The sale of preowned business aircraft continued to stabilize in 2023. At the same time there was a subtle shift toward a move to a buyer’s market. 

Wayne Starling, executive director of the International Aircraft Dealers Association, and Phil Winters, IADA chairman and Western Aircraft vice president of aircraft sales and charter management, discuss the 2023 market and what may lie ahead in 2024. They take a look at data from the latest IADA quarterly survey of brokers and dealers. Hosted by Molly McMillin, editor of business aviation for the Aviation Week Network.

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Rush Transcript:

Molly McMillin: Hello, and welcome to today's BCA Podcast. Thanks for joining us. I'm Molly McMillin, managing editor of Business Aviation for Aviation Week. Today, we're discussing the pre-owned business aviation market and how it fared in 2023. We’re also looking ahead to the new year, 2024. Before we get started, I want to remind you that you can subscribe to BCA podcast on Apple Podcasts or wherever you listen.

My guests today are Wayne Starling, executive director of the International Aircraft Dealers Association. And, Phil Winters. Phil is IADA's chairman as well as vice president of aircraft sales and charter management for Western Aircraft. Welcome, Wayne and Phil.

Phil Winters: Thank you.

Wayne Starling: Thank you very much for having us today.

Molly McMillin: IADA recently released its most recent quarterly market survey of dealers and brokers. You published a lot of data. It was interesting data; it showed the number of closed transactions for business aircraft of, last year, up from 1,399 a year ago, so there's momentum going into the year for sales. Wayne, could you tell us a little bit about that survey and maybe what you found were some of the highlights?

Wayne Starling: Sure, and thanks again for having us on this morning, Molly. The survey is unique, we do it on a quarterly basis. The survey goes out to over 1,000 of our members, so it reaches a nice audience. That's made up of dealers, brokers, OEMs, as well as product and service providers there. The report has two segments to it. One is the real data, and you'll find that in the Dealer Activity Report, which is actual numbers that we collect on a monthly basis and document. And then, the perspective of all of our members is the other portion of it.

I think what is unique about the report is it's made up of an association, basically here to serve our accredited dealers and certified brokers. I think the fact that we only represent 17% of all the dealers worldwide, but we do 50% of all the activity in the pre-owned market. That gives us the ability to really speak with authority and have actual data of what's taking place.

As you mentioned, we did wind up having a really outstanding fourth quarter, which made it for a very good year for IADA. Notice the prospective, if you go back to the July report, we actually projected an increase in activity for the next six months. That's exactly what we wound up with for the six months. The report has proven out, over and over again, to give some statistics and some data that really is dependable and reliable. We're pretty excited about that.

Molly McMillin: Were there any surprises in this report?

Wayne Starling: Phil, I'll let you respond to that.

Phil Winters: I think that Q4 was a little bit surprising, on the closed deals that occurred. When we think back to just over the past few years, with 2021 really peaking out and 2022 carrying that peak halfway through the year, and the transactions, and the terms, and the prices that we saw in those times were unprecedented. To include low inventory, high demand, never before seen low inventory and high demand. We knew that was unsustainable; we said that was unsustainable. It proved to be. Now, we're finding ourselves coming off of those highs over the course of the second half 2022 and 2023. At the end the day, the surprise for me was, in Q4 of 2022, we didn't really see the typical Q4 spike. However, this year, we saw that get all bit more traditional in its optics. That is, the Q4 spike actually, while maybe not as big as we've seen here or there over the years, it did occur. That was pleasantly surprising to me, that we were able to see a healthy Q4 when it came to transactions.

Molly McMillin: What do you feel were some of the highlights of 2023? One thing was pricing. The data in your survey shows that sellers lowered the price of their aircraft in 268 transactions, and that was more than double from 2022, when it was 107. What are you seeing in the pricing?

Phil Winters: That's spot on and what we're all seeing. The interesting thing to me, in some of the markets that we're a lot more focused on here at Western Aircraft, is that while the inventory has continued to increase over the course of 2023, what we've seen is the transactions have kept pace. That's a leading indicator. When the transactions don't keep pace, for example, 2010, 2012, when we saw everybody wanting to sell their airplane, and actually in many cases, needing to sell airplanes to liquidate, but there were no buyers. Then, you just saw inventory continue to climb. What we've seen over the course of 2023 is, while the inventory has increased, in fact so have the transactions, to the degree that they're keeping pace. The only real lever left to move in that is price, to your original question, which is the lowered price.

We have to keep perspective around lowered price from when, it's a relative number. The relativity coming from the peaks of end of 2021 and early 2022, it almost could only go down at that point. We don't see that buyers and sellers are too far apart, they're finding themselves, they're finding each other in the process. It's taking a little bit longer because some of the sellers who haven't needed to sell have these six-month ago, a year ago prices in their head. While buyers are saying, "I'd just wait a little bit, it's got to come down. The interest rates are going up, it's got to come down." There was a stall through that process, until the buyers and sellers finally realized a little bit more of the reality around actually transacting requires both parties to be in agreement. The prices have softened, but I think that's exactly what we expected, and I know it's exactly what we forecast.

Wayne Starling: Yeah, I think a couple things there, Molly, that support that. If you think a look at, on Aircraft Exchange, our listing service, our listings are back up to about 650, which is getting back to normal, what it was prior to the pandemic. Then, the inventory, while we all say the inventory's going up, it's still lower than any of us are accustomed to. We still have pretty good runway there, as far for inventory to go up more before it gets to where it was in the past.

I think the key to it is, is that the buyers and the sellers are finally coming in alignment. The people that thought their plane was worth way more than it was is finally adjusting that down. The buyers are beginning to understand that it is an opportunity to market. We're seeing them come together more than we have in the past. I refer to it, it's not a good word, but we're getting back to a normal market, I think, for what we're accustomed to.

Molly McMillin: Since the pandemic, there's been a lot of new entrants into the business aviation market, whether it's used, or new, or fractional, or charter. What have you seen since then and are they sticking around?

Phil Winters: Yeah. The demand was so high when the airlines stopped flying that we saw a lot of older airplanes that probably should have gone off to the boneyard come into charter services, buyers seeing an opportunity to capitalize on that. With all of those, they all reached peak capacity. Prices of charter flights increased dramatically over that time. There were no fractional opportunities available. Everybody was sold out. The demand was exceptionally high. Of those new entrants, we see flight hours have, again, normalized a bit across the fleet.

I think we're seeing some of that unwind a little bit. But again, off of highs that were completely unsustainable. The interesting thing I always want to talk about is what are the options to drive demand? Demand is what we all need to fuel the marketplace. The airlines, with their pricing on the increase, the compensation packages that they're offering to pilots, it has to drive the prices up if they want to retain earnings. We still see the airline alternative as not a great alternative, so demand is remaining high. Charter flights are still expensive. Fractional opportunities are still expensive.

It's really brought the next tier of travelers into the business aviation space. That is those who were traditionally with, ‘Okay, we'll take three or four people, we'll go on our business trip on the airlines.’ When that option went away, they all started to look at charter and/or fractional, and/or cards. Of course, once you experience business aviation, it's hard to go back. The whole process of the pandemic and what the airlines did, both on scheduling and availability of flights, and just the experience, has really brought in the next tier of business aviation travelers into the space. And they're sticking. They're staying around. That's helpful for demand and the optimism that we have, both through the course of 2023 and into 2024.

Wayne Starling: There was a big concern that we were going to see a rush back to sell, all these first-time buyers that came in. That has not happened, thank goodness. I think that's been a pleasant surprise for everybody because they are sticking. They are not stopping their planes, as so many people feared they might.

Molly McMillin: Wayne, I noticed one thing in your survey, that the number of deals under contract were down a little from a year ago -- from 972 to 962, so just a little bit. Although, there were fewer transactions that fell apart during 2023, it showed. Looking ahead to 2024, what is the momentum coming into the year and what are you each expecting for the year to hold?

Wayne Starling: Well, I think while we had an outstanding 4th quarter, there was still a tremendous amount of backlog that did not get done for multiple reasons. We know we're carrying over some momentum into January. But if you look at the report overall, there's nobody panicking. They don't feel as though we're on a downhill slide. They feel as though that we truly are going to be maintaining where we were last year. We do expect some slide, obviously, in some areas. But overall, the feedback and the prospective says that we can expect a more normal year across the board. Phil, what are your thoughts?

Phil Winters: Yeah. It's interesting, reading through the comments in the market report. There are a few that lean a little bit positive, a few that lean a little bit softly. That's different than what we saw two years ago. But at the end of day, from a sentiment perspective, everyone's feeling quite positive. There are going to be some segments of the marketplace that are a little challenged, and you can see in the report when you look at things like pricing projections. Again, crystal ball for qualitative type survey answers. But, with a lot of people responding and a lot of our members responding, when we’re looking at pricing projections, we see a slight decrease of pricing is projected by the survey. However, within that, the midsize jet seems to take the biggest category of hit on pricing. But we see the majority are stable to slightly decreasing.

The demand projections are stable. That's a good lookout for 2024. Everybody sees similar to what I'm talking through, is that there's stability there. Then, on the supply side, there's a slight increase projected amongst our group. Of that, the light jets seem to be the segment that could have more, according to our survey.

All of that to say, 2024, the activity still exists. The pricing's getting a little bit more rational. Buyers and sellers are getting more reasonable. And, the alternatives still are not incredible. All of that ... I was here in 2001, I was here in 2007, a lot of those sentiments existed then as well. But it's a little bit different today with the alternatives being less appealing to some of the perspective buyers and sellers. We're optimistic and we think that the 2024 forecast is relatively stable.

Wayne Starling: Molly, I would like to let people know, in case they don't know where to find the report, if you go to aircraftexchange.com, it's available to anybody that would like it.
Molly McMillin: Well, it looks like that's all the time we have today. But thank you so much, Wayne and Phil, for joining us. We really appreciate it.

Wayne Starling: Thank you, guys.

Phil Winters: Thanks, Molly.

Jeremy Kariuki: Thanks for listening to the BCA Podcast by Aviation Week Network. This week's episode was produced by Jeremy Kariuki and Cory Hitt. If you enjoyed the show, don't forget to like or follow us on your podcast app of choice. If you'd like to support us, please leave a rating wherever you listen. Thanks again, and we'll see you next time.