Thoughts on current airplane market

FormerHangie said:
I'm gathering that you like to buy a used airplane for a price similar to what airplanes sold for a few years ago. Considering those airplanes are now that much older, that seems like a reasonable request. I'm also assuming you'd like to buy a new truck without that pesky additional dealer markup, or even get a little discount. Le's see if we can project which one is more likely to happen.

Edmunds, the car web site people, estimate that there will be 15.2 million new vehicles sold in the U.S. this year. The Bureau of Transportation Statistics tells us that there are 212.2 million licensed drivers in the U. S. That comes out to one new vehicle for every 14 drivers, not too shabby, and if that actually occurs, it will either make the vehicle fleet larger or newer, depending on scrappage.

Let's see what we can come up on the aviation front. GAMA tells us that in the first three quarters, there were 895 total piston aircraft shipments by GAMA members in the first nine months of 2021. If we add the same number of shipments as were in the third quarter again as an estimate for the fourth quarter, that's a total of 1295, but that's for the whole world. The U.S. typically gets about two thirds of those, also according to the GAMA, so that's 855 airplanes. That includes some, but not all, light sport aircraft. Flight Design,Tecnam, Icon, Pipistrel, and CubCrafters are included, so maybe another 50 or so light sport? So we're looking at 900 or so new airplanes for the U. S.

Now, let's try to figure out how many pilots there are. The 2021 airman statistics have been published by the FAA: Some of these counts are very straightforward but a few of them require some estimation. The easy ones are:
Recreational Pilot: 85
Sport Pilot: 6801
Private Pilot: 161,459
and I'm going to count all of them.

Student pilot is not obvious, because student certificates don't expire any more. There have been approximately 50,000 student certificates issued each of the last five years, so I'm going to go with last year's student certificate issuance, which was 50,874. Note that there were approximately 23,000 first time Private certificates earned last year, so more than half of the students don't finish their ticket.

Also not obvious is the number of Commercial and Airline Transport certificate holders that fly light GA. Some of them clearly only fly for work, but I don't know what the split would be, so I'm going to say all the commercial rated pilots should be included, and a third of the ATPs, so that's 104,610 commercial and about 54,000 ATPs. Add all that together, and that comes to 377,829 pilots, or 420 pilots for every new airplane added to the fleet. So, no help there, the fleet is most likely going to shrink this year.

What about E-ABs, you ask? Well our own @wanttaja tells us here that approximately 1000 new homebuilts are registered each year, but the E-AB fleet is staying put in the 28,000 range, so no help there either.

I know some of us are hoping that as the boomers age out, that a large number of airplanes will come on the market. Sorry to say it's not likely, as the age groups that covers the baby boom generation has shrunk by a quarter over the last five years, and the age groups that will replace them are not going to be that much smaller.

So, what you have is a fairly stable pilot population chasing what is by and large the same old legacy fleet. All transportation equipment eventually wears out or gets destroyed by weather, neglect, and accidents, and needs to be replaced. That's not happening, so @Morgan3820 I don't see a less expensive airplane in you future. But a more reasonably priced truck later this year?


Doritos crystal ball say YES!
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Sir, I believe that you have me confused with another. I am not looking to replace my current aircraft. It fits my needs nicely. In fact I just came home from a trouble free flight to Fla. to visit the inlaws. 3.6 hrs.vs. 12 hrs driving.
Save for a lottery win, I have what is likely my last airplane. But, I am looking for what is likely my last truck, as I kept the last truck for 22 yrs. They still make new trucks albeit slowly as of late. As gas goes up, I anticipate fewer truck drivers.
 
Morgan3820 said:
Sir, I believe that you have me confused with another. I am not looking to replace my current aircraft. It fits my needs nicely. In fact I just came home from a trouble free flight to Fla. to visit the inlaws. 3.6 hrs.vs. 12 hrs driving.
Save for a lottery win, I have what is likely my last airplane. But, I am looking for what is likely my last truck, as I kept the last truck for 22 yrs. They still make new trucks albeit slowly as of late. As gas goes up, I anticipate fewer truck drivers.
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In that case, I think you'll find a reasonable deal on a new truck later this year. Those looking for an airplane, I don't think prices on them are coming down.
 
I agree production isn’t sufficient to drive prices down if demand remains where it is.

I’m curious why y’all think demand is sustainable? Demand for all leisure goods jumped due to COVID because people had more time. At least in finance, we’re going back to the office. My aviation time window is disappearing again. I had about 2-years to figure it out.

I’m not convinced we’ll have the same demand as airlines staff up and that quick path to an airliner jams up again (training seems to really be driving prices).

My whole time in aviation (started training in 1991) there has been talk of a pilot shortage. Except recently, the supply of pilots trying to get to the airlines has outstripped slots.

I don’t see it taking that long to fill the ranks with military and ab initio people.
 
Terry M - 3CK (Chicago) said:
I agree production isn’t sufficient to drive prices down if demand remains where it is.

I’m curious why y’all think demand is sustainable? .
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I see a ton of Boomers retiring and picking up airplanes. I keep hearing they finally waited and now they have time to fly. The kit market is crazy, too, for many of the same reasons. Hell, if I were retiring I'd go for a polished aluminum plane, 172 or 182 Johnson bar.
 
Morgan3820 said:
Ok, but what about my new truck?
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I was over-flying the Flint area the other day...they assemble full-sized GM trucks in Flint. I realize now I should have taken a picture: for as far as the eye could see, every unused parking lot for at least 20 miles in every direction was filled with GM trucks...Owosso to Davison (that's a distance of about 30 miles), parking lots just full of trucks. There has to be tens of thousands of them. I'm told they are 2021 models, waiting on chips. Being that they are already outdated (but new) models, I would think the only way GM can sell them is with deep discounts...but what do I know? I'm in the medical field, not the automotive industry.
 
Country Flier said:
I was over-flying the Flint area the other day...they assemble full-sized GM trucks in Flint. I realize now I should have taken a picture: for as far as the eye could see, every unused parking lot for at least 20 miles in every direction was filled with GM trucks...Owosso to Davison (that's a distance of about 30 miles), parking lots just full of trucks. There has to be tens of thousands of them. I'm told they are 2021 models, waiting on chips. Being that they are already outdated (but new) models, I would think the only way GM can sell them is with deep discounts...but what do I know? I'm in the medical field, not the automotive industry.
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That is a lot of inventory to carry and pay for. Once the chips show up it’ll be weird. The chip show up and we have 4 1/2 dollar gallon gas in a recession, who knows what will happen. That’s why I’m just waiting and banking my check so I can pay cash when the opportunity arises. Hard to be patient.
 
Those that keep saying a recession won't hurt airplane prices obviously weren't pilots in the 2000 to 2010 era. I remember all kinds of people paying these exact sort of prices pre-2008 on airplanes. Couple years later they were worth a third of what they paid. Took about 15 years for their value to recover.

Given the cycles I've seen, there is no way I'm going to tackle airplane ownership until things cycle down. Perhaps I'll be waiting forever, but I doubt it.

Those that are taking loans, and then taking more loans every moment their "airplane equity" increases...lol... What a house of cards.
 
jesse said:
Given the cycles I've seen, there is no way I'm going to tackle airplane ownership until things cycle down. Perhaps I'll be waiting forever, but I doubt it.
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There will probably be a dip in the future. The overall market looks to be receding and that will make a lot of people doubt the wisdom of buying a luxury item. Lower demand -> lower prices. The law of supply and demand i sas basic to economics as the law of gravity are to physics.

But....inflation.
 
bflynn said:
There will probably be a dip in the future. The overall market looks to be receding and that will make a lot of people doubt the wisdom of buying a luxury item. Lower demand -> lower prices. The law of supply and demand i sas basic to economics as the law of gravity are to physics.

But....inflation.
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Inflation didn't make a $35,000 172 worth $100,000 in a matter of like two years. Limited supply, excess demand, historically record low interest-rates, and silly bankers made that all happen. Problem is, everything I just said is temporary. The demand will drop, the supply will be less stressed, the low-interest rates will disappear, and the silly bankers will start becoming slightly less silly. Once that all happens...we'll watch the prices dive...and the cash buyers will come out to play.
 
The price of an asset already reflects all known information about the asset. - Efficient Market Hypothesis

"Predictions are hard, especially about the future." - Yogi Berra
 
A recession’s been predicted since the last recession. I agree there are lots of signs and yet… Getting kind of tired of waiting.
 
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Country Flier said:
I was over-flying the Flint area the other day...they assemble full-sized GM trucks in Flint. I realize now I should have taken a picture: for as far as the eye could see, every unused parking lot for at least 20 miles in every direction was filled with GM trucks...Owosso to Davison (that's a distance of about 30 miles), parking lots just full of trucks. There has to be tens of thousands of them. I'm told they are 2021 models, waiting on chips. Being that they are already outdated (but new) models, I would think the only way GM can sell them is with deep discounts...but what do I know? I'm in the medical field, not the automotive industry.
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I could see them scrapping them all. Think about the tax write off. Tax avoidance is more important than actually making a product and selling it.
 
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Ed Haywood said:
The price of an asset already reflects all known information about the asset but not all emotional factors. - Efficient Market Hypothesis with Half Fast Revision
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Many assets, such as airplanes, houses, paintings, and horses, are bought and sold on emotion regardless of information.

IMHO, long term averages reflect market efficiency, but short-term swings often reflect unrealistic optimism or unnecessary panic.
 
Half Fast said:
Many assets, such as airplanes, houses, paintings, and horses, are bought and sold on emotion regardless of information.

IMHO, long term averages reflect market efficiency, but short-term swings often reflect unrealistic optimism or unnecessary panic.
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Agreed, but to do anything with that insight, you have to believe that your insight is superior to the market as a whole. Eg the market is unrealistically optimistic, but YOU know better because YOU are not subject to misleading emotions.

My lifetime of experience tells me that such things are usually only clear in retrospect. Hence the Yogi Berra quote.
 
I have been hearing lately that pump gas could go to $6 or even $7 per gallon. I suspect that's going to put a pretty big dent in the large vehicle demand. Same goes for airplanes, my local airport is now $5.72. I have seen prices for aviation fuel in the mid $6 range already. That makes a lot of people think about an hour joy ride a little more. I am guessing, but when avgas prices are $6 or more on average, the number of flight hours will go down big time. Then the thought of "I hardly fly it anymore, why not sell it" comes up. I believe we are in for a horrible economy in the next couple of years, remember the late 70's?, Interest rates are going up, inflation is already up, taxes will likely be going up, I believe that in some areas the housing market is going to get crushed again like 2008. All in all, I believe there will be a correction in the expensive toy market.
 
Ed Haywood said:
Agreed, but to do anything with that insight, you have to believe that your insight is superior to the market as a whole. Eg the market is unrealistically optimistic, but YOU know better because YOU are not subject to misleading emotions.

My lifetime of experience tells me that such things are usually only clear in retrospect. Hence the Yogi Berra quote.
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:yeahthat:

I try to make investment and large purchase decisions based on information, but I still can’t prevent information being filtered through my own biases and emotions. Nor can anyone else. So Yogi was correct.

I’d also add that information must have a confidence factor associated with it. Sometimes the information driving a market is of low confidence or low quality.

But I don’t quite have a lifetime of experience yet; SWMBO won’t tell me how much longer she’ll let me live.
 
Wagondriver said:
I have been hearing lately that pump gas could go to $6 or even $7 per gallon. I suspect that's going to put a pretty big dent in the large vehicle demand. Same goes for airplanes, my local airport is now $5.72. I have seen prices for aviation fuel in the mid $6 range already. That makes a lot of people think about an hour joy ride a little more. I am guessing, but when avgas prices are $6 or more on average, the number of flight hours will go down big time. Then the thought of "I hardly fly it anymore, why not sell it" comes up. I believe we are in for a horrible economy in the next couple of years, remember the late 70's?, Interest rates are going up, inflation is already up, taxes will likely be going up, I believe that in some areas the housing market is going to get crushed again like 2008. All in all, I believe there will be a correction in the expensive toy market.
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I think the people that own the plane out right will just keep it. I have come across a lot of older people that have kept their plane despite not having a medical for years. The same with yachts and other status toys. It is hard to say “I am finished flying” Likewise the hot rod that sits in your backyard that you’ve been going to fix up for the last 30 years. For every one rational thinker there are 10 other emotional thinkers. Now for the items that are financed, that’s different kettle of fish.
 
I know of at least 3 airplanes that in 2008 were owned outright, that were sold for less than 60 cents on the dollar of what they were previously. One was a low time columbia 400 that sold for about $150k
 
I’m an older person but I would kind of hate to let our little airplane just sit and rot away. When we bought our first airplane, it was (for me) expensive. We kept it three or four years then sold it for what we paid. When we bought our second one in 2006 (which we still own), I used the mindset of buying a new car. For the cars we have had, I tried to drive my money out of them and knew their value would be nil when I traded them off. However, our airplane is now worth about what we have in it, including an overhaul. I am frankly surprised. If the value goes back down, oh well.
 
Wagondriver said:
I know of at least 3 airplanes that in 2008 were owned outright, that were sold for less than 60 cents on the dollar of what they were previously. One was a low time columbia 400 that sold for about $150k
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No doubt. Perhaps there were other financial pressures that forced the sale. Everybody has a different story. At $6/gallon. I will still fly. Gas is always the cheapest part of the hobby. My Arrow is a relatively efficient flyer. Not as efficient as a Mooney but more so than a skylane or Skyhawk.
 
Morgan3820 said:
…As gas goes up, I anticipate fewer truck drivers.
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Funny, our next door neighbor is the Toyota sales manager for a very large dealer group. We were talking yesterday and he shared new truck sales are already slowing, new truck orders are starting to cancel, and more trucks are being traded for more fuel efficient vehicles and expect the trend to continue but whether it stays a small change or grows is unclear.
 
TCABM said:
Funny, our next door neighbor is the Toyota sales manager for a very large dealer group. We were talking yesterday and he shared new truck sales are already slowing, new truck orders are starting to cancel, and more trucks are being traded for more fuel efficient vehicles and expect the trend to continue but whether it stays a small change or grows is unclear.
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An encouraging step in the right direction, for me anyway. I already own a gas sipper.
 
L J Donelson said:
I concur - I offered upfront but he said his word...
Life is a learning process. I shared my lesson learnt.
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That sucks. I'm wondering if he had verbal sellers remorse and slow rolled you intentionally to see if he could get a better offer. Either way, pretty sleezy, but I guess the guy who busted in with cash must of had plaid out plenty. We've been house shopping in the DC area for a year now and it's completely insane. If you don't jump in a property within minutes and buckets of cash, well, good luck...The aircraft market seems similar.
 
Wagondriver said:
I know of at least 3 airplanes that in 2008 were owned outright, that were sold for less than 60 cents on the dollar of what they were previously. One was a low time columbia 400 that sold for about $150k
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Yup, but you can't tell the #FOMO crowd that prices do in fact swing in both directions. They need that choice-supportive bias to keep them going on their financing, ("inflation-hedging" they'll quip to you), top-o market binges.
 
jesse said:
Inflation didn't make a $35,000 172 worth $100,000 in a matter of like two years.
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Of course it didn't, that was probably demand, a little bit of supply, and a touch of Van Bortel. However, when that demand recedes some, inflation will take up some of the slack. If the demand pull back is slight, inflation might be more and there will never be a decrease in prices.
 
Brad Z said:
That sucks. I'm wondering if he had verbal sellers remorse and slow rolled you intentionally to see if he could get a better offer. Either way, pretty sleezy, but I guess the guy who busted in with cash must of had plaid out plenty. We've been house shopping in the DC area for a year now and it's completely insane. If you don't jump in a property within minutes and buckets of cash, well, good luck...The aircraft market seems similar.
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Where are people getting all this cash?. I don’t have it.
 
Where are those w/ $ waiting for the market to turn parking it? At the current inflation rate and near zero interest rates, you're losing ground to the tune of 7%/year. That hurts if the downturn is 2-3 years away even with the expected Fed rate hikes.
 
Mahneuvers said:
Where are those w/ $ waiting for the market to turn parking it? At the current inflation rate and near zero interest rates, you're losing ground to the tune of 7%/year. That hurts if the downturn is 2-3 years away even with the expected Fed rate hikes.
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No safe harbor this year. Combined with the market downturn it is a mess.
 
Mahneuvers said:
Where are those w/ $ waiting for the market to turn parking it? At the current inflation rate and near zero interest rates, you're losing ground to the tune of 7%/year. That hurts if the downturn is 2-3 years away even with the expected Fed rate hikes.
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Precious metals. Primarily brass and lead.
 
Wagondriver said:
I have been hearing lately that pump gas could go to $6 or even $7 per gallon.
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man, I hope so. I have an interest in some property that would probably make me stinking rich if that happened.
 
Mahneuvers said:
Where are those w/ $ waiting for the market to turn parking it? At the current inflation rate and near zero interest rates, you're losing ground to the tune of 7%/year. That hurts if the downturn is 2-3 years away even with the expected Fed rate hikes.
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You could always put it into TIPS
 
Mahneuvers said:
Where are those w/ $ waiting for the market to turn parking it? At the current inflation rate and near zero interest rates, you're losing ground to the tune of 7%/year. That hurts if the downturn is 2-3 years away even with the expected Fed rate hikes.
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Index funds, same as the last 30 years. Downturns are just buying opportunities.
 
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