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Daniel Hall, Senior valuations consultant, ISTAT appraiser, ASA senior appraiser
Key Takeaways
- Business aircraft values continue their ascent. We have provided an independent and accurate assessment using our value opinions, thoroughly backed by over 300 variant value changes since early 2020.
- The business jet fleet has seen a market value increase of 12.9%, on a constant age basis, compared with pre-pandemic. This, at face value, is a “sensible” figure. We take a high-level perspective with our analysis.
- The light jet category has seen the greatest improvement (since 2020) of +20.4%, with very light jets (VLJs) close behind at +17.2%. These aircraft were less impacted by initial 2020 decreases (due to their largely domestic, within US flying patterns).
- The Long Range category of aircraft saw a -0.1% overall average reduction. In other words, values are on average very similar to pre-pandemic levels on a constant age basis. It saw recovery through 2021.
- Most business aviation types/variants have seen reasonable stability (+/- 10% change).
- The Market-to-Base Value relationship is key. Today, more than 70% of aircraft now have a Market Value above Base; this percentage was higher in 2007/2008, but many aircraft are now far higher than Base.
At the two-year mark of the pandemic, one aviation sector has not only recovered but is now going from strength to strength beyond previous levels is the business jet market. This is a timely point to look back at how aircraft values compare with January 2020. Many have questioned just how much higher they are – and are we entering “bubble” territory? Using Ascend by Cirium’s independent value opinions is an ideal approach to produce an accurate assessment of this. Values provide a balanced and large data set and exclude biases which could be found in comparing asking prices, for example (which are not opinions of value and do not adequately critique the market).
Ascend has thoroughly covered this market with over 300 variant value changes since early 2020. The first chart provides a quarterly visual on negative value changes through 2020 moving to positive in 2021. Although value changes can sometimes lag a fast-moving trading environment, it does capture the turn of the market. Indeed, December 2020 was a record sales month and Q1 2021 changes demonstrate that. Q3-Q4 2021 fully recognised a strong summer of demand.
How does today’s fleet value compare with pre-pandemic January 2020? Overall, if we consider the entire business jet universe – the fleet saw an average fleet-weighted market value increase of 12.9%, on a constant age basis. If we just look back one year to January 2021, this is an 18.1% increase, which demonstrates how 2020 saw some declines but 2021 saw greater overall recovery.
This, at face value, is a “sensible” figure. Since Summer 2021, many large numbers have been thrown out without adequate data backing them. We hear of “50-100%” increases, so it is important to step back to take perspective by examining the data.
Broken down by size segment, we can see how the light category has seen the greatest improvement (since 2020) of +20.4%, with VLJ close behind at +17.2%, together impacting over 6,500 aircraft. These aircraft were less impacted by initial 2020 decreases (due to their largely domestic, within US flying patterns), and therefore benefited further from a wider market pickup particularly with first-time buyers.
The long-range category of aircraft (which includes mainstream types such as Gulfstream, Bombardier Global, Falcon 7X / 8X etc) saw a -0.1% overall average reduction. In other words, values are on average very similar to pre-pandemic levels on a constant age basis. The sector had a difficult 2020. However, if we look at the category going back just one year to January 2021, its recovery (in effect reversal of reductions) is more pronounced with an average 15.1% increase.
The below chart demonstrates the range of value changes since pre-pandemic. Most business aviation types/variants have seen reasonable stability (+/- 10% change). Those with very large increases tend to be low-value, older types.
As appraisers, we’ll be reviewing if those types that have already seen large increases go up further in 2022 – or if they remain stable (some reviews are seeing stability).
Finally, a key bellwether of where we are in the value cycle is to review the Market-to-Base Value relationship. Indeed, it will also provide insight on the bubble question. The below demonstrates how greater than 70% of aircraft now have a Market Value above Base; this percentage was higher in 2007/2008, but many more aircraft are now far higher than Base (although many are lower value, older types). Almost 50% of aircraft are within 10% of Base Value.
This analysis is not static and will continue to evolve with changes in the market. We have completed further value changes since the article was completed and will continue to stay on top of changes throughout 2022 to support our customers.
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