A very high percentage of the business aircraft fleet is 20 years old or older. We as an industry keep finding ways to keep this older segment safe, efficient, reliable, and operating, which for many has become a pathway into our ownership ranks. First-time buyers have seen these price points as attractive. In some cases, operating costs may be slightly higher; however, with lower annual utilization the attractiveness of the acquisition cost outweighs the operating cost increases. Win-win.
With lower utilization comes the need for many of these owners to analyze the value of engine and APU programs, which are often 300-hour per year minimums against an actual annual utilization of what might be 150 hours or less. Paying what amounts to be twice the price for these programs no longer looks or feels like good insurance. As they approach the pre-owned market for these older aircraft, many buyers look very closely at remaining engine time before a scheduled event. Maybe even more than cosmetics or other upgrades. The aircraft with the most time remaining might win out over other aircraft with less remaining time. Many of these owners are considering their ownership to be the last for these aircraft. Investing in a long future for one of these aircraft is no longer the main criteria for selecting the right plane to buy. Residual loss rate is not always as high up in the discussions as it used to be, either.
Jay Mesinger is the CEO and Founder of Mesinger Jet Sales, an international aircraft brokerage firm, and has been regularly contributing to AIN since 2018.
