Oh we are ... the debt just isn't on the aircraft buyers balance sheet lol

The guy who bought my Baron took a loan. I shudder to think what the interest rate would be now. VC money in the valley has dried up. Homes aren't selling well, and prices are dropping. That has other knock on effects on things like contractors doing renovations and restaurants as folks on floating rate mortgages get squeezed and cut back on things like dining out.

That said, I've always used Las Vegas as a barometer for how the economy is doing. If I'm there and it's fairly empty with that feeling of desperation in the air, I know the economy is in trouble. If it's packed, the restaurants and hotels are hopping, I know the economy is fine. I was just there and it was bonkers packed. People are still out, people are still spending, and employment seems to be ok, at least for now.

I hope so, I really do, but "hope deferred makes the heart sick" and so far the waiting strategy hasn't paid off.

In December 2021 I was sure the Pilatus market couldn't get any crazier, one out of three Pilatus clients paid the price and bought at the top of the market, only it wasn't the top... not even close. We missed opportunities, ones that didn't seem even marginal at the time, that now seem like steals. The last two years have been a lot of hard work, extra effort and disappointment for my team. We'll see what happens, but without a major economic disruption I don't see higher inventory or lower prices.

At this point I'd be happy if prices for CJ - CJ4, Phenom 100 / 300, Challenger 300 / 604 / 605 and PC-12's would just drop to something that makes sense.

That’s just the calm before the storm. It’s a bit delayed especially this time around, even with all of the Fed rate hikes, because of the unprecedented amount of liquidity that has been pumped into the market through historically low interest rates and Covid freebies. The day of reckoning is near. It’s just harder to see due to the party going on and the obliviousness of the masses.

To be clear, my 6-12 months was for when more planes will show up on the market. I think there will be some additional delay before prices come down. If turbine prices come down much at all. I see a drop in pistons as inevitable, but there are other factors that could support a solid floor in the upper end of the market.

For those moving up, we're chomping at the bit!

Nm

It amuses me greatly that everyone is losing their minds over interest rate increases that have only taken rates back to what is historically normal, and even then it's the low side of normal.

A 12 year period of near zero rates was a historical aberration.

Best,
Rich

You can either have a shiny airplane in your hangar or useless, depreciating dollars in the bank. There is a much higher chance the airplane is going to appreciate than the dollars. Many people with no debt will choose to hold enjoyable hard assets vs trading them for useless paper currency in the inflationary environment. You are going to continue to see a strong demand for nice cars, boats, houses and planes.

The sky is not falling, prices have simply returned back to normal; similar to interest rates.

Mike

Exactly... you hit the nail on the head...

Again, exactly... you hit the nail on the head...

Yes but asset prices were WAY lower back then so the impact of those interest rates were less.

At least when it comes to housing, mortgage payments were a smaller part of people's incomes back in the 80's even though interest rates were much higher.

Further, there is way more debt out there than there was back then. People and companies have taken advantage of ever-declining rates to take on more and more debt but for the same monthly payment. That is now reversing. Very little of that debt can be paid off so it must be rolled over at higher interest rates.

I really don't know how this will affect airplane prices but higher interest rates will be taking ever-larger bites out of people's and company's disposable incomes over the coming years. This must lead to decreased consumption and lower prices. In fact, this is exactly what the Fed is trying to do in order to curb inflation.

How many people are left that have “NO” debt and can afford to pay cash?

Agreed.
However, if that 12 year period induced historically high debt, since the cost of funds was historically low, now that we're on the way back to historically “normal" interest rates, the results will not be pretty.

Most humans have a relatively short memory.

Agreed.
However, if that 12 year period induced historically high debt, since the cost of funds was historically low, now that we're on the way back to historically “normal" interest rates, the results will not be pretty.

Most humans have a relatively short memory.