Aviation Market Glossary
Essential terminology for business aviation transactions, finance, and market analysis
A
Absorption Rate
The rate at which available aircraft inventory would be sold given current transaction velocity. Calculated as: (Active Listings) / (Average Monthly Transactions). Lower rates indicate stronger seller's market.
Example: If 240 Citation CJ3s are listed and 20 sell per month, absorption rate = 12 months.
Airframe Hours
Total accumulated flight hours since aircraft manufacture. Primary indicator of usage and wear. Critical factor in valuation alongside cycles (takeoff/landing events) and calendar age.
Asking Premium/Discount
Percentage difference between listing price and estimated market value. Premium indicates seller pricing above market; discount indicates below-market pricing, often for quick sale or distressed circumstances.
B
Bonus Depreciation
Tax provision allowing businesses to immediately deduct a large percentage of asset purchase price in year placed in service. For aircraft: 100% bonus depreciation (when available) vs. standard MACRS 5-year schedule.
Example: $10M aircraft → $10M first-year deduction (100% bonus) vs. $2M/year over 5 years (MACRS).
Broker Commission
Fee paid to aircraft broker for facilitating transaction, typically 2-4% of sale price for seller's broker, sometimes additional 2-4% for buyer's broker. Negotiable and market-dependent.
C
Cycles
Number of pressurization cycles (takeoff and landing events) experienced by airframe. Along with hours, key indicator of structural wear. Heavy use on short routes = high cycles relative to hours.
D
Days on Market (DOM)
Time elapsed from initial public listing to confirmed sale. Median DOM by category indicates market velocity. Extended DOM often triggers price reductions.
Example: Light jets: ~140-180 days (2024), Large cabin: ~220-280 days.
Depreciation Curve
Rate of value decline over time, plotted as percentage of original value vs. age. Typically steepest in years 1-5, then flattens. Varies significantly by model popularity and technological obsolescence.
Distressed Sale
Transaction conducted under time pressure or financial duress. Characteristics: below-market pricing, quick close timeline, minimal pre-purchase inspection flexibility. Often results from bankruptcy, foreclosure, or estate liquidation.
E
Escrow Service
Third-party intermediary holding purchase funds during transaction, releasing upon satisfaction of closing conditions. Standard practice in aircraft transactions to protect both parties.
F
Financing Rate
Interest rate charged on aircraft acquisition loan. Varies by: borrower credit, down payment size, aircraft age/type, market conditions. Typical range (2024): 5.5-8.5% for qualified buyers.
Fresh Annual
Aircraft with recently completed (within 30-90 days) annual inspection. Increases transaction appeal by reducing buyer's near-term maintenance obligations and calendar-based inspection costs.
H
Hull Insurance
Aviation insurance covering physical damage to aircraft itself (as opposed to liability coverage). Premium based on: hull value, pilot experience, usage, home base. Required by lenders.
Example: $12M aircraft might carry $200-400K annual hull insurance premium depending on risk factors.
I
Inventory-to-Transaction Ratio
Market health metric comparing active listings to recent transaction volume. Higher ratios indicate buyer's market (excess supply); lower ratios indicate seller's market (tight inventory).
Example: 1,200 listings / 300 monthly transactions = 4.0 ratio (balanced market ~3-5).
L
Lien Search
Investigation to identify any outstanding financial claims or encumbrances against aircraft. Conducted via FAA Aircraft Registry and international equivalents. Essential pre-purchase due diligence.
Loan-to-Value (LTV)
Percentage of aircraft appraised value financed by lender. Typical LTV: 75-85% for new aircraft, 70-80% for pre-owned. Lower LTV = larger down payment = lower risk, often better rates.
M
MACRS Depreciation
Modified Accelerated Cost Recovery System - standard IRS depreciation schedule for business assets. Aircraft classified as 5-year property: 20%, 32%, 19.2%, 11.52%, 11.52%, 5.76% annual deductions.
Market Sentiment Index
Composite indicator of buyer/seller confidence and market momentum. Components: inventory levels, financing conditions, transaction velocity, forward operator intentions. Scaled 0-100 (50 = neutral).
N
Negative Equity
Situation where aircraft market value falls below outstanding loan balance. Occurs when: rapid depreciation, overleveraged purchase, or market downturn. Complicates sale requiring cash at closing to clear lien.
O
Off-Market Transaction
Sale conducted privately without public listing or broker involvement. Estimated 10-15% of total market volume. Not captured in listing-based market analysis, potentially skews observed pricing trends.
P
Pre-Purchase Inspection (PPI)
Comprehensive technical examination of aircraft by qualified maintenance facility before sale closes. Identifies airworthiness issues, deferred maintenance, and undisclosed problems. Cost: $15K-50K+ depending on aircraft complexity.
Price Momentum
Rate of market value change over recent period, indicating pricing trend direction and strength. Positive momentum = appreciating values; negative = depreciating. Calculated as 3-month or 6-month rolling percentage change.
R
Recapture Tax
Tax liability triggered when asset sold for more than depreciated basis. With bonus depreciation, rapid first-year write-off means most gain treated as ordinary income recapture vs. capital gains.
Example: $10M aircraft, $10M bonus depreciation, sold for $9M = $9M ordinary income recapture.
Residual Value
Estimated market value of aircraft at future date, typically end of loan term or lease period. Critical for: lender underwriting, lease rate calculation, and depreciation forecasting.
S
Squawk
Discrepancy or defect noted during inspection or operation. Documented in logbooks. Deferred squawks (non-airworthiness items) negotiating points; airworthiness squawks must be resolved before flight.
Stale Listing
Aircraft listed for extended period (typically >365 days) without sale. Often indicates: overpricing, poor condition, or seller inflexibility. Market data analysis often excludes stale listings from velocity calculations.
T
Time & Materials (T&M)
Maintenance billing method charging actual labor hours and parts costs vs. fixed price. Common for unscheduled repairs. Contrasts with scheduled maintenance packages offered at flat rates.
Transaction Velocity
Speed at which aircraft sell, measured as median days from listing to sale. Indicator of market liquidity and buyer demand. Varies significantly by category, price point, and market conditions.
Turnkey Condition
Aircraft ready for immediate operation with no deferred maintenance, current inspections, and all ADs (Airworthiness Directives) complied with. Commands premium pricing vs. aircraft requiring pre-delivery work.
V
Vref Value
Aircraft valuation published by Vref Aircraft Value Reference, widely used industry pricing guide. Provides baseline market values adjusted for condition, time, region, and equipment. Updated monthly.
Y
Year-over-Year (YoY)
Comparison metric measuring change from same period in prior year. Eliminates seasonal variation effects. Example: Q4 2025 transactions compared to Q4 2024, not Q3 2025.
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