EAST CAPE OF BAJA CALIFORNIA SUR, MEXICO
PHOTO BY JACK BRITTINGHAM
TWO MARKETS, ONE MESSAGE
Welcome to the third quarter! This is when things start to get interesting as we march through the second half of the year. The market is beyond intriguing right now. So much so that I’m struggling to provide a proper adjective to describe what we are seeing, and more importantly, what we are feeling.
Of the two scenarios below, which market do you think sounds like a stronger environment?
Scenario #1:
• 105 PC-12’s for sale
• 5.0% of the fleet for sale
Scenario #2:
• 52 PC-12’s for sale
• 4% of the fleet for sale
Obviously, the latter scenario is stronger. But what if I told you both of those scenarios are representations of the marketplace right now? Given the current tariff environment, the US market can immediately eliminate all foreign-based aircraft from its competition. There is a 10% duty on all Pilatus aircraft imports into the United States. So when we look at the market, we really have to look at it from a different lens: first being the worldwide market, and if you’re in the United States, then just the US.
Scenario #2 is eerily similar to January 2021. What followed was a run on airplanes, which took the market to historically low inventory levels and a historically high increase in values. Needless to say, that was a global market and we’re not suggesting prices will jump 20%, but it would be foolish not to make some correlation between the two. 100% bonus depreciation was available then and it is now. Inflation was approaching 2% (on its way up) then and is approaching 2% (on its way down) now. The S&P 500 was at an all-time high and trending upward then, and it is doing the same now. Pilatus was rolling out a new product then (NGX) and they are doing so now (PRO). All of these factors and
so many more have a real impact on the pre-owned airplane market.
Other subtle indicators tell us where the market is trending. As an example, we take great pride in evaluating an asset’s retail value. In 2024, we performed 75 Pilatus Appraisal Reports (PARs) for owners. Among the owners who decided to sell, their aircraft averaged just over 98% of the sold value we had suggested. Due to tariffs and recent demand, our two most recent deliveries achieved 103% of their original projected value (pre-tariff). This validates the observations we’ve noted above.
We’ve adjusted for market demand in the past, and we should be going to the spice rack for a ‘touch’ of it to account for the change in demand here domestically. Our accuracy cannot be fully explored unless we use a market demand component with our algorithm. No one could have predicted that tariffs would play such a significant role in today’s market, but they have.
In conclusion, the phones are ringing at JetSwiss. The market is moving and shaking. Values that have been very stable for the better part of 18 months could be seeing some slight fluctuations here domestically, and signs point to a high level of engagement amongst clients looking to acquire an airplane. I guess my golf game can wait until next year. It’s time to buckle up for the ride ahead.
Fly safe, The JetSwiss Team
MARKET CHANGES IN THE LAST 30 DAYS BY YEAR MODEL
1995, 1996, 2007, 2010, 2010, 2011, 2014, 2016, 2017, 2017, 2018, 2019, 2020, 2020, 2020*, 2020*, 2021, 2024, 2024
0-30 Days on Market
31-60 Days on Market
61-90 Days on Market
4-6 Months on Market
7-12 Months on Market
1-2 Years on Market
FLEET LOCATION
“All Pilatus aircraft imported into the United States will be subject to 10% tariff. There was a brief 31% reciprocal tariff on Swiss produced products at one point. However, there is currently a 90 day pause on that duty (clock is already running).”
AVERAGE PRICE BY QUARTER 2020-2025
proprietary Pilatus Appraisal Report (PAR),
Asking Price By Total Hours
$8.0M
$8,000,000
AIRCRAFT
ASKING PRICE VS. TOTAL TIME
$7.0M
$7,000,000
$6.0M
$6,000,000
$5.0M
$5,000,000
$4.0M
$4,000,000
$3.0M
$3,000,000
Similar to the Asking Price vs Model Year chart, this information helps our clients determine “the mileage on the car” for their specific budget. Want to own a low time aircraft? This chart will give you an indication on what you will spend. Note: aircraft under 1,000 hours total time historically yield much higher prices.
$2.0M
$2,000,000
$1.0M
$1,000,000
AIRCRAFT ASKING PRICE VS. MODEL YEAR
This chart reflects the current market for Pilatus PC-12 aircraft that are on the retail market. Want to know how much your Pilatus dollars will buy? This is a great place to start! As you can see, the aircraft model year plays a key factor in pricing of the aircraft–thus generates a commensurate trend curve. This data provides a baseline for our aircraft evaluations.
$8,000,000.00
$7,000,000.00
$6,000,000.00
$5,000,000.00
$4,000,000.00
$3,000,000.00
$2,000,000.00
$1,000,000.00
This information helps our clients determine “the mileage on the car” for their specific budget. “Want to own a low time aircraft?” This chart will give you an indication on what you will spend. Note: aircraft under 1,000 hours total time historically yield much higher prices.
This chart reflects the current market for Pilatus PC-24 aircraft that are on the retail market. Want to know how much your Pilatus dollars will buy? This is a great place to start! As you can see, the aircraft model year plays a key factor in pricing of the aircraft–thus generates a commensurate trend curve. This data provides a baseline for our aircraft evaluations.
PC-24 BY THE NUMBERS
Have you heard the news? 100% Bonus Depreciation is back for both new and used aircraft purchases. Now that it’s official, what does this mean for the market? Based on how things have played out in the past, Preston Holland shares his take—and gives us a peek into his crystal ball on where the market might be headed.
BONUS DEPRECIATION BOOM TIMES
By Preston Holland
...
Tax Strategies and the Bonus Depreciation Context for Private Jets
There are many readers of this newsletter who are in real estate, so you’re likely intimately familiar with depreciation. There are cost segregation studies, land benefits, and passive loss carry-forward strategies. These are all great ways to make tax incentivized returns using real estate and leveraging the tax code.
Airplanes are a bit different from real estate.
No 1031 Exchange
I texted my friend KJ Mc Carter, CPA at Aviation Tax Consultants. He pointed out that one big difference is that there is no 1031 like-kind exchange for aircraft. That means you do not get a step-up in basis when you trade aircraft, and because used equipment only qualified for bonus depreciation starting in 2017, depreciation recapture now affects all aircraft trades.
Let’s say you buy an aircraft for $12m and a few years later you sell it for $9m. Under the MACRS schedule, you may have depreciated the aircraft $5m before selling. The remaining basis is $7m, so you would report a $2m gain (sale price $9m minus $7m remaining basis). That gain is taxed as ordinary income, which makes it very expensive.
Why Bonus Depreciation Could Be Different This Time
I attended two dinners this week with aircraft brokers and other service providers. At both events, bonus depreciation dominated the conversation. The consensus in the transaction community is that bonus depreciation will reenergize the transaction volume that was lackluster in 2024. To put this in perspective, 2024 saw the fewest aircraft transactions since 2016... a year before used equipment
qualified for 100 percent bonus depreciation.
I do not believe the effects will be immediate in the private aviation market, and here is the data that informs my conclusion.
Transaction Volume Lags Bonus Depreciation
If you look at the historical transaction volume data from the last 25 years and correlate it with the bonus depreciation concept, there is actually a lag between the increase in bonus depreciation and the increase in transaction volume.
My theory is what I call the “PJ Country Club Effect.”
As we’ve discussed before, private aviation is a bit of a taboo subject and hence why you read this newsletter. You can’t really talk about flying private to random people at random times. Where it does come up is at the Country Club or places like that. Taxes inevitably come up and tax strategies, and one person goes “well I bought a jet because I can depreciate it” and then others get the
idea and it spreads.
Here’s the data that supports this theory. This is bonus depreciation rate compared to total transaction volume (both new and used).
If you notice, 2018 had a pretty significant increase in transactions, even though the first year of 100% bonus depreciation was 2017. Its almost like the news had to travel and then people had to gear up to buy something.
Interest Rates are Higher This Time
Interest rates are higher today than they have been in the past with the 100% bonus depreciation.
Interest rates are 1% to 3.5% higher. But what does this mean?
Approximately 25-30% of business jet transactions are financed, which is an incredibly low number. In my day job as an aircraft financier, this means a small portion of transactions are being fought over by the various banks and lending institution.
But the reason it is different this time has very little to do with the cost of borrowing for the airplane, in my opinion.
When interest rates are low, capital becomes more risk seeking as it becomes yield-seeking. Buying a business jet for a tax play is a very “riskon” type of activity, but when your risk free rate of return is 4% and many see their hurdle rate as 11-12%, the tax benefit play seems too high-risk for many even when they’re paying cash. Also, remember how interest rates affect charter rates. The rate of return on charter has to be so high for people that between the tax depreciation benefit and the cash flow from the charter, smart money is going to be wanting 1418% returns on their money at minimum.
Bringing
it All Together
When we look at the lagging indicator, the 5 year treasury rate as a benchmark for cost of capital, and transaction volume, I think we can start to guess from a macro level what bonus depreciation is going to do to the aircraft market.
My crystal ball, which is not investment advice or tax advice, predicts that 2025 will resemble 2017 more than 2020 through 2022 and might even look more like 2016. Buyers of business jets are getting smarter and making better decisions than they did during the pandemic.
I expect aircraft that are twenty to twentyfive years old, such as Hawkers, Learjets, and G200s, which saw a huge bump in value during the pandemic, to continue declining in value.
However, high-pedigree aircraft will likely enjoy a modest bump in valuation because bonus-depreciation buyers who sat on the sidelines during 2024 are poised to enter the market.
There is pent-up demand, but I think it will be more of a slow burn than a shot out of a cannon, as some have predicted.
PRESIDENT AND FOUNDER OF PRESTIGE AIRCRAFT FINANCE
To read the full article, scan here.
For more information on Prestige Aircraft Finance, scan here.
PRESTON HOLLAND
Bonus Depreciation
Bonus Depreciation
5 Year Treasury
Transactional Volume
5 Year Treasury
THE AMERICAN DREAM GRANTS THE SWISS MACHINE
A Conversation with Dean Garritson, Owner of Green River Cabins and Cottages
Many of us built businesses from the ground up. Some of us bought a company and turned it into something more. You’ve probably heard the JetSwiss story a thousand times: Our founder was a test pilot for Pilatus for over 20 years. He pitched a pre-owned sales program to Pilatus but was denied, so he took matters into his own hands. Years of hard work, perseverance, and doing things a little differently turned this once twoperson dream into a fully functioning 13-person orchestra!
With it being July and sticking to the American Dream theme, we spoke to our good friend and client, Dean Garritson, about his businesses. From politics to log cabins, to equipment leasing and banking, there truly is no single path to success. But there is one constant in chasing the American Dream. You must keep on moving.
Let’s start from the top.
LIFE’S PIVOT OFTEN PUTS YOU IN THE RIGHT PLACE.
Dean left the political scene in search for something new. How new? Try buying a business he knew absolutely nothing about. But it checked some very important boxes at the time–affordable and not so technical that he couldn’t roll up his sleeves and learn. So in 2006, he bought a portable log cabin and cottage business called Green River Cabins and Cottages.
WE ALL NEED TO BE HUMBLED.
Dean spent the first two years of his new business absorbing everything and putting out daily fires. Sound familiar? He was the president, but also the sales person, purchaser, inventory manager, and the guy
doing the drawings…
“I drew with Microsoft Paint and listened to Bob Marley. It was such a joke but that was the tool I had.”
DOING THINGS RIGHT HELPS TAKE FLIGHT.
Dean discovered that the folks on the floor had the basic building process down, but the quality of product was lacking. Most people picture round logs when they think of cabins, but Dean discovered that flat logs last much longer. It took him two years to convince another company to “cook” his logs just right. His custom kiln process created a stable building component and reduced shrinkage. Now, the cabins were more tightly fit and energy efficient. Quality? Check!
IN IT FOR THE LONG HAUL.
With a good quality product in place, Dean turned to scaling. Time to master repeatability. So he standardized drawings, trained the team to follow them, and worked with the shop floor for feedback. That’s when “all kinds of efficiencies start flowing.” His first big wholesale deal was 8 cabins. Now, it’s not uncommon to sign contracts for 50 or more. With more cash coming in, they could hire real experts and continue to improve the company. Even with experts, there is always room for growth.
CLOSING THOUGHTS:
Here’s why we share this story with you. One, who doesn’t love a good relatable and interesting success story? And two, it mirrors how we rock over here at JetSwiss. Perhaps this is how you roll with your company. In building a good business, some truths hold steady.
1. A LIFE’S PIVOT OFTEN PUTS YOU IN THE
2. WE ALL NEED TO BE HUMBLED.
3. DOING THINGS DIFFERENTLY, INTENTIONALLY AND WITH CARE, USUALLY PAYS OFF.
4. YOU’RE NEVER DONE LEARNING. BUILDING SOMETHING GREAT IS A CONSTANT EVOLUTION.
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