Announcing its first-quarter market report on Tuesday, the International Aircraft Dealers Association (IADA) said its members reported a 35.2% increase in closed deals compared to the first quarter of 2021.

In a statement, IADA Executive Director Wayne Starling also said clients entered into 223 new acquisition deals this quarter, nearly double the number of clients who did so in the same period l last year.

“Global demand is very high,” Starling said, “and much like the fourth quarter of 2021, that demand is married to limited inventory levels.”

However, based on feedback from IADA members, these constraints may ease and provide greater inventory for the market this year.

The report also included information from IADA members who provided context around some of the market conditions. For example, David Lee of Soljets predicted that the market would continue to be robust, but a lack of inventory was hurting deal flow. Meanwhile, XOJET’s Gordon Cameron said the rising cost of capital could slow buyers’ ability to close, slowing demand over the next 12 months.

A source of concern for members in the report is the indication that owners and operators could face the highest insurance premiums in 20 years, largely thanks to the Russian-Ukrainian conflict. Single-pilot operators could feel the worst pressure, with conference panelists believing fares continue to climb.

Additionally, buyers of new and pre-owned aircraft may face price increases due to out of stock.

Industry experts give their opinion

In a virtual conference following the announcement, some aviation experts attempted to provide context for the report.

“There are a lot of potential headwinds in the market,” said Brian Proctor, president and CEO of Mente Group. “A lot is happening with international political activities and interest rates, causing a bit of conservatism, but the numbers speak for themselves.”

Meanwhile, Suzanne Miners-Levy, shareholder of Advocate Consulting Legal Group, said all indications point to the trend of more first-time buyers entering the market, even as more traditional business travel continues to rebound. In addition, seasoned buyers have shown interest in refreshing their fleet.

“We don’t see that cooling, and I don’t see an early buyer cooling in this report,” Miners-Levy said.

As for the challenges, Miners-Levy pointed out:

  • Increase in insurance rates
  • Long maintenance inspection times
  • A continued shortage of inventory at some facilities

The price is not an issue, but there is a ceiling

Paul Kirby, executive vice president of QS Partners, said that for the first time customers are deciding they are willing to spend above market value to buy a new plane, but only to a certain extent. Using data his firm has tracked in 60 markets over the past 12 months, Kirby said customers are willing to go up to 45% above market value.

“We’re starting to see some of these markets finally have a real cap. Still, there is a bit of a new normal, and that new normal is about 50%, or in some cases, 70-80% higher than before.

Change optics

When Zipporah Marmor, Vice President of Aircraft Transactions at ACASS in Montreal, Canada, was asked to describe her customer demographics, Zipporah Marmor said companies ultimately double down because the optics around the business jet ownership was changing.

“We’ve had large corporate clients who, before the pandemic, were looking to sell, not because they weren’t flying, but because they didn’t like the optics of ownership – they were suffering pressure from shareholders and customers – right now that has changed,” Marmor said.

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