The Impact of Presidential Elections on the Private Aircraft Market
The Impact of Presidential Elections on the Private Aircraft Market
State of the Market
As we approach another presidential election, the private aircraft market continues to experience tight conditions. Recent data from JetNet reveals that the inventory of pre-owned business jets has been significantly low, with the average days on market for these aircraft at a historic low. Average days on the market for a Citation CJ3 dropped from 400 days in 2020 to just 200 days in 2023. This sharp decrease indicates a highly competitive market where aircraft are being sold more quickly than in previous years.
Furthermore, the average asking prices for popular models like the Embraer Phenom 300 and Gulfstream G650 have seen significant increases. In 2020, the average asking price for a Phenom 300 was around $7 million, whereas in 2023, it soared to over $9 million. This 28% increase in just three years highlights the growing demand and limited supply driving up prices.
Election-Year Uncertainty
Tax incentives for aircraft purchases, such as bonus depreciation, can vary significantly based on the political landscape. Changes in administration may lead to shifts in these incentives, influencing the decisions of buyers and sellers. Earlier this year the House had approved a new bill, H.R. 7024. This legislation would extend 100% bonus depreciation to 2026. However, it is currently stalled in the Senate until after November in order to avoid awarding any unnecessary political wins to either party. Banks and financial institutions also tend to adopt more conservative lending practices during election years, adding another layer of difficulty for those looking to finance aircraft purchases.
Post-Election Market Loosening
Historically, the private aircraft market activity sees a strong uptick in the year following a presidential election. Once the new administration's policies become clearer, confidence is typically restored among market participants. This renewed confidence often leads to an increase in market activity, with more transactions taking place.
Data from previous election cycles supports this trend. Following the 2016 election, the inventory of pre-owned business jets increased by 15% in 2017, while average days on the market began to rise, indicating a less frenzied buying environment. Similarly, after the 2020 election, the market saw a gradual increase in aircraft availability and a slight decrease in asking prices as the new administration's policies were implemented.
Conclusion
The private aircraft market remains tight in the run-up to a presidential election due to the uncertainty surrounding potential policy changes and economic conditions. However, this tightness typically gives way to a more stable and active market in the year following the election, as the new administration's policies become clearer and market participants regain confidence. For buyers and sellers, understanding these patterns can help in making more informed decisions and capitalizing on market conditions at the right time.
As we move closer to the upcoming election, staying informed and prepared for potential changes will be crucial for navigating the private aircraft market. Whether you are looking to buy, sell, or finance a private aircraft, keeping an eye on the political landscape and its implications on the market will be key to success.