Buying an aircraft at the right price is not proving an easy task in 2018.
A wealth of capital providers, both traditional and new, are competing for the same deals, allowing aircraft sellers to largely dictate terms, active buyers tell FlightGlobal.
As a result, there are many prospective buyers who are finding it difficult to put their capital to work as increased competition drives returns down.
"I get the sense that a lot of people are sitting back and watching the market right now," an aircraft buyer says. "It's a market for sellers right now, really. There's too much capital bidding for the same stuff."
However, there is a growing sense that the much-vaunted influx of new capital into aviation is starting to slow down and potentially thin out.
One active broker tells FlightGlobal that there is a number of US-based investment vehicles set up by private equity firms that have raised substantial amounts to invest – in some cases, around $500 million – but have yet to find any deals that make sense.
The difficulties that some prospective buyers are encountering in putting their capital to work may mean that some of the new money decides to leave aviation in search of less competitive fields.
Certainly, for those buyers with a longer-term commitment to the market, this may be a boon, as less competition would make it easier to find acceptable deals.
But aviation is already seen as an oversubscribed asset class by many industry participants, so any withdrawals would have to be on a significant scale to have any impact in the short term.
Additionally, cheap Chinese capital – which has been accused by industry incumbents of distorting the market by various means, including buying aircraft at artificially high prices – is unlikely to exit
While some believe that the new investors in question will change their behaviour over time, others directly involved in the Chinese market are less convinced.
"Some of these investors are happy losing money on deals, particularly if it is an Air China aircraft," a broker who specialises in tailoring deals for Chinese investors told FlightGlobal in Dublin in January. "They can say 'I own an Air China aircraft' to others, and that can be important. They make any money they lose back on other investments."
The likelihood is that 2018 will be a year for the seller – and that may still be largely the case in 2019 as well.
Source: Cirium Dashboard
