I am seeing prices on used turbine aircraft that are crazy. It seems to be everyone's favorite subject and I get asked daily what X is worth and what I think the market is going to do, so here's your thread!

When you think about how many rich guys there are in the world, and how relatively few turbine powered premium aircraft there are, I predict that the values of turbine aircraft continue going up, even during the next recession.

I do not see the same for the low end of the piston aircraft market.

Tony - they aren't rich in a recession/depression. The fact is that it's been a VC funding bonanza the last few years, doesn't mean there is real earnings there. Soon as that goes away, which it already is doing (see article), there will be a flood of jets and turbines on the market.

https://www.wsj.com/articles/for-tech-startups-the-party-is-over-11652710330

There are plenty of “rich guys” who aren’t dependent on “new money”. I’m sure there might be a small dip, based on the depth and length of a recession, but they’ll otherwise be fine.

There is a LOT of cash floating around the USA, and unless the dollar falls off the map, rich folks will be fine.

Then why didn't they buy turbines during last recession if they're recession proof? Why was the market ice cold then?

Arguably….

COVID had not yet been a factor, nor COVID’s effective reordering to the Economy and Commercial Air Travel had occurred, which has most likely changed peoples attitudes toward what they are willing to pay in order to avoid….

I think airline / TSA issues and COVID helped the current market… plus lots of cash and low cost money.

A bear market would/will snuff values for many toys, homes, real estate and stock market investments. Will still be lots of cash out there but much warier $ and able to earn interest on it unlike the last couple of decades.

I agree that there are plenty of people who will still be able to afford turbines and I also agree there are plenty of folks who will no longer be able to afford turbines. The people buying who are heavily leveraged against their tech/crypto portfolio are out, for example. There's also a large group of people who can take advantage of the tax rules for corporate aircraft. If you're making a lot less profit there's presumably less of an incentive to spend millions on a turboprop/jet for tax purposes. Balanced against that, COVID has made commercial air travel truly miserable so maybe you just spend the money anyway.

The supply of airplanes is fairly inelastic so it doesn't take a huge swing in demand to have a big impact on price. My crystal ball is broken so I really have no idea how this will pan out. I would be curious to see if waiting lists for new turbines go up or down, though. Feels like that might be a leading indicator of the market softening.

As a relatively new (3.5 years) owner of an entry level turbine (Meridian) I have given a lot of thought to selling and harvesting the gain. Then I think about how it has grown my reach and shrunk the world around me and I quickly come to my senses. Ain't no way I'm selling my turbine. I think those that have bought into a turbine are not going to be sellers if they can afford it, regardless of what their stock portfolio or P&L shows. Sure large companies with several turbines will cut back and sell off some, but those single turbine operators are going to be very resistant to get rid of their magic carpets. I've got a long list of things that get sold before the Meridian.

I've seen the market go up and come down... I didn't start a company representing buyers expecting this market!

What I haven't seen is so many new to aviation individuals, families and companies buying turbine equipment. I can't speak for the entirety of aircraft buyers who fit in this category, but I can tell you that our clients who are "new to aviation" can well afford it, paid cash in most instances, could have bought an airplane years or even decades ago and they won't be selling their airplanes unless it's to upgrade.

Covid both changed the perception of private aviation and caused folks to explore options. Now we don't have enough airframes to meet the demand.

I believe demand and prices will soften this Summer for a variety of reasons, but will there suddenly be abundant inventory and pre-Covid prices? Not without an economic collapse.

Sure.

Just had a client pay 1M over asking for a Pilatus.

I advised against it.

Eventually the needle comes off the record and there will lots of asses looking for unavailable seats.

Agree, Chip can bring a buyer with $2m over market for my plane and I wouldn’t part ways, wouldn’t even consider it

Good luck out there

I would bet the number of turbines purchased with nearly free margin loans is not a trivial number and the cost of these margin loans is going to be changing quickly. For example, the interest expense on a margin loan has been about 1% for the past 2 years. That number is probably going to be closer to 5% in a year. To put that into context, on a $3 million plane that was only $30K of annual interest. If the fed funds rate hits 4% next year, that would result in a 5% rate on margin loans. The carrying cost on that same $3 million plane will be $150K just sitting there. That could create some sellers very quickly.

Edited to add chart.

I have read that over 100 billion dollars was ripped off from various COVID relief programs. I’ll bet some of that money found it’s way into aviation. Easy to overpay when it’s funny money that one didn’t work for.