AINsight: Preowned Bizcraft Pricing Is Anybody’s Guess

 - January 6, 2023, 12:02 PM
Phenom 300 business jets lined up on airport ramp
(Photo: Privatejetexpert, CC BY-SA 4.0, via Wikimedia Commons)

Let me first begin by saying Happy New Year to all. I hope everyone enjoyed the holidays and is back at their desks ready to see what awaits us: more preowned aircraft supply, more pricing headwinds, and more days on the market.

More, more, more—or prehaps less, less, less? It might take us the first couple of months of 2023 to have a clearer picture of the landscape ahead of us. 

Except for the typical last-minute closings at the end of the year, there seemed to be less panic and frenzy this year over the last two years. As I have said, possibly due to less supply, possibly due to a bit less demand. 

I can remember 2020 well. We were all trying to figure out what the pandemic meant. What was the real impact on everything including our industry going to be? No real answers, and no real history with this type of global event. Would sales completely stop? Would prices drop?

I'm not sure any of us could have predicted what happened. Unprecedented demand from first-time buyers depleted a healthy supply of aircraft and resulted in a supply/demand dynamic unseen before in our industry. Prices were increasing 10 percent per month in some cases and fair and balanced transaction processes were eliminated. 

In 2020, 100 percent bonus depreciation was in play and by the fourth quarter people were already wary of commercial travel. No one wanted to get on flights with crowds and no one wanted to go to commercial airports to get exposed to the virus.

So they began to turn to business aircraft charter, fractional ownership, and whole ownership. For many aircraft brokers, it would turn out to be their best sales year ever. As I mentioned above, we had a great supply available to choose from and pricing was still languishing a bit from the preceding year or two of higher supply and a bit lower demand.

For those who bought in fourth-quarter 2020, you likely enjoyed a balanced process with respect to the transaction. Prebuys were the norm. Pandemic demand, low supply, and higher pricing had not yet hit.

At the time we sold a couple of low-time, well-equipped Bombardier Challenger 604s. They were both in the $5 million to $6 million-dollar range. Then, within the following quarter, Challenger 604s of the same vintage, but more likely to have higher time, less equipment, and weaker pedigree rose to the $8 million to $9 million range.

Anyone who had a memory of that $5 million price had some real heartache with the new pricing. Especially when you coupled it with the fact that what you were paying for was no longer the same quality and likely allowed much less due diligence from the seller.

It made it very difficult for people who knew our market pre-pandemic to accept pricing that began the following year. Paying 30 percent or more for less of an airplane on many fronts was a difficult pill to swallow.

Currently, the majority of our industry does not expect the pricing to go back to pre-pandemic levels. But with what I expect will be more supply in 2023, there should be a return of a more balanced transaction. That includes more price negotiation with residual loss once again prevailing, and a fairer, due-diligence process allowed by the seller.

As long as a better choice and more normal transaction processes come to pass, 2023 will be a return of better attitudes about what will become the current, normal pricing and should be a great year for us all—aircraft brokers, buyers, and sellers alike. 

Jay Mesinger is the CEO and Founder of Mesinger Jet Sales, an international aircraft brokerage firm. With 49 years of successfully buying and selling aircraft, Mesinger Jet Sales has a global reputation for personalized, transparent service.

The opinions expressed in this column are those of the author and not necessarily endorsed by AIN Media Group.