Owners of new business aircraft should now expect the asset to depreciate by at least 50 percent at year five, while owners of aircraft older than 15 to 20 years need to realize that they might be the last owner of the airplane, said speakers at a state-of-the-market session this morning at the Corporate Jet investor conference in Miami. Moderated by CJI’s Alasdair Whyte, the panel included Anthony Kioussis of Asset Insight, Chris Miller of Shearwater Aero Capital and Dean Roberts of Rolls-Royce North America.
According to Kioussis, the “new normal” is that business aircraft steeply depreciate in the first five to six years of life, with depreciation flattening out between years 10 and 15. “This increases the cost of flying for new owners,” he noted. Miller added that aircraft depreciation rates are now closely mirroring those of the luxury auto market.
For those with older aircraft, “A lot of these people out there are the last owners,” said Miller. “For the most part, they are unsellable assets. A problem is, how they will be disposed?” Miller suggested that the only reasonable options for owners with older aircraft are to keep flying them until it becomes cost-prohibitive to do so, or part them out in the near future while there is still a large enough user base. Kioussis said lower-cost NextGen avionics could help keep older aircraft flying longer. He also recommends exchanging engines as a lower-cost option to conducting expensive overhauls.