The business jet market is now entering uncharted territory with prices rising for both pre-owned and new aircraft simultaneously.
As we reported last month, industry analysis shows that less than 5% of the pre-owned fleet is currently for sale. This historic low level of available stock has been met with a historic high level of first-time buyers drawn to business aviation as a more reliable alternative to commercial aviation during the Covid pandemic. These two factors have shifted the sector decisively towards a ‘seller’s market’ with a substantial attendant increase in prices.
This price increase in the pre-owned sector had not noticeably, until recently, impacted OEMs selling new build aircraft but, according to noted industry analyst Brian Foley, that situation is now changing. All major OEMs have recently recorded Q2 book-to-bill ratios of around 2:1 – in other words, twice as many aircraft being sold as compared to the number delivered.
“The number of used aircraft transactions have recently set all-time records, and the inventory to choose from has shrunk to just a third of typical levels. With few cream puffs remaining, buyers have nowhere left to go except to the new plane showroom,” said Foley.
“Before raising list prices, manufacturers will first discount less, an amount that varies by make, model, and customer but is typically in the single-digit percentages. It’s believed that this is just a first leg up in longer-term, steadily increasing jet prices as more buyers chase a limited airplane supply, all while being fanned by systemic inflation throughout the economy and supply chain. The industry is embarking on its first opportunity for firming up prices in well over a decade, pointing towards a long-overdue clear runway towards improved margins and prosperity.”