Tight Pre-Owned Market Driving MROs’ Post Pandemic Prospects

Stevens Aerospace MRO work
Engine maintenance on a Citation Encore is shown in progress at Stevens Aerospace & Defense Systems' Greenville, South Carolina, facility. Photo credit: Stevens Aerospace

As the world unwinds from the pandemic’s worst days, business aircraft MROs are seeing a surge in demand for upgrades and modifications.  

“When the pandemic took hold, maintenance tasks would have been stripped back with depleted flight hours,” notes Robin Dunlop, a partner in ALTEA, a London-based consultancy focusing on business jets, helicopters and regional airliners. “As flight hours increase those tasks will now be more pressing—if not urgent.”

Coupled with this is another dynamic--a run on the pre-owned aircraft market with a scarcity of available inventory. According to Paul Cardarelli, vice president, sales for JETNET in Utica, New York, only about 7% of the global in-service fleet of business jets is currently for sale. “With availability below 10%, we are entering the post-pandemic world with a strong sellers’ market in place,” he says. “Buyers in search of late-model, low-time, clean aircraft have few to choose from.”

The market for available aircraft was starting to slow by the fourth quarter of 2019, due to the then-unresolved Brexit issue, a contentious U.S. presidential election and the release of post-recession pent-up demand that was largely satiated in 2018 through 2019. “What remained were many older jets in excess of 15 years of age. These tend to be regarded as market irrelevant by many of the brokers and financiers who facilitate the mainstream, pre-owned business jet market,” says Cardarelli.

To illustrate, he reports that, according to JETNET data, for the first six months of 2019, total pre-owned business jet transactions—including leases agreements and whole (not fractional) retail sales—numbered 1,165, out of a composite inventory of 2058 jets available for sale. For the same period in 2020, the total was 967 out of 2,239 on the market—down 17%. However, for the first six months of 2021, JETNET has noted recovery to 1,207, up 25% over the same period in 2020—despite a depleted inventory of just 1,663. “For the MRO upgrade and modification market, this could have some significance,” he says.

But, there is another factor in the mix. Prior to the 2009-10 recession, a new business jet out of the factory would lose about 25% of its residual value within its first five years, he says. "That changed post-recession,” he points out. “Today, depreciation for the same period is as much as 40-50%. The owner of a 5-10 year-old business jet may today conclude that since the big depreciation has been flown out of their plane, it will depreciate at a slower pace going forward, and that the pre-owned market offers no viable replacement.”  As a result, he explains, some owners may conclude it is strategically wiser to hold onto their aircraft for another two to three years, and invest in modifications and upgrades.

Remarket or Upgrade?

In that regard, ALTEA partner Dunlop says that modification decisions will depend largely on whether the owner wants to remarket or continue operating the aircraft.

“Interior upgrades really depend on whether the owner is chartering the aircraft and needs to keep the aircraft’s contemporary appeal, or if there are more nuanced changes wanted,” remarks Dunlop, adding that “many business aviation users now fully expect” an easy to use and fast SATCOM, which on many aircraft is not the case. “This definitely drives appeal in the aircraft’s utilization,” he says.

Thomas Chatfield, CEO of Vancouver-headquartered Camber Aviation Management, a completion management firm catering to the large cabin business jet market, reports that post-COVID a considerable amount of cabin refurbishment activity is taking place particularly among aircraft approaching their first major checks—about 10-12 years for a private jet. And while cabin refurbishments range from re-upholstery to major upgrades of communication and entertainment systems, he notes that major changes to galleys are also happening.

“Operators want the ability to prepare and cook food inflight, rather than just heating something in a microwave,” says Chatfield. “We are seeing this trend among operators of Global Expresses, Gulfstreams and Falcons. The latest kitchen technology, on the ground, is being applied to business aircraft.”

Along this line, Chatfield says that video conferencing is another trending upgrade. “That’s the next logical step beyond email, texting and voice, and it is starting right now,” he stresses.

Asked if the pandemic has directly led to demand for any specific kinds of modifications, Chatfield reports that three are especially representative of post-COVID flying.  

The first pertains to the air filtration systems. “Depending on the aircraft’s age, it could involve simply replacing the filters and cleaning the ducting, or installing antimicrobial systems,” he says.  “Because of the pandemic, antimicrobial air purification systems will become popular and in demand.”

The second, says Chatfield, will address repair and replacement of upholstery and cabin finishes, such as wood trim. During the pandemic, he notes, cleaning solutions were heavily applied to almost every surface in the cabin including the upholstery and the trim. “Repeated applications of cleaning solutions can degrade and damage upholstery and wood finishes. At the same time, the aging process takes its toll,” he says.

The third cabin upgrade Chatfield sites is the installation of anti-microbial ultraviolet lamps.   “When the aircraft discharges passengers and the door is closed, the UV lamps, which work on a timer, are activated to disinfect the cabin. Depending on the time set, they automatically shut off,” he says.

One other trend which Chatfield observes is that people new to business aviation are entering the market by acquiring pre-owned aircraft, and ordering upgrades and modification work.  “I believe we will see more of this by corporate, private and charter operators,” he remarks. “That will generate more maintenance events.”