The new normal
A used aircraft market bubble that wasn’t
Markets like predictability, and the past two years have been anything but. From a brief but complete shutdown to major hesitancy to frenzied buying, predictability has been replaced by whiplash. Inventory has been exceptionally low in most markets; prices are climbing faster than the buying guides can keep up; and normal procedures, such as prepurchase inspections, have been set aside. Some of that seems to be changing.
“After a two-year run of record demand and declining or nonexistent inventory levels, there is change in the air—and it seems that it will come upon us rather quickly,” said Emily Deaton, CEO of jetAVIVA, in her executive summary of the turbine aircraft sales firm’s quarterly report.
The sentiment is shared by everyone from brokers to financial firms and shops. VREF President Jason Zilberbrand said in his quarterly report for the valuation and appraisal firm that, “Demand continues to outpace supply, although we may finally be hitting the apex for asking prices, as for the first time in over a year, sellers are being forced to lower asking prices to find a buyer.” The Business Jet Traveler story quotes multiple sources saying that while prebuys still aren’t necessarily the norm, they are definitely back on the table.
The new normal
One challenge with all this talk of readjustment and market changes is that they must be put into context. Historically, a healthy and balanced market meant that 10 percent of any particular model’s fleet is up for sale. Today, experts are talking about a slowdown because many markets are sitting at 4 percent. Looking across a large sampling of small and midsize jets and twin and single turboprops, many are still hovering below 2 percent, and only the Embraer Phenom 100E, with four for sale, or 8.3 percent of the inventory, even approaches 10 percent.
“There’s an argument that this is the new normal,” Deaton said. “The difference between 1 and 2 percent and 4 and 5 percent when you have been so constrained feels markedly different.” How we got here is less clear. When interest rates rise and the stock market stumbles, as it has this year, the airplane market usually feels it. And indeed, this summer there appeared to be a pretty significant slowdown. Deaton and Zilberbrand both mentioned what a slow second quarter it was. But then an interesting thing happened, and August came in with a boom.
It’s difficult to pinpoint exactly why, but at least one theory is that buyers who were turned off because of high asking prices, bidding wars, and unreasonable seller demands have re-entered the market to quickly prop it back up. “If you have some stabilization, buyers will come out of the woodwork,” Deaton said, and many of the potential buyers jetAVIVA signed up at the end of 2021 and early this year just sat waiting. Deaton said in some cases they were able to find an airplane, but the buyer didn’t like the asking price or thought other seller demands were unreasonable, and they were content to sit it out. But now those buyers are coming back and buying an airplane.
In good health
Despite the high interest rates, shaky stock market, and higher airplane inventory, it’s generally agreed that the market is trending healthier. Mike Francis, senior vice president of Private Bank, said in the recent International Aircraft Dealers Association market report, “Demand I expect will continue, and even if it falls off a bit, I’d in some ways prefer that as it’ll help the market get back to its normal equilibrium.”
The business of predicting what happens next has become messier than ever. Most analysts predicted last summer’s slowdown, but not everyone predicted this most recent upturn of activity. Yet, many agree that the fourth quarter will be strong, as it often is. This year, activity may be even more robust because of the end of bonus depreciation. And even if interest rates continue to rise as expected, the impact on turboprops and jets seems to be minimal. Deaton said she thinks the initial shock of interest rate hikes has worn off, and knowing there will be continued hikes means that buying today is always going to be better than buying tomorrow.
Many other factors are at play. Zilberbrand said that lousy airline travel continues to push demand for business aviation aircraft, and a dearth of airplanes coming off factory floors will continue to push people to the used market. “Any broker worth his salt is going to use extended backlogs in the new aircraft market to help make a used sale,” Deaton said. When a used Phenom 300 sells for $12 million, which is considerably more than a tricked-out one from the factory, you know that waiting two years or more just isn’t in the cards for many buyers.
A good time to be a seller
How to navigate the owner-flown market in such a time? It’s still a good time to be a seller. Asking prices are still high. Zilberbrand said he thinks they’ll keep climbing in many segments, which is likely true if manufacturing backlogs stay strong. But the crazy days are over. “Selling it to try and make twice what you paid, I would caution,” Deaton said. “But if you legitimately want or need to sell, it’s still a good opportunity to do so.”
Buyers will still struggle in certain markets. Although we all like to talk about the used airplane market as one big mixing pot of makes and models, the reality is that, especially in the turbine world, each type is its own market. That’s especially true in the owner-flown world, which makes sense. The cost and difficulty of training on a new model dissuades many from jumping between them. Manufacturers will tell you the same thing. A Piper representative once said that they are more likely to find success with a Cirrus piston owner than pilfering a current TBM customer.
So, while some buyers will get lucky and find decent inventory, time, and space to be choosier, for others it will feel like nothing has changed. Beechcraft King Air C90GT or GTi shoppers will have to remain patient. In early August only one of each was on the market, for a total of 1.1 and 0.8 percent of the respective fleets. But those looking for a Piper M600 were no doubt happy to see six on the market in early August, or nearly 6.2 percent of the fleet.
For months now, some buyers have been waiting for the bubble to burst. Yet despite experiencing nearly all the traditional external stressors that would pop a bubble with little change, it should be clearer than ever that this isn’t a bubble. Experts agree that prices will remain high, and inventory will remain low for the foreseeable future. Welcome to the new normal. Jump on in.
Future turbines: Bigger, faster, longer-legged
The burgeoning market in new and used turboprop and jet sales shows no sign of letting up, in spite of the stock market and other economic jitters. In response, the near future seems to be favoring ever-larger, more capable globe-striding corporate jets. Here are a few examples.
Bombardier is currently following up on the success of its Global 7500 with an even bigger, longer-legged design: the Global 8000. As the name suggests, the airplane at Mach 0.85 will have a maximum still-air, ISA-conditions range of 8,000 nautical miles carrying eight passengers and four crew. That’s 500 nm farther than the Global 7500s. It’ll do Mach 0.94, but range will suffer.
As you might expect, the Global 8000 will have fly-by-wire controls, dual head-up displays with synthetic vision, and Pro Line Fusion avionics. Power will be from twin GE Passport engines of 18,920 pounds of thrust apiece. The cabin ain’t shabby either, with four zones, HEPA filtration to remove 99.99 percent of viruses and other contaminants, space for up to 19, swanky “zero-G” Nuage seating, a 6-foot 2-inch cabin height, and a cabin altitude of 2,900 feet at FL410. Maximum operating altitude is FL510. For all its mass and speed, the airplane’s takeoff and landing distances come in at 5,760 and 2,237 feet, respectively. Entry into service is currently set for some time in 2025.
Bombardier’s EcoJet is another design worth watching. It was revealed at the European Business Aviation Convention and Exhibit (EBACE) in June 2022. This will consist of a blended-wing design that merges the wings and fuselage. The concept has been in the works for 10 years, and a model is being built to test the concept. The goal is to have a functional prototype in flight testing within the next six to 12 months. Propulsion goals are aimed at a variety of possibilities, including electric, hydrogen, and hybrid power schemes, including turbine engines powered by sustainable aviation fuel.
Dassault Aviation’s Falcon 10X, projected to enter service in late 2025, will be Dassault’s newest fly-by-wire flagship, with a Mach 0.85 range of 7,500 nm; maximum speed is Mach 0.925. This will give the Falcon line its longest-legged offering to date. Previously, Falcons maxed out well below the 10X’s range, with its 8X at 6,450 nm, 7X at 5,950 nm, 6X at 5,500 nm, 900LX at 4,950 nm, and 2000LX at 4,800 nm. At a maximum takeoff weight of 115,000 pounds, the 10X will be the heaviest of its competitors, yet Dassault says it will be able to take off in less than 6,000 feet and land in under 2,500 feet. Power will be by twin 18,000-pound-thrust Rolls Royce Pearl engines, and avionics by Honeywell, which will include dual HUDs with combined enhanced vision systems/synthetic vision systems. The 53-foot 10-inch-long cabin is big enough to accommodate a private bedroom, and its 6-foot 8-inch cabin height makes the 10X perhaps the roomiest ever in its class.
Gulfstream’s G800, introduced shortly after the company’s G700 and G400, boasts a maximum range of—yep, you guessed it—8,000 nm (again, at Mach 0.85), in keeping with what seems like a never-ending range contest. But if it’s speed you need, then the G800 can be pushed to Mach 0.925. Rolls-Royce Pearl engines make it all possible, with each having 18,250 pounds of thrust. The cabin is pure luxury, with 16 of the biggest windows yet, up to four zones, fresh air filtered by plasma-ionization every two to three minutes, room for 19 seats and capable of sleeping 10, plus a full-fuel payload of 2,300 pounds. The G800’s Symmetry flight deck is by Honeywell, and includes dual HUDS with, just as you’d expect, combined vision system displays. First deliveries of the $72 million jet are expected in 2023. Deliveries of the new, 4,200-nm, 11- to 12-seat G400 should come in 2025.
Then there’s Boom Technology Inc.’s Boom Overture, a delta-winged, four-engine, 65- to 80-passenger supersonic airliner capable of cruising at Mach 1.7 and flying for 4,200 nm. After the dissolution of Aerion Inc., another manufacturer aiming to build a supersonic passenger airplane, Boom remains the last name standing for now, with civilian supersonic ambitions. Boom has attracted investors and plans to have its XB–1 Baby Boom one-third scale, 1,000-nm demonstrator flying by later this year. According to reports, tests of the full-scale Overture should begin in 2026, with entry into service in 2030. The company says that American Airlines has ordered 20 Booms, and United Airlines another 15, although the market for supersonic business travel could create demand for as many as 1,000 supersonics like the Boom.—Thomas A. Horne
