Happy New Year to everyone! It has been a bit since I have sent out an update on market conditions, and I thought it was overdue. Q4 of 2023 was as busy as ever, so I never had a chance to issue an update before year-end. So, I will do my best to summarize what the end of last year looked like and give some insight on what you might expect for 2024.
I think Q4 of 2023 exceeded a lot of peoples’ expectations. Demand was strong and many buyers continued to be motivated to put an aircraft into service before year-end so they could take advantage of the Bonus Depreciation available in 2023. As the amount of depreciation begins to sunset in the coming years, I expect the year-end drive might begin to wane, but I think 2024 should still offer enough incentive for a lot of people to press for closings by year-end.
As you can see on the attached Jet & Turbo-Prop Market Summaries, the number of aircraft for sale increased quite a bit in 2023. The year started with a historical low supply of aircraft and ended with a fairly balanced market of roughly 6% of the active fleet of jets and right at 4% of turbo-props listed for sale. However, it is somewhat a mixed market, with supply of older “legacy” aircraft increasing significantly, while supply of some of the current generation aircraft that are in higher demand increasing only slightly. Consequently, prices on legacy aircraft have experienced a significant price correction, while prices on some newer models have remained flat, or only experienced minor price corrections.
In 2024, demand remains strong so far. We have secured several acquisition agreements with clients looking to add aircraft this year, and also listed several aircraft for sale for clients who would like to upgrade their fleet. But, deals do seem a bit harder in the current environment. There are numerous hurdles to overcome in the current environment including supply chain issues, MRO shop availability, inflation, higher interest rates, global unrest & uncertainty around the pending election. These hurdles have caused a gap between buyers’ expectations and sellers’ expectations. Neither side seems to be in a hurry, as both sides feel time is on their side.
I will say that this seems to be a market where pedigree of aircraft has become increasingly important. In the frenetic buying that occurred during 2022 & 2023, getting any aircraft closed by year-end seemed to be all that mattered. But, as supply has increased and time constraints have become less important, things have normalized a bit on what buyers are looking for in an aircraft. We are moving back to the basics of aircraft transactions. Today’s buyers are looking for aircraft with good ownership & maintenance history. The low time, well-equipped and cared for aircraft are rising to the top, while the aircraft with some “hair” on them, are losing value.
The OEM backlog remains strong with most manufactures demonstrating a 2-year wait for their flagship aircraft. The overall economy remains robust, and with the current administration continuing to inject money into the economy during an election year, all signs point to a strong 2024. The timeless adage of “time kills deals” has never been more true, so it remains very important to move forward quickly in the current environment.
I hope you find this information helpful. If you have any questions on the general marketplace, the value of your aircraft, or would like some pricing guidance on any specific aircraft, please don’t hesitate to reach out.
Best wishes for a solid and profitable 2024!
Toby Smith