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Leading Edge: Aircraft supply and demand

The Third Quarter Market Report released by the International Aircraft Dealers Association on October 18 presents an “astounding” 20 to 30 per cent increase in the sales prices of used business aircraft, relative to the corresponding quarter of 2020. The report is based a survey of accredited dealers of the International Aircraft Dealers Association (IADA) and sales data, including statistics from North America (36 per cent), Europe (20), Latin America (18), Asia and the Pacific (15), Middle East and Africa (12), and less than one percent in the Caribbean.

IADA explains its members buy and sell more aircraft by dollar volume than the rest of the world’s dealers combined, averaging more than 700 transactions and US$6 billion in volume per year. The global network includes 48 accredited dealers, certified brokers, all of the major OEMs, and more than 63 of the industry’s top products and services providers. The association has its finger on the pulse of the aircraft sales market, as outlined by Phil Lightstone in his timely feature article published in this issue, Aircraft Acquisition Simplified (page 24).

Among the total 182 aircraft agreements made in the third quarter of 2021 by IADA dealers, only seven transactions involved lowered prices, while there were 83 deals with lowered prices over the same period in 2020, among much fewer 110 agreements. IADA Executive Director Wayne Starling describes the current market for used business aircraft as being in “an unusual place, with much higher prices and dearth of inventory.” Starling continues to explain the Q3 2021 responses from IADA members indicate the next six months will continue to hold increased pricing and demand for all sectors of the market, as well as inventory deficiencies. This includes preowned turboprop, light jet, midsize, large and ultra-long-range jet markets.

The lack of aircraft supply – the seller’s market – is made more acute by growing optimism among business aircraft operators around the world. At its 2021 JETNET iQ Summit, held at the TWA Flight Center in mid-September, aviation research firm JETNET noted Net Optimism, which it measures the difference in the percentage of respondents who believe that the business aviation industry is past the low point in the current business cycle less those who believe the sector has not yet reached the low point, reached above 68 per cent. As measured by JETNET, this represented an 11-year high in the Q3 2021, after “cratering” at -43% in second quarter of 2020.

At a time when its most recent survey was more than 80% complete, “Optimists” outnumber “Pessimists” by a factor of 8-to-1 in Q3 2021. JETNET, which has compiled dozens of aircraft marketplace surveys for more than a decade, describes this as a noteworthy customer metric that is fueling the demand for new and pre-owned aircraft – and driving higher flight activity in 2021: “With pre-owned business aircraft inventory, as a percentage of the in-service fleet, at all-time lows in late September 2021, would-be pre-owned buyers are flocking with their brokers/dealers to the doors of the business aircraft manufacturers.”

With its own unique access to the pulse of global aircraft sales, JETNET notes the most important question of the current environment might not be how sustainable is the demand, but rather how well can the supply chain deal with it. The firm notes this is exacerbated by the challenge of finding the skilled talent needed to build, sell, fly and maintain aircraft – an ongoing issue the industry was highly focused on for months before the world changed in March 2020. 

IADA dealers reported 40 transactions fell apart in Q3 2021, compared with 50 in the same period of 2020. IADA dealers also closed 325 deals this past quarter, compared with 283 in Q3 2020. Even with the aircraft inventory shortage, optimism is a powerful pill, as are growing manufacturer backlogs.