In announcing its first-quarter market report Tuesday, the International Aircraft Dealers Association (IADA) said its members reported a 35.2 percent increase in closed deals compared to the first quarter of 2021.
In a statement, the executive director of IADA, Wayne Starling, also shared that customers have entered into 223 new acquisitions agreements this quarter, nearly double the amount of customers that did so at the same time last year.
“Global demand is very high,” Starling said, “and, much like the fourth quarter of 2021, that demand is married to constrained inventory levels.”
However, based on feedback from IADA members, those constraints could soften and provide greater inventory for the market this year.
The report also included insights from IADA members that provided context around some of the market conditions. For instance, David Lee of Soljets predicted that the market would continue to be robust, but that a lack of inventory hurt deal flow. Meanwhile, Gordon Cameron of XOJET said the rising cost of capital could slow buyers’ opportunity to close, thus slowing demand over the next 12 months.
One cause for concern for members in the report is the indication that owners and operators could face the highest insurance premiums in 20 years, thanks in large part to the Russian-Ukraine conflict. Single-piloted operators could feel the worst squeeze, with panelists at the conference estimating that rates were continuing to climb.
Also, shoppers for new and used jets could be facing rising prices because of an inventory shortage.
Industry Experts Weigh In
During a virtual conference that followed the announcement, some aviation experts tried to provide context to the report.
“There are a lot of potential headwinds in the marketplace,” said Brian Proctor, president and CEO of Mente Group. “many things that are going on with international political activities and interest rates, causing a little bit of conservatism, but the numbers speak for themselves.”
Meanwhile, Suzanne Miners-Levy, an Advocate Consulting Legal Group shareholder, said all indications point to the trend that more first-time buyers are coming to the market, even as more traditional commercial travel continues to rebound. What’s more, seasoned buyers showed interest in refreshing their fleet.
“We are not seeing that cool off, and I’m not seeing a cooling of first-time buyers in this report,” Miners-Levy said.
As for challenges, Miners-Levy pointed out:
- Increasing insurance rates
- Long maintenance inspection times
- An ongoing short supply of inventory at some facilities
Price Isn’t an Issue, But a Ceiling Exists
Paul Kirby, executive vice president at QS Partners, said that for the first time, customers are deciding that they may be willing to spend beyond market value to buy a new airplane, but only to a certain extent. Using data his company tracks across 60 markets over the past 12 months, Kirby said the customers were willing to go as high as 45 percent above market value.
“We’re starting to see some of those markets finally have a real ceiling. Still, there’s a little bit of a new normal, and that new normal is about 50 percent, or in some cases, 70 to 80 percent higher than before.”
When Zipporah Marmor, vice president of aircraft transactions at ACASS in Montreal, Canada, was asked to describe her customer demographic, she said that corporations were finally doubling down because the optics around corporate jet ownership were changing.
“We’ve had large corporate clients that before the pandemic were looking to sell, not because they weren’t utilizing the aircraft, but because they didn’t like the optics of ownership—they were facing pressure from shareholders and customers—right now that’s changed,” Marmor said.