Crystal Ball for 2019
First a little pat on the back, our 2018 projections were fairly accurate. We are seeing interest in new models and customers upgrading to these new models. There is less late model high quality aircraft for sale. Prices have stabilized or in some markets shown slight increases.
What is the outlook for 2019?
We feel that 2019 will continue to see demand for new models. The low production levels from earlier in the decade are being felt in the market place. In some cases, the aircraft you might want to upgrade to as a 5 year or newer model, might not exist on the resale market and you will need to consider a new plane to meet your requirements. New models are offering significant improvements in their respective categories, from increases in performance to perhaps more significantly, improvements in interior comfort.
Positive items for 2019 will be a continued strong economy. The OEM’s have and do not appear likely to make large increases in production hedging against any economic headwinds. This will continue to increase high quality aircraft demand and will result in more, albeit small, price increases. We also see a large number of older aircraft that will miss the ADS-B equipment mandate and be parked. This hopefully will stimulate demand in older aircraft that have been upgraded to the new mandates. Could we see some small price increases in older aircraft that meet the new requirements?
There are potential negative items lurking for 2019. Demand is staying relatively flat in the US. This market is still around 70% of the total aircraft market. Any decreases in the US are felt hard in a world market with tepid demand. Any backsliding in the other world markets, even as a small percentage of the total will be impactful.
July 2019 will mark the longest economic recovery on record. Economists do not believe it can continue forever. Most people think there will be a slow down, the question is will it be 2019 or 2020 or later. We think that the economy will feel the slow down in 2020. The US election will paralyze business decisions with the risk of a highly polarized campaign for President. However, unlike some recessions, we do not feel it will be as severe and will not have as big of an impact on the aircraft industry.
Scheduling pre purchase inspections and upgrades to your new purchase might take longer. Maintenance facilities are at capacity doing upgrades for the ADS-B mandate plus many operators are taking the scheduled downtime to do other heavy maintenance or upgrades. Combine that with an aging fleet that takes more shop days and you have quickly used up the maintenance facilities shop capacity.
For many years we have heard of the upcoming pilot and maintenance technician shortage. It is here and is real. Corporate flight departments will be faced with increasing competition from the major airlines. The airlines are struggling to find enough pilots to continue their growth. Finding high quality aviation personnel will be an issue for corporate aviation.
Historically, the hardest felt drops in the aviation market have come from years where we saw a run up of production. Since demand for new aircraft has remained fairly steady over the last 7 years, and the OEM’s are not eager to overproduce we think any setbacks in the economy will not be a catastrophic event and will be a small bump in the road. The new models will help keep this more stable as well.
The market you are experiencing today is the aircraft market until we see some outside increase in demand.
