The Old Adage No Longer Applies

In the past few decades, new technologies, such as GPS, and safety mandates, including RVSM or EGPWS, were the primary motivators for people to modify their aircraft. The aviation industry is mostly past its era of safety mandates and airspace requirements, leaving the door open for new motivations like connectivity or parts obsolescence. Recently in the aviation industry, owners have been spending significantly more money on modifying existing aircraft rather than purchasing new ones. On paper, this may seem contrary to not spending more money on an airplane that isn’t worth the expense. Why are so many in the business now turning against this commonly held rule of thumb?

Much of this change stems from the current availability of new aircraft. Unfortunately, if an operator were to approach an aircraft manufacturer today for a new plane, it could take up to three years before the aircraft would be delivered. This is caused by a few main factors. First, aircraft production was greatly affected by the pandemic. The manufacturing rate was complicated by the various restrictions and lockdowns that followed. Additionally, post-COVID, there has been a big spike in air travelers turning toward private and business aviation rather than the airlines for their transportation needs. There have never been more first-time aircraft owners than in the last 2 years.

This, combined with delayed production, has led to a market where aircraft availability is limited. With the demand far outweighing the supply for both new and used aircraft, many people are deciding that it is necessary to spend more money equipping their existing aircraft rather than waiting for a new one. If you look at the old adage, this may seem like a bad idea. The reality is that the value of an aircraft is dictated by demand. In the past, the state of the marketplace did not have such a drastic gap between supply and demand. It was challenging to rationalize overspending on an aircraft modification. Now, the old adage no longer applies.

Aircraft modification is no longer driven by mandated changes or significant technological advancements; it is determined by the availability of new and used aircraft. The higher the demand for new planes, the more used aircraft are worth. It is quite similar to the housing market. Like the present circumstances of aviation, there are more people looking for homes than there are homes available. This, of course, exponentially increases the value of the houses that are available. It also means that before most buyers can even think about buying a certain home on the market, it’s already sold. The demand is greater than the supply. So, just as it is wise for homeowners today to renovate their homes instead of selling and attempting to buy a new house, it is sensible for aircraft owners to invest in their aircraft that they have now. The cost might be a greater than the magic 25% of the current value which is contrary to the old rule of thumb, but it will save the owner time. More importantly though, upgrading now is a guaranteed return of investment. While it may seem expensive in the short term for owners, their current aircraft when modified up to date features and capabilities have never been worth more.

The Old Adage No Longer Applies

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