Page 6 - Feb24T

Position Report
by Dianne White
Trends to Watch in 2024
PHOTO COURTESY OF JESSICA AMBATS
As we make our flight plans for 2024, here’s a look at some of the trends that are worth watching.
Aircraft Market
As we reach the 4th anniversary of the COVID pandemic, we are starting to hear less about “struggling supply chains” that hobbled manufacturing and more about “resets” and “market rebalancing.” This is especially true in the single- pilot turboprop and jet markets. From major OEMs to avionics and component manufacturers, a new normalcy is taking shape, resulting in more reliable and reasonable lead times and backlogs.
In the pre-owned owner-flown business market, 2023 sales were steady but down compared to the brisk sales activity in 2022. In 2023, many aircraft owners were hanging onto their aircraft, as manifested in the percentage of aircraft available worldwide. By the end of October, only 3.8% of the turboprop worldwide fleet was for sale. Less than 7% of the business jet fleet was for sale. Both are well below the traditional industry average of 10%.
Is 2024 going to turn more toward a buyer’s market? Probably not to any significant degree, based on the market performance in late 2023. Going into a U.S. presidential election year with geo-political tensions sparking uncertainty, none of the industry soothsayers have 100% confidence in what will happen. But with the U.S. economy continuing to perform well, those looking to buy, sell, or trade up will have the confidence to carry on with their plans.
Insurance
One major pain point for the owner-flown segment of business aviation is attaining insurance. The good news is that there is plenty of insurance capacity, and premium
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increases are tempering, according to Tom Hauge of Wings Insurance. The sweet spot in terms of hull value is under $3 million. Once you go above $5 million, there are fewer insurers interested in quoting the owner-flown aircraft. This is all stated with one big caveat: low-time pilots requesting coverage for a high-hull value aircraft should expect headwinds in attaining coverage, and premiums will be high.
In other good news, new underwriters are entering the owner-f lown segment of the market. For example, three new underwriters – Eiger, Mach 2, and Applied Underwriters –are now writing policies for Piper Mirage and Meridian owners.
Now, the bad news: the lack of underwriters willing to write policies for turbine aircraft pilots over the age of 70 is unlikely to change. There are no good answers on the horizon for the senior single-pilot operator except to fly with a second qualified pilot or step down to a piston aircraft, such as a Cessna 182 or Bonanza. For piston singles, most pilots are insurable until at least age 80.
Aircraft Financing
It’s been an ugly couple of years of rising inflation and interest rates. But through it all, the availability of aircraft financing has generally remained good. Interest rates topped out in early November, and most financial forecasters predict them to decrease somewhat this year.
The Federal Reserve’s Dot Plot, which capsulizes each Fed official’s short-term interest rate projection for the year, is one guidepost that provides some insight into the Fed’s thinking and expectations for the economy at large. The most recent Dot Plot suggests the Fed expects the federal funds interest rate to decrease 0.75 percentage points in 2024 with the caveat that inflation and economic