State of the aviation industry amidst war in Europe
Most of the globally aware and affected population were a bit shocked last week when Russia actually initiated its invasion of Ukraine. Of course, I'm not a political accommodator, but war is horrible no matter how you look at it. My heart goes out to all those affected.
My name is Steve Avarsano. Many people in the private aviation industry remember two years ago when I had the unfortunate honor of correctly predicting the impending tsunami of disrupted business and personal issues that were about to hit us with COVID-19, while everyone else's attention at the time were on the destructive but thankfully short-lived forest fires in Australia.
Because I have the Jet Sail showroom in London, I have all types of people coming through who are global influencers, billionaires, royalty, government officials, and influential entrepreneurs, along with all the people advising them. These people educate me with first-hand information as to what is really happening in the world.
Unfortunately, I believe that last week could possibly mark another turning point for the business aviation industry. Although sixty percent of the jet market is in the U.S., we have to remember that business aviation is a truly global marketplace. Ultra-high net worth individuals and so many corporations conduct their lives and businesses on an international scale. Along with order backlogs sitting on manufacturers' production lines destined for Russia and Russia-related entities, there are also aircraft and maintenance shops and interior refurbishment hangars that could possibly get caught up with a wider sanctioned web that is really not intended.
What happens if governments impose sanctions on trade with a wider net of Russian-related businesses? Right now, the definition is far from clear, which direction it is really moving in. In 2021, due to the increased demand and gradual reduction in supply, the prices for aircraft started to rise, and sales went through the roof, turning the market into a seller's market in what seemed to be a bidding frenzy on certain models through the end of the year.
That's an important point to consider when you look at the number of planes on the production lines or order books destined for Russia-related entities right now. Corporate aircraft are not a fast-moving consumer good for the mass market. This means that even when there is a recession or uncertainty in the market, the business of buying and selling jets does not really need many customers to make for a successful year, or for that matter, a bad year.
The difference of a handful of clients per month or even a year can drastically change the market. While Russia may have unintentionally but miraculously and temporarily cured COVID and global warming by moving it off the front pages for the time being, these and other issues are sure to return when Ukraine's future becomes more clear.
At the time of this recording, we don't really know how long this war will last, so maybe it is a bit prudent for buyers to step back, digest the global situation, and move with a bit more caution. Even though we're all finding ourselves having to do this to compete, it's very difficult to commit to buy an aircraft with no pre-purchase inspection and chase prices higher, which today, and that's a qualified today, seem to be continuously increasing.
I estimate that there are around 300 to 500 aircraft in the current worldwide fleet that are likely connected to Russian-related owners, depending on how this sector is actually defined. Unfortunately, this is not a clear definition. Some of these may be impacted by sanctions, which could mean more inventory coming into the marketplace if, in fact, they are able to be sold. We're still seeing a very fluid market, which is why I'm preparing to launch a fund to buy aircraft that could become quietly available to the market if this situation worsens.
I'll leave you with this thought: be careful who you choose to work with, and when buying and selling an aircraft, pay attention to the entire global situation, not just your local corner of the world. Make sure you research different news or media sources as many may have ulterior motives, predetermined conflicting, and conflicted opinions. Since market intelligence is such a valuable aspect of our business, and I know this video will be for the most part reaching a very familiar jet market savvy audience, I welcome your thoughts. I truly value informed opinions and factual data, so I invite you to please leave your comments below.