continue to struggle to satisfy record demand with their existing fleets
- Aircraft values are up an average of 40% YOY, with some of the most popular aircraft models increasing by as much as 60% compared with their pre-pandemic values
- Q3 had the first value declines in nearly three years, with a handful of markets down 4%–10% as supply increased, demand waned, and sellers attempted to exit at, or near, the perceived “top” of the market
Impacts of a Looming Recession
- The chart below shows the Percentage of Active Fleet for Sale for each quarter going back to Q1 2000. Note the large and consistent increase from Q4 2007 to Q1 2009 in which the market went from 10.5% of the fleet for sale to 17.5% in five quarters, a 67% increase in availability
- With 3.4% of the fleet available for sale, today’s market continues to be undersupplied, and it is therefore reasonable to conclude that a 5%–7% rise in availability, much like the market experienced in 2008, would return the market to a balanced environment and would not result in the rapid and precipitous declines in value experienced during the last market downturn
Aircraft Value Bubble?
- Today’s aircraft values are more rational, stable, and predictable than they were in the bubble years of 2007 and 2008
- As an example, the graph on the left above shows the Vref value of a 2000 model year Gulfstream V. New, this aircraft cost $40.5M, but by 2008, the aircraft was worth $44M, or 108% of its original factory-new price. Over 50% of that value was erased during the following 12 months
- For comparison, the graph on the right above shows the Vref value of a 2014 model year Gulfstream G550, which today, even with the recent appreciation, transacts for approximately 50% of its factory-new list price
- This stable rate of depreciation since new, coupled with the historically low inventory, resilient demand, strong OEM backlogs, and disciplined OEM production rates mean that values are unlikely to decline at a comparable rate or speed as they did in 2008