Uncharted territory
What will prices do in this market?
How much? We’re in uncharted territory in terms of how this market reacts to those inputs, so it remains to be seen.
What we can speculate, based on previous history, is that prices of new aircraft will likely continue to increase or, in the best-case scenario, remain flat. We don’t anticipate seeing in the near term any decrease in pricing, but instead a contraction in units built—reduction in supply.
In the owner-flown used market, we anticipate prices will remain relatively flat, and depending on how deep and long any potential recession is, we may eventually see some softening.
Basic economics rules everything—and by “basic” I mean supply and demand. The past several years have witnessed considerably restrained supply, which added pressure to demand, resulting in price inflation. Then came COVID. Those who had the wherewithal to fly themselves, their family, and colleagues safely and comfortably in an owner-flown aircraft suddenly sought out GA aircraft to do so. Add to that, manufacturers’ and repair facilities’ inability to effectively source and supply both parts and labor, and what we had was a recipe for prices spiking during that pandemic period.
With the pandemic now waning, we at AOPA Aviation Finance see demand waning, too. However, two factors contribute to the general trend of prices not easing in line with lowered demand pressure. The first factor is the stickiness of prices on the downside. Traditionally, prices go up quickly but fall very slowly, regardless of supply.
The second factor relates directly to supply. In a given year, the owner-flown market loses more aircraft than companies manufacture, because of obsolescence, accidents, and other factors.
That said, prices have softened (or perhaps regressed a bit to the mean) in some markets, particularly in light and cabin class jets. Some of that may be attributable to those markets’ specific superheating, and skyrocketing values fueled by tax policy, COVID, and even the allure of chartering aircraft. [email protected]
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Adam Meredith
