Whether it is trying to scratch the surface to figure out what is underneath or looking around the corner to figure out what is next, the desire is the same. What will 2019 bring for us all involved in business aviation? What will be holdovers from a very successful 2018 and what might settle back into what we have learned to live with for the proceeding 10 years? The key to this question will be the global demand versus the global supply. During this past year, we have all learned to work with high demand and lower corresponding supply. These lessons have found us more willing to import aircraft and consider that extra effort and cost to be the new normal. These extra steps for acquisitions for our North American clients have just become what is normal when mounting a search. Regardless of the dynamics between demand and supply, the North American market is still the most active with the highest level of transactional activity.
Conventional wisdom has that dynamic remaining a constant for some years to come. Although many of what were the emerging markets have reemerged as active bastions of activity, Europe is probably second to North America for transactions and that will likely remain the same for some time to come. At the Corporate Jet Investor conference last month in Miami, one of the questions posed to the audience of some 350 leading aircraft lenders, aviation tax and legal experts, management companies, and appraisers, as well as brokers was: “When do you believe there will be a downturn in our market growth?”
There was no real reason for any answer given. None of us has a crystal ball, only the basic memory that good things do not last forever. So, based on that and a gut check, as well as a general fear of the future unknown, the overwhelming answer was 2020.
The cocktail conversations regarding this assessment ran the gamut. Of course, geopolitical occurrences seemed to rise to the top. There are so many risky conflicts occurring, as well as political considerations in the U.S. and abroad, that most thought that something would rise to the “Game Changer” classification in the next 18 to 24 months.
Then came the discussion about the level of inventory that will be available. As we all know, much of the buying that has occurred in the last 18 months has been in the first-time buyer category. This is great for the industry as it brings in new participants, but it does not help available supply, as those participants do not come to the table with an asset to sell. 2019 will start to see the deliveries beginning with the new entrants, the Gulfstream 500 and 600, and Bombardier 7500, 6500, and 5500. These new entrants alone, not to mention Citation and Falcon products, will bring trade-ins from existing owners and boost in a very positive way an increase in available inventory of younger aircraft.
Another very interesting fact that was discussed was what is considered a low adoption rate of ADS-B Out. I am not sure why but come January 1, 2020, a considerable percentage of the fleet, mostly the older segment, will not be qualified for continued operation. This will be a very interesting and busy year as people scramble to comply with this upgrade mandate.
We at Mesinger Jet Sales wish you all a very healthy and Happy holiday season and the brightest and most wonderful New Year!