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Pre-owned business jet marketplace: did ALTEA rightly anticipate the current state of the market? And what might be coming?

Nearly six months on from ALTEA’s insight into the pre-owned business jet marketplace, the specialist consulting firm examines their predictions as the business aviation industry plans to gather at EBACE (European Business Aviation Conference & Exhibition) in Geneva in just a few days’ time.

ALTEA partner, Jean Sémiramoth, sums up the team’s anticipation for this showcase industry event, “We can’t wait to get there and gauge the mood of the sector’s key players. It’s also a good time to look back at the trends we foresaw six months ago and consider objectively whether we were right and where we may have been wrong.

“Back in December 2022, the ALTEA team summarised a number of observations that were underpinned by industry data and the Company’s own research:

  1. We stated that “preliminary data suggest[ed] that there were roughly 15% to 20% fewer pre-owned business jet transactions in 2022 than in 2021”. In the meantime, consolidated data for December 2022 were released and showed a total of 3,560 transactions of pre-owned business jets in 2022, i.e. nearly 14% less than in 2021. That is nearly on par with what we anticipated though our projections were slightly more conservative.
  2. We expected that “more pre-owned business jets [would] come to market” and that has clearly been the case. From 1,175+ units available at the end of December 2022, the global inventory of pre-owned business jets for sale has increased to 1,325 at the end of April 2023, according to JETNET data. Not a steep hike; but rather a slow – yet steady – growth.In the absence of any material change in the underlying factors – apart from further economic shocks potentially in the banking sector – we believe this trend will continue for the time being.
  3. We stated that “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 above”. To be fair, it may be too soon to establish whether this is yet the case or not. However, recent reports indicate a small decline in worldwide business jet activity during the first four months of this year compared with the same period last year. So, it will be interesting to scrutinise business jet activity per region going forward.
  4. We anticipated that “average number of days on the market [would] rise and more sellers [would] lower their asking prices”. The average number of days on the market rose from 291 days at the end of December 2022 to 320 by the end of April 2023, according to JETNET data. As for asking prices, whilst we’re seeing more price reductions than last year, the average asking price of pre-owned business jets has continued to rise overall, but at a lower rate; a clear indication from our perspective of the market normalising and heading to balance.”

According to Sémiramoth, overall – and as anticipated, but without obviously moving to a buyer’s market – there has a mild shift whereby market conditions favour sellers a little less. In this “new normal”, more buyers are paying further attention to the condition of aircraft and matters such as damage history, complete records, pre-purchase inspection and delivery conditions.

“Sellers are advised to engage appraisal expertise before listing aircraft for sale; and financiers likewise to mitigate their risk exposure, or simply to monitor aircraft value trends so they can make informed decisions. We are working with several owners and financial institutions to deliver a realistic estimate of what their aircraft is worth in prevailing market conditions; and to help them recognise the issues and concerns prospective buyers are likely to point out which could ultimately impede the prospect of a successful resale.”

So, what might be coming in the near term? The ALTEA team suggests that one area to watch is the ultra-long-haul sector and specifically the Gulfstream family of aircraft. Gulfstream expect to begin deliveries of their new flagship product, the G700, shortly.

According to ALTEA Partner, Andrew Butler, “If the OEM is able to deliver as planned and to the numbers expected – then we could see the availability of both G550 and G650/ER increase and prices begin to fall. Whilst inventories of both types have been relatively stable over the last six months – demand remaining robust – a concerted effort to deliver G700 aircraft (given certification delays) could bring a change in this sector. We recall that the numbers of G550 aircraft coming to market escalated once G650 deliveries began in earnest (an availability increase of over 300%), so we might see a similar occurrence in the market again – this time potentially affecting the G650/ER types.

“We all know that Gulfstream owners show a lot of loyalty towards the product line – hence, when they take delivery of their new G700, many might potentially wish to offload their existing machine with the minimum of delay. Of course, leading to an inevitable drop in asking prices.”