Mallory Libex | April 9, 2022
Insights

The Tides Are Turning

The Tides Are Turning

In the past few weeks, it has become clear that aircraft inventory is starting to make its way back into the pre-owned markets. Inventory numbers still reside on the historically low side, but the trend seems to be changing. So, where is this new inventory coming from, and will it continue? Is it possible that this is the start of a healthy correction that these markets desperately need or are the floodgates about to open? Due to the current geopolitical pressure, as well as the Federal Reserve’s decision to reverse its easy money policy, the whispers are being heard of recessionary fears. In my adult life, I have experienced the dot com bust in 2000, the Great Recession in 2008, as well as the self-induced recession of the global pandemic of 2020. My basis of past experiences leads me to the knee-jerk thought that every recession will lead to a borderline catastrophic correction. That said, the economy sneezing does not necessarily mean it has a cold. A healthy correction appears to be in its early stages, but too much too fast could be overwhelming.

Anyone with a pulse on the pre-owned aircraft markets will tell you that this market is poised to absorb any moderate amount of new inventory and prices could definitely use some relief from the historically inflated prices. There is no shortage of buyers ready to catch any rebound that bounces in their direction; however, they could just as easily step back to avoid catching what appears to be a falling knife. With all this in mind, the pre-owned aircraft markets are due for a healthy change of course, but any black swan is sure to increase buyer trepidation. If the situation in Europe intensifies or the Federal Reserve moves too aggressively, this healthy trickle of inventory could quickly turn into a fire hose of desperate sellers racing to the bottom. If what we are seeing in these markets is due to the recent rate hike of 0.25% by the Feds, then what will be the result of the six additional rate hikes planned for later this year? Chances are that, if well-planned and far enough apart, these interest rate increases could provide a healthy flow of pre-owned aircraft back into markets. The next few months will surely tell the tale of where these markets are headed, but caution has made its way back into the conversation.

All fear-mongering aside, keep in mind that most irrational decisions are usually emotional reactions induced when faced with difficult decisions. The decisions we face moving forward are tough but necessary. Inflation is out of control and must be reined in. Exorbitant aircraft prices and the lack of inventory were never going to become a new normal. This was always a short-lived spike that was sure to correct itself at some point. The writing is on the wall and those who follow these markets are seeing it first-hand. If this trend holds course in a smooth and orderly fashion, then the road back to normal aircraft markets has already begun. This rocket ship ride we have been on these last few quarters is starting to lose thrust. The biggest unknown we all face at this point is whether or not we will be staring up at a parachute on the way back to earth.

 

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Ryan Linn – Director 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.

rlinn@flyomni.com | (916) 753-4797

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