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Pre-Owned Aircraft Market Stabilizes after Ten–Year Decline

by GlobalAir.com 3. August 2018 13:38
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A recovery is in progress in the pre-owned business jet market following what seemed to be an interminable downturn since 2008. Even though the U.S. market strengthened in recent years, weakness in other world-areas kept global inventories excessively high, providing downward pressure on aircraft values in all markets.

Now, as those international markets are returning to relative stability, surging demand in the U.S. is driving a new market dynamic.

Inventory of pre-owned airplanes for sale has declined on a quarter-over-quarter basis for the last two years, with much of what is remaining picked clean of the most desirable aircraft. Just a year ago, a buyer could enter the market for almost any model and be able to find an aircraft meeting its acquisition parameters. And because it was a buyer’s market, it could typically negotiate favorable pricing as well.

Well, that picture has changed considerably, especially for buyers targeting current or recent-production model aircraft with Next-Gen avionics updates, desirable cabin configurations, and reasonably strong paint and interior. Those buyers are finding themselves in competition, even bidding wars, to have a shot at that qualified aircraft. Buyers that are slow to make an offer on a strong candidate are often left behind, finding themselves starting their search anew, and hopefully wiser from the experience.


Falcon 7X

Following are examples from current and recent production models in mid-sized to large-cabin markets where inventory has taken a dramatic drop in the last 12 months:

Model

July 1, 2017

July 1, 2018

% Reduction

Falcon 7X

31

20

35%

Falcon 2000EX Series

25

14

44%

G450

31

18

42%

Challenger 605/650

16

8

50%

Challenger 300/350

34

21

38%

Citation Sovereign/+

34

21

38%

Even some older models have seen inventories drop over the last year, as buyers have recognized value opportunities in this category.

Model

July 1, 2017

July 1, 2018

% Reduction

Falcon 900B

21

11

48%

G200

31

21

32%

GIV-SP

39

26

33%

Challenger 604

32

20

38%

 

Where does the market go from here?
The aircraft market is, of course, driven by the global economy. And there’s also compelling data that suggests our market’s health is tied directly to price of oil, as countries whose economies are tied to oil, and companies whose profits rise and fall with the price of oil, are significant users of business aircraft. While it is beyond the scope of this article to predict the global economy and the price of oil in the long-term, the forecast for the pre-owned market for remainder of 2018 and into 2019 looks good.
- Confidence, a key psychological factor for business jet buyers, is strong that the economic outlook is positive.
- The U.S. tax environment is more favorable for the acquisition of aircraft.
- The number of very-high-net-worth individuals is growing globally.
- Demand for pre-owned aircraft, especially among U.S, buyers, has displayed sustained strength the last two years.
- Utilization of business aircraft, both in North America and Europe, are returning to pre-recession levels.
- Depreciation rates for many models are inching back to historic norms (3-5% annual depreciation), after several years of double digit value slides.

All of this points to a continuation of the current market environment, characterized by more buyers entering the market, and sellers of quality aircraft finding themselves in a stronger position than they have been in a decade. Prices will continue to stabilize, and even experience a slight uptick in some cases.

It should be noted that not all models will see this scenario. Those that are 25-30 years and older are still faced with bloated inventories. Many owners are trying to get out from underneath their aircraft before regulatory mandates take affect that require expensive avionics upgrades. In addition, as these older aircraft become more expensive to maintain and operate, demand for them diminishes. Sellers of aging aircraft will still experience long market times and value softness.


Challenger 605

Summary
Despite the challenges owners of older aircraft are facing, current market trends are positive for the entire industry. Sellers are entering the market with new-found confidence. Buyers are more optimistic that the value of the aircraft they acquire is not going to drop precipitously as soon as they close. OEM’s are getting calls from buyers who just a year ago would have been looking solely in the newer pre-owned market. Charter operators, service centers, and training providers are all enjoying healthy (and in some cases excessive!) demand. A sense of stability is taking hold which has been missing in our market for a decade. And though there always seems to be a storm cloud or two forming on the horizon, aircraft owners are seeing asset value retention finally returning to historic norms.

By Jim Donath

Jim Donath is President of Donath Aircraft Services, a Chicago-based aircraft brokerage firm focused on the mid-sized and large cabin markets for over 40 years.

 

 

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Jim Donath

Why it Took us 3 days to Fly to Oshkosh

by Tori Williams 1. August 2018 18:00
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Only a few days have passed since we returned from the “World’s Greatest Aviation Celebration” at EAA’s AirVenture and I am already having withdrawals! There is nothing quite like sleeping under the wing of an airplane that you flew in and waking up to the sound of aircraft engines whirling to life. As anyone who has been to AirVenture in Oshkosh, Wisconsin knows, the week is completely unforgettable and there is no shortage of things to see and do.

This is the 4th year my husband and I have flown in, and the 2nd time that we’ve flown my father-in-law’s 1931 Waco ASO. This “Straightwing” biplane was restored in the 70’s and has an open cockpit. It is a wonderful aircraft, but definitely not ideal for cross-country flying. It’s extremely windy, and even in the middle of summer the air gets freezing once you’re at altitude. We knew we were in for a long trip before we left, but the series of events that followed were nothing short of unexpected.

Our plan was to leave Saturday morning, have a leisurely trip up, and arrive that evening to set up camp. However, the reality of our trip to Oshkosh was very different. When we got up Saturday morning, it was pouring rain and ceilings were at 800’. We had to wait for that to clear out, so we weren’t able to depart until around 3pm. We had a 20 knot headwind, and ForeFlight indicated our speed across the ground varied between 60-70 mph. We were slow, and the thunderstorms from earlier had broken up but there were still showers we had to avoid.

We made a quick fuel stop in Harvard, Illinois at a gorgeous grass strip called Dacey Airport. After this we were finally in the homestretch to Ripon.

An important side-note: for those who haven’t read the Oshkosh NOTAM, the gist of the arrival procedure is to approach the town of Ripon, southwest of Oshkosh, and visually separate yourself from incoming traffic. Once you have a half mile separation from the plane in front of you, everyone is instructed to fly at 90 knots and 1800 ft in single file to the next town of Fisk. Once directly over Fisk, the Air Traffic Controllers ask you to “rock your wings” for identification purposes and then they assign you a runway and you are passed to another controller who clears you to land. There are often 4 or 5 aircraft on final at any given moment, so accuracy landings “on the dot” and turning off the runway as soon as able are important. The NOTAM states that no talking on the radio is allowed, so usually this approach is actually easier than landing at some other airports.

With the NOTAM in hand and mostly memorized, we approached Ripon with high hopes for a smooth arrival and landing. After all, the 3 other times we have flown in there were never any issues. However, when we were less than 5 miles from Ripon we heard this on the radio: “Attention all traffic – the Oshkosh field is now closed to incoming traffic for the Bonanza mass arrival. Begin holding. This will be a LONG delay so divert to an alternate if you have low fuel.” Partly because we didn’t expect a long delay, and partly because the fuel at Dacey was so expensive, we didn’t fill the tank up. We were far from a fuel emergency, but didn’t have enough to hold for a “LONG delay.” We immediately turned to our alternate, Fon du Lac. As we got near and contacted the temporary control tower, we were out of luck again. Fon du Lac was where the Bonanza mass arrival was departing from, and were again told to divert due to “150 Bonanzas on the runway” (Certainly something you would only hear at AirVenture.)

We began looking for a third alternate, and located untowered Dodge County airport 23 nm away. The annoying thing about this section of our trip was that dozens of other aircraft were forced to do the same thing, and we were all inbound to Dodge County at the same time. One such aircraft had a stuck mic, so he was continually transmitting over everyone else trying to coordinate within the pattern. Eventually we all were able to communicate and land, and I must give props to the staff at Dodge County for the “refueling assembly line” they had created to deal with the sudden influx of frustrated aircraft.

The whole FBO was full of pilots who had to divert. Several were on their phones calling every hotel in town only to find out they didn’t have any rooms available. We asked around for a bit about lodging but it appeared our only option in Dodge County was to set up our tent and camp out. With less than an hour left of daylight, we decided to try going back to Fon du Lac, where my father-in-law had found a hotel with open rooms.

We immediately took off, watching as others began pitching their tents on the airport below us. Thankfully Fon du Lac had cleared out the Bonanzas, and we were able to land there (behind a C-47!) and tie down for the night. We were generously given a ride to the hotel by a T-6 pilot who had the same misfortune as us while trying to enter Oshkosh. His wife had brought a camper up earlier in the week and she drove there to retrieve him. After some late-night pizza delivery, we were exhausted and got some rest before a second attempt to enter Oshkosh on Sunday.

Sunday morning we were awoken to the sound of thunder and heavy rain. The weather had taken a turn for the worse overnight, and it was clearly going to be IFR for several hours. We spent most of the day in the terminal at Fon du Lac, watching The Open Championship on tv and monitoring weather. Finally around 3pm the skies began opening up. Immediately engines could be heard starting and it was “go time” for getting into Oshkosh. We took a few moments to refuel and ready the airplanes, and went on our merry way towards Ripon.

10 miles from Ripon we began monitoring the approach frequency. It already didn’t sound good. The controller urgently repeated the phrases “we are oversaturated! Everyone approaching Fisk turn LEFT and enter a hold! If you are not at Ripon, do not come to Ripon! Enter a hold and come back with a half-mile separation!” We figured this was just a big push of traffic, and it would pass through soon. We were very wrong.

This video was taken by someone else who was in the air the same time as we were. You can hear the hecticness and see the planes that are too close for comfort.

Our approach took several minutes, and the controller hadn’t mentioned a hold in a while so we figured it was safe to go over Ripon and enter the lineup over the railroad tracks to Fisk. However, as soon as we got closer we realized just how many aircraft were trying to do the exact same thing. Dozens of planes could be seen in any direction at different speeds and altitudes, going every which way and being way too close for comfort. It was very reminiscent of a WWI dogfight. We maneuvered around a few such planes but ended up with a Kitfox on top of us, a Navajo flanking us on the right, and a couple small Cessnas flanking our left. Clearly this wasn’t going to work and we would be turned away if we even tried to approach Ripon.

We broke away from that disastrous group and entered a hold around the rather large Green Lake. After a few circles mixed with other traffic, it became clear they were not allowing people to enter Oshkosh any time soon. The controller continued to instruct planes to “turn left and enter a hold,” “restart the approach,” or “stay away from Ripon.” At one point he said “there are 300 of you between Ripon and Fisk, we cannot have that and we need better separation!” I’m not sure of the 300 figure was an exaggeration, but it certainly felt like it was accurate.

We stayed in a hold for a little over 2 hours before we decided to return to Fon du Lac and try again later. During this time several other aircraft began declaring low fuel emergencies and were granted permission to land. We monitored approach for several hours after we landed and it was the same story: people turned away right and left for airport oversaturation or improper compliance with the NOTAM.

We spent another night in Fon du Lac and got up at 5:30am Monday morning. Oshkosh officially opened for arrivals at 7:00am but we were not going to get there late and enter a hold. We departed Fon du Lac at 6:40 and went straight into Oshkosh. This was the arrival we were accustomed to. Peaceful, respectful, professional. We landed on the yellow dot and had an incredibly fun week. I hope that next year they seriously consider a way to handle the record-breaking traffic!

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Aviation Safety | Flying | Airports

Timing Is Critical When Appealing An Emergency Order Of Revocation

by Greg Reigel 1. August 2018 17:43
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A recent NTSB decision highlights the imperative of appealing an emergency order of revocation in a timely manner, and the continuing, near-insurmountable hurdle of trying to prove "good cause" if the appeal deadline is missed. In Administrator v. Muriuki the FAA issued an emergency order revoking the airman's medical certificate. Per 49 C.F.R. § 821.53(a) the airman had 10 days within which to appeal the order. The airman did not file his appeal until 4 days after it was due. However, it is possible for the Board to accept a late-filed appeal if the airman is able to show "good cause" for delay in filing. Unfortunately, the Board rejected the airman's "good cause" argument and rejected the late-filed appeal.

What is noteworthy about this case isn't the fact that the Board is strict about timing requirements for filing appeals. That isn't new. But what is important about this case is how the Board continues to reject legitimate "good cause" arguments asserted by airmen.

In this case, the FAA issued a notice of proposed certificate action ("Notice") in December 2017 with respect to the airman's medical certificate. The emergency order revoking the airman's medical certificate was not issued until April 13, 2018. During the time period from December 2017 through mid-April 2018 the airman was traveling away from his home but had made arrangements for someone to check his mail. However, the person who was supposed to be checking the airman's mail never checked the mail when the FAA issued the emergency order and so the airman was not aware that the order was issued.

Rather, on April 20, 2018 the airman went in to apply for a new medical certificate and was told by the aviation medical examiner ("AME") that he could not issue a medical and the airman should contact the FAA directly for more information. The airman called the the FAA on April 20, April 23, and April 24, and, finally, on April 25, 2018 someone from the FAA told the airman that the FAA had sent him something in the mail, although the individual apparently did not tell the airman exactly what had been sent.

So, the airman then contacted the person who was supposed to be checking his mail who then confirmed to the airman that the emergency order was sent to the airman. The airman retained an attorney that day and, after the attorney contacts the FAA attorney the following day to obtain a copy of the order, the attorney filed an appeal on behalf of the airman on April 27, 2018 - a mere 4 days after it was otherwise due.

In analyzing the case the Board observed that "good cause" is defined by two criteria: (1) factors outside of respondent's control prevented him from knowing or acting upon the emergency order, and (2) once he was aware, he acted diligently to initiate his appeal. Based upon the facts, the Board believed that the airman's arrangements for having his mail checked were inadequate because the airman did not explain how often his mail was being checked and admitted that during the week when the emergency order was issued the mail was not checked at all.

It was also unhappy with the fact that the airman followed the AME's instructions and attempted to contact the FAA to find out what was going on, rather than going back and checking his mail. According to the Board, the airman also could have contacted the FAA investigator handling the case and he should have done more to assure that the mail was checked and he was notified if/when something from the FAA was received. Thus, it concluded that it was not convinced circumstances beyond the airman’s control prevented him from knowing about the emergency order.

And even if that weren't the case, the Board went on to find that the airman's actions after the AME refused to issue him a medical did not show diligence. The Board faulted the airman for only trying to call the FAA and waiting 5 days before going back to have his mail checked. (Of course this ignores the fact that it took the airman 5 days to get an answer out of the FAA, and an incomplete answer at that).

At the end of the day, this case makes clear, yet again, that you can expect the Board to be almost completely unforgiving if you file an appeal late. Although you may request that the Board accept the late-appeal based upon "good cause", please realize that the burden of proving "good cause" is nearly insurmountable.

So, if you are the subject of an FAA investigation, make sure you check your mail every day. If you can't, have someone you trust check it for you. And if you receive something from the FAA, don't ignore it. Open it immediately. The time for you to defend and protect your rights may already be ticking. And if you do receive an order, emergency or otherwise, from the FAA, do not delay in taking action. It is much better to argue the merits of an FAA decision rather than whether you met the timing requirements for an appeal of the FAA's decision.

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Greg Reigel



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