There is a very compelling argument to look at the pre-owned market today. Used aircraft have already experienced the majority of their market depreciation in value.  This helps to hedge some of the residual risk over the ownership period.

There are very high quality aircraft to be had that can offer as good a quality of ownership and experience as a brand new aircraft. A common sweet spot is an aircraft that is two- to three-years-old.  Warranties are still in effect and major maintenance costs are not imminent.

The other benefit of a used aircraft is availability. Commonly, a used aircraft can be purchased and placed into service as quickly as two-to-three months.  But delivery of a new aircraft, which can be personalized to specific needs and has a full warranty, can require as little as four-to-six months or as long as three years.

There are regulatory requirements around how the aircraft is maintained and documented.  But, equally as important, the documentation can reflect up to 20-25 percent of the value of the aircraft. So, documentation is a very critical aspect of any transaction.

A high degree of comfort can be gained with the pedigree of the aircraft by reviewing the associated documentation. Complete, well-organized records provide insight to the operator. The pride in ownership and maintenance will show within the records and in conversation.

Similarly, an operator should provide equal care in documentation management, in part, due to the value retention, but also to assist in future sales.

The overall compression in market prices and growing choices have made a buyer's choices more complex.  For example, a buyer with a capital budget of $6 million can consider at least 10 different current-generation makes and models. And each of these models has distinct performance, maintenance and cost differences.

This creates a lot of confusion for the buyers, because the choices are becoming more numerous. The number of aircraft on the market results in much more dialogue and emphasizes the need for due diligence in making the right choice. Understand the pros and cons of the different makes and models before making the purchase to enter the market with confidence. 

Further, manufacturers are continuing to develop aircraft at various price points. The choices will be even more complex.as these aircraft are certified and enter the market.

There have been some significant changes to the fractional markets over past year. Potential buyers should be aware of this evolution and potential impact for them as owners.

For example, two manufacturers have recently exited the fractional market. 

Bombardier and Cessna had fractional programs that were part of their portfolio. Strategically, their intent was to capture buyers at the lowest entry point of ownership. Then, as they grew into their demand, they would eventually grow into the product line as whole owners. In the case of Bombardier, their fractional program (Flexjet) was sold to the parent company of a competitor. 

Cessna's program, CitationAir, was shut down.

There have been other changes in the turboprop fractional programs. On the one hand, a large provider called Avantair filed bankruptcy and closed its program. This left owners with few options and much frustration. 

On the other hand, a new provider has entered the market. Wheels Up is providing fractional programs on KingAir turboprops and plans to grow aggressively.

The values of corporate aircraft took a significant hit over the past five years. The bulk of value loss occurred in the first two years. 

Since then, the values have stabilized to a greater degree of comfort. This stabilization and overall market correction have given potential first-time buyers the confidence to enter the market.

The lack of other travel options have also driven first-time buyers into the market.  Commercial airline options remain increasingly frustrating.  At the same time, the fractional markets did not experience the same changes are whole aircraft.  As a result, the economic gap between fraction and ownership closed. 

The prices of aircraft before 2008 were appreciating quite regularly. There are many stories of owners selling aircraft for more than they purchased.  As a result, financing companies were very bullish.  Financing and lease agreements were written with very aggressive terms which were favorable to the lessee or the owner.

Since 2008 –  and the lessons of the economic downfall –  the financial markets have effectively changed how aircraft are financed.  This has resulted in a number of limitations and provisions that lenders are adding to their regular terms and conditions. These are potential risks to owners or lessees that they need to be aware of before they finalize their financing.

For example, a number of companies will no longer finance an older aircraft. Typically, the equation is: If the age of the aircraft plus the financing term is greater than 15 years, it’s no longer a financeable asset. It is a very difficult proposition if you try to finance an older aircraft.

Second, the lease conditions have evolved in such a way that the return provisions have changed dramatically. There’s a lot of risk on the cost side to the lessee stipulating the physical condition –or even equipage on the aircraft – that needs to be maintained when it comes back to the lessor.

These issues need to be researched as the buyer goes into the financial markets.