BLOG

2023 Pre-owned Jet Pricing Outlook

By Michael Dwyer

January 11, 2023

Catching a Falling Knife

As we enter into the new year, it is important to assess the industry and market trajectory of used aircraft trades.

In this analysis we share insight on what we expect to see in 2023 for pre-owned jet pricing. Our perspective is based on trends carrying over from Q4 2022, current market conditions, and years of aviation expertise. As industry leaders, our clients trust us to advise on the development of strategy, for both buyers and sellers, to safely ride the wave of market volatility to their fiscal advantage.  

Get an insider view and watch a video of Mike discussing the 2023 outlook, or continue reading below.

Our analysis will:

  • First outline the downward direction, slowly accelerating velocity, and expected depth of the trough.  
  • We will then examine the factors affecting the markets.
  • Finally, we will share tactics to best achieve superior asset management in 2023. 

Our goal, since we cannot affect macroeconomic conditions and airplane pricing, is to make well informed, confident decisions.

 

Market Direction, Velocity and Depth 

Direction

The pre-owned airplane pricing outlook is fairly well understood.  Prices are down 10% already and falling as inventories rise and recession conversations abound.  The purpose of this article is to discuss how far prices will fall and how fast.  Market direction isn’t hard to gauge, it’s the velocity and depth we will attempt to illuminate. 

Velocity

As 2022 came to a close, it was easy to identify when the pricing wave saw its crest. In the fall of 2022, aircraft for sale inventories began to expand.  These inventories grew from 1% of the fleet population to 3% deeper into Q4, building up to their current level of 5% on market.  Historically 5% of a fleet for sale is wonderful news for a seller, but in the context of the direction and rate the percentage is moving, it is alarming.

  • The number of transactions per month for used jets slowed down as much as 30% in popular models compared to the prior year.
  • Furthermore, it completely stopped for the last two quarters in some older equipment models.
  • During the first two months of Q4 2022, while the metrics were deteriorating, pricing remained stable based on typical Q4 financial and psychological factors that favor concluding business
  • Then, on or about December 1, 2022, we saw our buyers pausing.  The trigger was the inability to execute a contract, conduct an inspection, close and put the airplane into service prior to year-end.  Our predictions to sellers that airplanes would be worth less in 2023 started to come true and pricing, as mentioned, has fallen as much as 10%.  

Expected Depth

With this market direction and velocity in mind, we’ll next discuss how far it will fall. 

Let’s look back into history for momentous market changes.  In 2009, we saw pricing fall 40% in 12 months.  In 2020 during Covid, pricing fell as quickly as 30% in 90 days. 

Before we project to 2023, we need to consider the pricing escalation throughout 2021 and the first half of 2022. The sophisticated financial term for the never-before-seen climb of used airplane pricing is beserk (Merriam-Webster: frenzied, crazed).  Popular models climbed as much as 40%!

This means prices are now declining at whatever rate we predict, starting from an all-time high

To make our assessment, the question we considered is: whether prices will fall back as fast and as far as they climbed in six quarters, or return to historic annual fair market valuation depreciation rates of 7-10% per year from the high-water mark?

Here is an argument for somewhere in the middle, another 10% of price decline, which is never a terrible perspective.

We’ve already seen in trades that the decline is more than 10% this year. There is a logic that the largest shift percentage wise occurs early in the sea change.  Our brokerage business is typically steady in rising and falling markets.  It’s the turn where we pause, as buyers expect prices to fall and sellers have not quite reconciled to that reality.  It’s the pause that decreases sales volume, increases inventory and drives the resultant decline in pricing. 

We are predicting that 2023 inventories will continue to grow. But remember, they can still double to get back to what we consider normal, when 10% of a fleet is for sale.  

 

Factors Affecting the Markets

One indicator of a healthy market we’d like to highlight is the lead times for new equipment from the manufacturers.  This is now typically past 2 years for popular models.  As the buyers of new equipment receive delivery, they will in turn sell to trade their existing fleet. This assures quality pre-owned inventory supply.  New buyers tend to take excellent care of their existing equipment and this contributes to a stable supply with predictable timing.  

If we take a look back at another factor (unrelated to current economic conditions) that initially drove the pre-owned pricing so high, it helps give context to the market fluctuations. Covid motivated, high net worth buyers backed by a record breaking stock market entered the aviation market.  The buying frenzy started in the summer of 2020.  These early covid buyers are now kicking off the beginning of a 3-year replacement cycle, and many of these clients are moving onto their second airplane. We expect this trend to continue and consider it a stabilizing factor.

 

Strategies For 2023 Aircraft Asset Management

With all these implications of the market changes in mind, it is important to develop a strategy and execute on well-advised tactics for managing aviation assets as the tides change. This concept speaks to the title of this article, “catching a falling knife”.  

Given that we can’t predict all the pricing factors we have discussed, a few things are clear:

  • For a pure seller, getting to market and closing faster yields more money.  This is contrary to the conventional wisdom that a quick-fire sale will be at a lower price.  Now, the gloomier your view of 2023, the sooner you sell, the better.  Extensive market information becomes critical to ensure that your pricing decision is well informed and confident.  
  • For a pure buyer, time is on your side. Keeping abreast of the markets for quality inventory should be top priority, as opposed to chasing the incredible pace of transactions in the recent past.
  • For an owner upgrading, time works for you if you focus on the buy side where you save $2 buying for every $1 you lose selling.  
  • For an owner downsizing, speed is your friend. We suggest getting your aircraft to market immediately to achieve greater return.

 

The norm in jet transactions with such sophisticated participants is typically buy high and sell high, or buy low and sell low.  The best way to optimize buy high and sell low is through accurate and timely information.  

Beyond market conditions, there are a host of operational behaviors that will help keep the value of your fleet as high as possible. Considerations such as cosmetics, maintenance status, serial number, birth order, model selection, avionics generation, and record keeping are all integral to preserving value. While being the next airplane to sell is always important to a seller, it's crucial in down markets where time to sell expands. 

 

We would love to help advise on your upcoming trades. Please reach out and allow us to show you the products and services we have to help you achieve your goals.

Contact Guardian Jet

Media Contact


Jill Henning

jill@forwardstmarketing.com
+1 203-453-0800

Stay Connected


Learn the latest about aircraft sales, brokerage trends and more.

By submitting your information, you acknowledge that you may be sent marketing material and newsletters.

Your information is secure and will never be shared with any third party. View our Privacy Policy

* indicates required

Latest Updates

January 4, 2023

Now Hiring: Regional Sales Manager, Chicago

Read More

January 4, 2023

Now Hiring: Regional Sales Manager, Europe

Read More

November 1, 2022

Private Aircraft Management - Top 20 Questions to Ask

Read More