2021 has turned into a rarity in the private aviation world – a strong Seller’s Market. There are more buyers than aircraft for sale, and a seller holds more negotiating power. The last time conditions were this pronounced was 2007. Prior to COVID-19, the market was fairly evenly balanced, but the speed at which our current market has turned and supply of aircraft for sale decreased has shocked everyone in the industry.
There are a lot of inputs as to why this has occurred. Reduced airline service in 2020 made private travel often the only method of getting from A to B in a timely manner or at all. A fear of COVID-19 played a factor in the initial uptick in sales. Thanks to record amounts of government stimulus, there is a lot of money in the system right now and low-interest debt is readily available.
SELLERS
The market is the best it has been in 14 years for sellers. Look at the market data closely with your broker to see how you can use this time to your advantage. You can probably be a little more aggressive in your asking price. If you do not need to sell in a certain time frame, we advise to put your asking price on the upper end of what the market will allow. If you get it wrong, you can always decrease your price. We are seeing that buyers are paying for quality aircraft right now. But aircraft that have very high time, need major refurbishment or major maintenance, or have damage history are languishing on the market. While the market is as busy as it has ever been, buyers are still avoiding aircraft with a problematic history.
If you are planning on selling your aircraft to upgrade, you need to have your replacement aircraft lined up before you put your current one on the market. Aircraft can sell quickly, and you will struggle more to buy a replacement than to sell your current aircraft. If you cannot conclude a transaction because you are waiting to find a replacement aircraft, you are needlessly engaging buyers, and eventually your aircraft will be regarded as not actually for sale.
BUYERS
Be flexible. When the supply of aircraft available for sale is this limited, compromise and flexibility are the key.
Be flexible on model, on price point, on interior. If you are holding tight and fast to a long list of wants and needs, you limit an already small pool of options. If you only want a Gulfstream G550 with a forward galley and 15 passenger interior, you will end up waiting a long time as aircraft with these parameters are hard to find. If you want to buy an aircraft right now, decide what you can and are willing to sacrifice and what you cannot. This is very personal and talk to your broker about which areas will affect your usage. A better approach to determining your options is to know, for example, that you want a long-range aircraft that goes from London to Miami and can hold a minimum of 12 passengers. Then look at your options from there. You’ll find that now you can also look at Falcon 7Xs, Global 5000s, Global Express/XRS/6000, G500s, G550s and G650s. You will have better odds of finding an aircraft in this ultra-competitive marketplace if you are less specific as to which model you purchase. Of course, the other option is to wait until this cycle of shortage is over, but who knows when that could be.
Have your financing approved before you begin your aircraft search for the same reasons a seller should have their replacement aircraft sorted before putting their aircraft for sale. Sellers want to move quickly and are reluctant to wait for a buyer to organize their financing. In a seller’s market, a seller loses other buyers when they are waiting, and patience is limited.
Lastly, a buyer can be almost certain they will not find an undervalued opportunity. With the competitive nature of the markets, it is remarkably rare to find a distressed deal at this time, because sellers are generally not distressed and anyone who needs to sell can easily do so at will.
How long this season of a seller’s market will last is uncertain. Until an external shock to the system changes the current dynamic, we do not foresee the situation changing, whether that shock is economic or travel or something completely unknown. In contrast to 2006 – 2008, the OEM’s have not increased their production rates at this time though this will probably change in the near future. With the amount of production remaining stable and the OEMs sold out for a minimum of 1 year, there are no alternatives for buyers to pursue. Expect that this seller’s market will last for the next several months at minimum. While a market that is this beneficial to sellers is without question the aberration to the norm, it will likely continue for the near term.
