Mallory Libex | June 25, 2022

All Bets are Off

Gas prices are at an all-time high, interest rates are on the rise, inflation is out of control, and war rages on the other side of the pond.

All things considered, there is little doubt that our economy appears to be heading for a correction in the months and years ahead. However, are things really as bad as the headlines say or will this simply be a return to normal? The whipsaw of the pandemic shutdowns in 2020 and its subsequent free money recovery in 2021 was unlike anything anyone had ever seen. What we were left with was an economic environment flush with cash, coupled with enthusiastic participants spending like jailbreak prisoners running from Shawshank. This post-covid buying frenzy was never meant to last forever and now the time has come for a return to a more normal market. This will not be a painless transition for some, but we are far from blood in the streets. A shallow pullback might be on the horizon.

Buyers have been on the short end of the stick for quite some time now. I am in favor of price discovery and getting sellers every penny the market will tolerate; however, paying inflated prices, having a lack of thorough pre-purchase due diligence, and hard deposits is something no professional broker, nor the market should be cheering for. Our pre-owned aircraft market is only healthy when inventory is balanced and prices are realistic. Buying and selling Dutch turnip bulbs and expecting it to last forever is a dangerous fantasy. Currently, we have a pre-owned business jet market that has less than 3% of the fleet for sale. Is a retracement back to a more normal 5 to 6% of the fleet for sale really the end of the world? Although some might think so, the short answer is no. A market with competition and choice is the only market that is sustainable in the long term and that’s a market we have drifted too far from.

The unfortunate hubris of the Federal Reserve to keep interest rates artificially low for an extended period and the heedless spending of our elected officials has helped fuel our current landscape. In response, the aforementioned fraternity has just announced a ¾ percent rate hike, and my money is on another ¾ percent increase in the next month. These rate hikes will have an impact on our pre-owned aircraft markets. In the months ahead, new pre-owned inventory is sure to start making its way into the market. The cards are still stacked against the buyers, but the longevity of this bull run and its executioner have shown their cards. We now know that killing inflation is the new goal for the Federal Reserve for as long as it takes. As long as they don’t kill the patient in the process, this hawkish approach should lead us back to a more normal market. The trend of sellers entering the market grows a tad bit each day and more buyers are choosing to sit idle waiting to see what hand is dealt. Although the house of cards may seem shaky at the moment, a return to normal should not be seen as a disaster, but rather a relief.

Ryan Linn – Vice President of Aircraft Sales

Those who know Ryan know his longtime passion for planes. As a matter of fact, Ryan soloed his first aircraft before receiving his driver’s license at age 16. Today, he holds multiple jet type ratings (LRJET, CL604 and B737) and is responsible for aircraft sales, brokerage, acquisitions, market analysis, data research and special projects. Ryan puts client needs first, always respecting time and understanding the importance of investments. Outside the world of aviation, Ryan enjoys spending time with his wife and two children. He also enjoys heading out to the golf course as often as possible. | (916) 753-4797

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