February 8, 2018
Marketplace trends continue to indicate that private aircraft owners and operators are reacting favorably to changes in the new tax laws that encourage purchases. “We are already seeing a dramatic effect on the pre-owned aircraft market resulting from this change,” said Daniel Jennings, President of The Private Jet Company, a leading private aircraft broker. The new tax law permits 100% depreciation (up from 50%) in the first year of operation of the cost of new and used aircraft purchased between September 27, 2017 and January 1, 2023, subject to certain conditions.
The new tax law also makes other changes impacting the private jet industry, including the elimination of tax deferral on sale of aircraft through "like-kind” exchanges and full "recapture" of taxes when an aircraft is sold. Everyone should consult their tax accounting and legal experts to fully understand the tax law changes and the effects on their individual tax situation.
“As an industry, based on current statistics, we have moved from a buyer’s market to a seller’s market, based on a significant reduction in inventories,” said Jennings. According to JetNet, the pre-owned business jet market transitioned to a seller’s market in December 2017, as new and used aircraft inventories dropped below the 10% benchmark to 9.9% of Worldwide aircraft available for sale, and down from 11% in December 2016.
“While prices have not increased yet, they are starting to firm,” Jennings advised. “Sellers have multiple buyers talking to them and are becoming more emboldened to hold their price points. We are seeing that low-time, late model, high-quality aircraft priced to sell move quickly, and buyers now have to pay more for older, somewhat less desirable aircraft,” he said. Jennings expects this trend to continue for the foreseeable future as long as the economy holds. He also believes that the market will see a dramatic escalation of transactions in the third and fourth quarter of 2018 based on buyers’ year-end tax strategies.
Jennings recommends that buyers take action now because the market has already changed and will continue to tighten, with prices expected to trend higher over time. “For those thinking about buying a jet, if you’re waiting on the sidelines thinking that prices will get better as they always used to, now that’s all changed,” he said. “Buyers are going to pay more to get less, with fewer available aircraft and less choices.” The Private Jet Company is well qualified to help buyers find a desirable aircraft in a seller’s market, through its sales, acquisition and consulting services operating in major markets around the world.