What if I told you 15 years ago that, one day, you would gladly pay close to $1,000 for a cell phone? You would have most likely laughed in disbelief; I know I would have. When a new product hits the market, it is often obscure, costly, and seemingly unnecessary. However, time and time again these new “luxuries” quickly turn into necessities due to popular demand. Business aircraft are no exception to this diffusion. As certain upgrades are incorporated on an aircraft, they usually start out as an expensive rarity that most likely adds value to the aircraft if incorporated. Over time, as more of these products are implemented to an aircraft fleet, their presence quickly becomes mandatory. What once was seen as a novelty has become standard equipment and the lack thereof leaves your aircraft less valuable than your peers. This theory of innovation is not new and dates to the 1960’s. However, what is new is the speed at which these innovations seem to be taking place and the affect they have on aircraft value.
It’s hard to imagine that wireless internet on private aircraft went from being an exception 10 years ago to the rule in 2021. Ask anyone in the charter business if Wi-Fi is necessary and the answer is a resounding “yes.” Wi-Fi is just one example of how technological advancements evolve from a “nice to have” to a “must have.” Another example is WAAS. I remember talking to pilots 5 years ago who said they had no need for WAAS. Today, these same pilots will tell you they can’t live without it. These two items are good examples of how a product evolved from simply adding value and functionality to an aircraft, to deducting value for their absence. Once a new innovation hits the point of widespread adoption the aircraft owner has two choices; pay to have the product added for their own use or forgo the addition and deduct the aircraft value proportionally when it is time to sell. As technology advances at whiplash speed, do not be surprised to see even more aircraft advancements move through this evolutionary adoption process even faster.
It is key to remember that when a new upgrade is introduced it is less important to be an early adopter and more important to stay informed on the fleet trends. Not all upgrades receive widespread adoption and as such aircraft values will remain unaffected. As previously discussed, however, once most of a fleet has incorporated this new normal, then aircraft valuations will be altered. How much and to what degree are valuations altered is all dependent on the upgrade. Looking into the future at what new advancement will receive mainstream adaptation is anyone’s guess. We obviously have some leading contenders with synthetic vision, emergency autoland, runway safety features, and on and on. I leave you with this – we live in a world where self-driving electric cars can be purchased using Bitcoin. In the next 5 to 10 years, business aircraft and their upgrades are sure to evolve to the ever-advancing technological landscape. Being well-informed and open minded will be the key in keeping pace with a constantly progressing environment.
Finally, there is one key point on this topic I have yet to discuss. What happens when it’s the government, not the market, that dictates which products receive widespread adoption due to regulatory compliance? The landscape beings to alter rapidly. Tune in next month for part II.
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.
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