When analyzing the business aircraft market, it’s easy to get lost in the noise of general trends. However, astute buyers and sellers know that one of the indicators of the true health of a specific model, like a pre-owned Challenger 350 or a Citation Latitude, is revealed by a specific metric: the absorption rate. This critical indicator functions like a pulse check for a market, revealing the balance between supply and demand and signaling whether it’s a seller’s, buyer’s, or balanced market.

WHAT IS THE ABSORPTION RATE?

Simply put, the absorption rate is a measure of the rate at which available aircraft for sale will be “absorbed”, or purchased, at the current pace of demand. It’s typically expressed in months of inventory and is calculated by dividing the number of aircraft currently for sale by the average number of aircraft sold per month over a set period. A low absorption rate indicates a strong, fast-moving market. A high absorption rate suggests a sluggish market with an oversupply of inventory.

WHAT THE ABSORPTION RATE REVEALS ABOUT A SPECIFIC JET MODEL

A Healthy, Low Absorption Rate: The Seller’s Market

• Strong demand and high liquidity: A low absorption rate means that a particular jet model is in high demand, and sales are happening quickly. This creates a highly liquid market where sellers can expect faster transactions and may attract multiple offers.

• Resilient or increasing value: When demand outstrips supply, the aircraft’s value holds strong or even appreciates, as was seen for many private jets during the pandemic. For owners, this is a clear sign that their asset is performing well.

• A signal of a desirable aircraft: A consistently low absorption rate for a specific model over time indicates a well-regarded jet with favorable operational costs, reliability, or a desirable cabin experience. Buyers are actively seeking this asset, making it a sound investment.

A High Absorption Rate: The Buyer’s Market

• Oversupply and market softness: If a jet model’s absorption rate rises significantly, it indicates more supply than current demand can support. Sellers may face longer listing times and must become more competitive on pricing to attract offers.

• Downward pressure on prices: In a high-absorption environment, prices for that specific model often soften. Buyers gain negotiating power and can afford to be more selective, potentially leading to better deals.

• Potential warning signs: A climbing absorption rate could be an early warning of an aging model losing favor, higher-than-expected operating costs, or broader market shifts impacting that jet’s segment.

USING THE ABSORPTION RATE FOR STRATEGIC DECISIONS

Both buyers and sellers can leverage the absorption rate to make informed decisions:

• For sellers: If the rate is low, it’s an optimal time to list your aircraft to maximize return. If it’s high, it may be prudent to hold off on selling, if possible, or prepare for a longer sales cycle and adjust your pricing strategy accordingly.

• For buyers: During a high-absorption period, buyers can be patient, explore multiple options, and negotiate favorable terms. When the rate is low, buyers should be ready to act quickly and recognize that they will have less leverage in negotiations.

At Holstein Aviation, our IADA certified professionals bring decades of transaction experience, real-time market intelligence and global reach. We guide our clients through every step of the process, ensuring confidence and clarity in today’s dynamic environment. We can help you evaluate the absorption rate for various models of aircraft that you might be considering purchasing to assist in the process of determining the best fit for your needs. Alternatively, if you are considering selling your aircraft, we can help you craft a plan to sell at the highest price that the market will allow considering factors such as the current absorption rate. Regardless of whether you’re preparing to buy an aircraft or sell your aircraft, Holstein Aviation is your trusted partner in business aviation.