Predicting the future is a risky business. You can take all the information in the world, draw logical and supportable conclusions, and still get it dead wrong.
Recently, a statistic has been shared around the business aviation industry that only 10% of new entrants into charter, fractional, and whole aircraft ownership were forecasted to remain. This conclusion was supported by the theory that these clients would return to commercial air travel because the airline schedules were improving.
Well, Southwest Airlines and the FAA certainly changed that outlook. Normal holiday travel issues and winter weather were compounded by the Southwest scheduling debacle, resulting in over 15,000 flights being canceled. On the day of the NOTAM outage, over 10,000 commercial airline flights were grounded – all because one system failed for 90 minutes.
I’m going to go out on a limb and predict that these widespread cancellations and delays are a good thing for business aviation.
But regardless of what the airlines do to support our industry – we should also take that 10% figure as a direct challenge. The future of our industry depends on the long-term retention of these “first-time buyers.” We’ve long held that there were many who could afford it, but fewer who felt the expense was worth the investment. COVID tipped the scales. Going forward, the industry’s success will depend on how we continue to serve and support these new clients.
This is especially true for longtime aircraft owners. An excess of buyers enables higher aircraft values. The last year proved that our industry has the capacity to stretch the laws of supply and demand. Aircraft inventory has been steadily increasing since February of 2022. It’s currently recovered to mid-2021 levels and looks to continue climbing. However, for most of last year, despite the increase in supply – prices also continued to rise. The key is demand. Business aviation customers are the variable we must seek to protect at all costs.
At jetAVIVA we are taking this call to action seriously. Our position in the market affords us the ability to service hundreds of clients each year, and we are doubling down on the level of support we provide them. We’re adding to our team of sales professionals in critical markets. We’ve grown our organization to expand our capacity in market tracking, technical services, and transactions. We are standing by our commitment to be “Relationship First” – for the duration of the customer’s time in business aviation.
Our forecast for 2023 is a return to normalized transaction dynamics: a better balance between buyer and seller priorities. The increase in available inventory will buoy the purchaser’s position better than in previous years, and sellers should plan and price accordingly. Economic pressures will further stabilize the market; however I remain optimistic that demand will hold – and this will be another good year for those looking to buy, sell, and trade.
Happy New Year, friends.