By Joseph Carfagna, Jr. – Partner, President & CEO
I am not the only aircraft sales professional you have heard talk about the iconic decrease in supply of pre-owned corporate aircraft. But why do we think we are here, and where do we think things may be headed? Let’s discuss & add up all of the ingredients…
- A strong stock market for a long time
- Unprecedented low interest rates (not for long now)
- Loads of new wealth that has been created in recent years
- The global pandemic
- Big tax incentives (which are scheduled to begin rolling back after 2023)
This all adds up to a frothy mix of ingredients that have caused this shift.
We now know that approximately 30% of all pre-owned corporate aircraft sales in 2021 were to first time buyers. This is a huge factor – first time buyers do not have an aircraft to sell before buying another.
In sum, corporate aircraft have become like oceanfront Palm Beach real estate – hard to find, and you will pay a premium to get the one you want.
But enough about where we have been and how we got here. Now that we are here, what should someone considering the purchase of an aircraft do? Let me sum up what I have been telling our clients:
- Get your search laser focused and know what you really want
- Be ready with aviation counsel retained and ownership structure established
- Retain a broker to help you – this is as critical as it ever has been. The best brokers have access to a network and can usually learn about inventory coming to market before an end user ever will.
- Be patient and listen to your broker. If you retain the right broker, they will have your best interest in mind. Hiring an IADA Certified Broker is a good way to ensure this.
- Call your financial advisor or money manager
Why the last bullet point? It sure seems like the stock market, a world event or both, will cause the market to loosen up and shake out some supply. A 10% or 15% correction in the stock market and interest rates up a point or two before year end will certainly change the outlook in my opinion. After nearly 30 years of doing this, I have seen it all – the 1993-1994 recession, the surge of the market in 1999 and the dot com crash of 2000, the crazy demand of 2007 and 2008 followed by the crash in the Fall of 2008 to name the most significant. In all of those instances, supply got pinched (although in no case pinched as hard as it is now) and prices went up. Then in rather dramatic fashion, the floodgates of supply opened and prices corrected themselves.
Anyone who is thinking about purchasing a corporate jet typically follows the stock market and consumer confidence as the indicator and I believe this time will be no exception. What is the takeaway? Get educated, hire a professional, target your focus and be ready to act quickly – if the market remains as it is now through the rest of the year, it will take persistence combined with assistance to get an aircraft with the right attributes purchased this year.