Contact Us

Ascend by Cirium, Expert view, Financial investments

Ascend by Cirium Weekly Team Perspective: Tony Brooks on the fascinating dynamics at play within the business jet market

April 1, 2022

Falling availability, increases in values and backlog extensions are offset against sanctions on Russian aircraft.

READ ALL OF THE LATEST UPDATES FROM ASCEND BY CIRIUM EXPERTS WHO DELIVER POWERFUL ANALYSIS, COMMENTARIES AND PROJECTIONS TO AIRLINES, AIRCRAFT BUILD AND MAINTENANCE COMPANIES, FINANCIAL INSTITUTIONS, INSURERS AND NON-BANKING FINANCIERS.

MEET THE ASCEND BY CIRIUM TEAM


Tony Brooks, Senior valuations analyst, ISTAT appraiser, at Ascend by Cirium

The business jet market is a very dynamic one at the present time with the falling availability, increases in values and backlog extensions being offset against the more pessimistic sanctions imposed on Russian aircraft.  Let’s have a quick look at some of the intricacies at play.

Although used transaction volumes for many corporate types are increasing, this liquidity attribute could be affected if the low supply of aircraft becomes more of a long-term rather than short-term issue.

With a manufacturer ramp-up of production unpractical, the used market continues to soak up the pressure.

Indeed, it is becoming a more common practice for asking prices to be removed from public listings within this firm market as owners anticipate further values increases. Also, it is important to bear in mind that some aircraft, although not publicly available, have owners who are selling but are waiting to see how much further values strengthen before committing.

Let’s have a look at one particularly interesting metric within the current market.

How does the very low supply of available corporate aircraft affect the market mechanisms?

There are several points worthy of note:

  • Buyers may not have the purchaser power to demand discounts concerning any physical defects on the aircraft such as poor interior condition or damage history. In a sellers’ market with low supply, asking prices are more likely to be achieved than in a market with wider choice and indeed our Appraisal team continues to monitor an increasing volume of such trades.
  • Manufacturer loyalty, although it is true to say, not as strong as it has historically been, is put to the test in a market with low supply. Owners traditionally loyal to one company are forced to consider moving to a competitor either because of low used availability or lengthening backlogs at the new end.
  • The Manufacturer Trade-In option becomes less attractive both as the wait-time for new aircraft continues to lengthen and the prospect of selling at a higher price on the open market increases.

So, three very different examples but all very much at play at the present time.

The sanctions imposed on Russian aircraft are widespread in nature and our Analysts continue to monitor the situation closely. One such sanction imposed, the banning of the supply of spare parts, could prevent the essential maintenance of aircraft and therefore flight activity within Russia may well decline in the coming months. It is also important to point out that because some Russian aircraft stationed outside of the region are very difficult to identify, they may in fact still be flying and therefore any impact on flight activity for these aircraft could be hard to assess.

Whether the world moves into a war-induced severe recession remains to be seen, but such a likelihood will only be detrimental to the health of the business jet market.

As we move through 2022 it will be very interesting to watch the market dynamics at play in the midst of an unfortunate war.


SEE MORE ASCEND BY CIRIUM POSTS.

RELX logo