With a new US President taking office, an uncertain economic environment and conflict in Europe and the Middle East, 2025 could pose a range of challenges and opportunities for Business Aviation finance. Gerrard Cowan, with AvBuyer, explores.
It has been a turbulent few years for the global economy and for Business Aviation.
Chad Anderson, CEO of business aircraft acquisition specialist Jetcraft, reflects that demand for pre-owned aircraft surged following the Covid-19 pandemic, “driven by a combination of supply chain issues affecting new aircraft production and an influx of first-time buyers entering the market”.
This dynamic could begin to shift in 2025, he says. With new aircraft production expected to ramp up and more deliveries coming online, the pre-owned market might soften slightly, which could impact aircraft values and loan-to-value ratios.
Still, well-maintained and newer pre-owned models are likely to be highly sought after and to hold their value, Anderson says.
“In a high-demand market, financing availability could become more competitive, especially for in-demand models that retain strong value,” he adds. “Buyers will need to act swiftly and be well-prepared to secure favorable financing terms.”
Demand is still very strong, but there is a division in the market based on aircraft age, notes Ramy Sidhom, Head of PNC Aviation Finance. Older aircraft experienced an unprecedented increase in demand and value in the first few post-pandemic years, but now the inventory of older models has stabilized and their values are falling.
“First-time buyers who bought older aircraft at their height of demand and value are now experiencing their first major maintenance events, leading them to explore upgrades for newer models,” he highlights.
There has been great speculation about what would become of the first-time buyers, post-pandemic – would they stay or go? They have not exited the market, says Sidhom, but rather have refined their searches, becoming savvier and exploring options that meet all of their unique mission needs.
This will impact the market heading into the coming year, he predicts. “We believe they are here to stay, and they will continue to appreciate the convenience, safety and productivity that Business Aviation provides.
“Additionally, newer aircraft remain in high demand and inventory remains very tight, a trend we expect to continue into 2025.”
Sidhom points to a range of other areas to watch for in 2025. For instance, he highlights the potential rise in inventory levels (particularly in older model aircraft), potential changes to the new aircraft order backlogs for the OEMs, their challenges with delivery schedules, and the general supply chain challenges faced by the industry.
This article was originally published by AvBuyer on December 11, 2024.