Will business aircraft values recover? The Sharpwings share their perspective

posted on 4th January 2021 by Eddie Saunders
Will business aircraft values recover? The Sharpwings share their perspective
Jean Sémiramoth

Although business aviation did not collapse to the same extent as commercial aviation, the sector certainly has not escaped the global impact of the COVID-19 pandemic and its widespread impacts on the economy. An impact far more devastating than Brexit, continuing trade tensions and the rise of environmental concerns, for example.

Sémiramoth evaluates the current status to see how financiers, owners and operators can navigate the months ahead.  “There is a near unanimous consensus across the industry that acknowledges pre-owned aircraft values are down. From turboprops to large-cabin, long-range business jets we’re seeing a reduction of roughly 10% to 25% across the past 12 months.”

According to The Sharpwings, in those national economies where business aviation is prominent, higher fluctuations have been observed in pre-owned aircraft values, notably large-cabin, long-range business jets. This segment has been the most affected by international travel restrictions and enforced border shutdowns to cope with the persistence and resurgence of the pandemic. Until vaccines and/or medical treatments are widely available and international travel restrictions can be lifted this may be an indication of what to expect for 2021.

Sémiramoth adds that most, if not all, business aircraft manufacturers had to suspend production at some point during 2020 due to the first lockdowns and many have decided to curtail their production rates for the near future. “But it remains to be seen whether these prudent and smart decisions will be enough to mitigate the risk of over-supply and unsold inventories” he says.

“The downturn business aviation is now going through means a lean time for orders and this is continuing to put pressure on aircraft manufacturer backlogs. Will this push aircraft manufacturers to be more aggressive on pricing across their entire product portfolios – putting downward pressure on pre-owned aircraft market values? This is clearly a likely scenario.”

The Sharpwings observes that the COVID-19 crisis does not overshadow the fact that 2020 has been a year of exciting developments in business aviation despite the circumstances. Bombardier has become the only major stand-alone business aircraft manufacturer, at a time when business aviation just entered a new downturn; whilst Boeing pulled out of a planned Embraer tie-up, raising questions on what could be next for Embraer Executive Jets.