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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

Last Quarter 2011 Market Condition Report

by GlobalAir.com 1. November 2011 13:32
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LAST QUARTER 2011 MARKET CONDITION REPORT

Globalair Article – November 2011 By Jeremy R.C. Cox

In March 2009 I wrote an article for Globalair.com that was Titled: ”The Not So Great Depression”,
you can re-read this by clicking on this link:
http://blog.globalair.com/post/The-Not-So-Great-Depression.aspx

I wrote that piece whilst we were all living under the developing fall-out that was created as a
direct result of the Global Financial Crisis (GFC) that was first felt in the late summer of the previous
year, and was later proved to have started a full year before then (2007.)

The purpose of this article is to attempt to track just how far the Used Business Aircraft Market has
managed to pull itself away from the stinging clutches of GFC. I will use a statistical analysis process
that is fuelled by the numbers available to me through my subscription to AMSTAT. I will let you draw
your own conclusion as to where we currently stand overall, however it would be remiss of me if I didn’t
state that I believe that the Used Business Aircraft Market is on-track to achieve a soon to be issued
clean bill of health.

 

IT IS ALL IN THE NUMBERS, I.E. THE ‘PERCENTAGE FOR SALE’

November 2005 – Baseline

10,207 Turbo-Props, 1,127 or 11.04% were available for Sale

5,757 Light Jets, 833 or 14.47% were available for Sale

4,967 Medium Jets, 544 or 10.95% were available for Sale

3,180 Large Jets, 279 or 8.77% were available for Sale

 

November 2007 – Pre GFC Effect

11,121 Turbo-Props, 928 or 8.34% were available for Sale

6,417 Light Jets, 812 or 12.65% were available for Sale

5,757 Medium Jets, 584 or 10.14% were available for Sale

3,728 Large Jets, 267 or 7.16% were available for Sale

 

November 2009 – Within The Depths of GFC

12,049 Turbo-Props, 1,503 or 12.47% were available for Sale

7,285 Light Jets, 1,313 or 18.02% were available for Sale

6,568 Medium Jets, 1,098 or 16.72% were available for Sale

4,233 Large Jets, 597 or 14.10% were available for Sale

 

November 2011 – Emerging From GFC

12,616 Turbo-Props, 1,350 or 10.70% were available for Sale

7,615 Light Jets, 1,198 or 15.73% were available for Sale

6,826 Medium Jets, 924 or 13.54% were available for Sale

4,612 Large Jets, 554 or 12.01% were available for Sale

SUMMARY GRAPH SHOWING HISTORICAL TO CURRENT PERCENTAGE FOR SALE

 

As you can see from the numbers and the associated Graph, the Percentage-for-sale ‘Peak’ came
approximately
in 2009 (Light Jets peaked at 18% Mid 2009, while the rest all peaked in late 2009.)
We are about halfway back
to normal therefore 2012/2013 are looking like they might be ‘rock-solid.’

 

THE TIME IT TAKES TO SELL IN TOUGH TIMES

 

How long does it take to sell an Aircraft? Statistically for the same Groups, one can track the Number of
Days
On Market, i.e. the Average calendar time period in days from Initial Listing For Sale until Deal Closing.
The numbers are as follows:

November 2005 – Baseline

Average Days On Market for all Turbo-Props was 505

Average Days On Market for all Light Jets was 498

Average Days On Market for all Medium Jets was 436

Average Days On Market for all Large Jets was 447

 

November 2007 – Pre GFC Effect

Average Days On Market for all Turbo-Props was 492

Average Days On Market for all Light Jets was 517

Average Days On Market for all Medium Jets was 382

Average Days On Market for all Large Jets was 409

 

November 2009 – Within The Depths of GFC

Average Days On Market for all Turbo-Props was 420

Average Days On Market for all Light Jets was 471

Average Days On Market for all Medium Jets was 357

Average Days On Market for all Large Jets was 376

 

November 2011 – Emerging From GFC

Average Days On Market for all Turbo-Props was 553

Average Days On Market for all Light Jets was 588

Average Days On Market for all Medium Jets was 471

Average Days On Market for all Large Jets was 459

SUMMARY GRAPH SHOWING AVERAGE DAYS ON MARKET

 

 

What is really interesting about this graph is the fact that when an Aircraft MUST be sold ASAP, it is
‘Right-Priced’ and sold in less time than normal. The Lowest number of Days occurred immediately after
GFC showed it despicable face to us all.

Now for the Same Aircraft Groups we shall focus on the Average Year of Manufacture for each Group:

 

AGE AFFECTS POPULARITY

November 2005 – Baseline

Average For-Sale Year of Manufacture for all Turbo-Props was 1982

Average For-Sale Year of Manufacture for all Light Jets was 1983

Average For-Sale Year of Manufacture for all Medium Jets was 1985

Average For-Sale Year of Manufacture for all Large Jets was 1982

 

November 2007 – Pre GFC Effect

Average For-Sale Year of Manufacture for all Turbo-Props was 1984

Average For-Sale Year of Manufacture for all Light Jets was 1985

Average For-Sale Year of Manufacture for all Medium Jets was 1988

Average For-Sale Year of Manufacture for all Large Jets was 1985

 

November 2009 – Within The Depths of GFC

Average For-Sale Year of Manufacture for all Turbo-Props was 1987

Average For-Sale Year of Manufacture for all Light Jets was 1989

Average For-Sale Year of Manufacture for all Medium Jets was 1992

Average For-Sale Year of Manufacture for all Large Jets was 1992

 

November 2011 – Emerging From GFC

Average For-Sale Year of Manufacture for all Turbo-Props is 1988

Average For-Sale Year of Manufacture for all Light Jets is 1990

Average For-Sale Year of Manufacture for all Medium Jets is 1992

AVERAGE AGES OF FOR SALE AIRCRAFT ARE GETTING YOUNGER, AS THE FLEET AGES

 

 

SPECIFIC MODELS

 

The following figures are quite enlightening as to the issue of Age and Obsolescence:

 

Year of Manufacture

1985

1981

1976

1978

1983

1979

 

MU2 Solitare

Merlin IIIB

Learjet 25B

Sabreliner 75A

Challenger 600

Gulfstream II

 

 $1,375,000.00

 $1,795,000.00

 $1,297,500.00

 $2,990,000.00

 $9,000,000.00

 $7,775,000.00

Year of Analysis

MU2 Solitare

Merlin IIIB

Learjet 25B

Sabreliner 75A

Challenger 600

Gulfstream II

Nov-05

 $900,600.

 $ 828,800.

 $645,000.

 $683,000.

 $4,395,000.

 $ 2,912,692.

Nov-06

 $910,727.

 $767,475.

 $715,833.

 $513,333.

 $5,412,857.

 $3,007,333.

Nov-07

 $834,800.

 $883,494.

 $590,000.

 $629,000.

 $5,297,222.

 $2,696,000.

Dec-08

 $891,500.

 $963,132.

 $520,625.

 $825,000.

 $4,626,667.

 $2,171,574.

Nov-09

 $841,128.

 $930,000.

 $648,875.

 $666,666.

 $2,815,594.

 $908,890.

Dec-10

 $824,480.

 $706,600.

 $496,642.

 $499,900.

 $2,163,333.

 $819,928.

Nov-11

 $728,800.

 $717,750.

 $485,500.

 $350,000.

 $1,665,625.

 $826,691.

OBSELETE AIRCRAFT (BASED UPON VALUES)

Year of Manufacture

2002

2005

2003

2000

2001

1999

 

Socata TBM700B

King Air 350

Cessna CJ1

Hawker 800XP

Challenger 604

Gulfstream V

 

 $2,512,390.

 $5,881,474.

 $4,024,000.

 $11,895,000.

 $23,235,000.

 $39,100,000.

Year of Analysis

Socata TBM700B

King Air 350

Cessna CJ1

Hawker 800XP

Challenger 604

Gulfstream V

Nov-05

 $2,071,153.

 $2,651,666.

 $3,554,500.

 $10,208,000.

 $18,500,000.

 $36,573,333.

Nov-06

 $1,905,833.

 $3,658,333.

 $3,374,500.

 $9,768,000.

 $18,700,000.

 $33,950,000.

Nov-07

 $1,850,000.

 $4,211,923.

 $3,610,000.

 $9,158,214.

 $22,315,000.

 $45,000,000.

Dec-08

 $1,859,875.

 $3,633,947.

 $3,552,222.

 $8,918,700.

 $20,675,000.

 $38,683,333.

Nov-09

 $1,685,556.

 $3,594,565.

 $2,944,750.

 $5,852,250.

 $13,140,455.

 $25,185,714.

Dec-10

 $1,634,989.

 $2,941,500.

 $2,641,500.

 $4,610,313.

 $13,289,000.

 $26,247,500.

Nov-11

 $1,587,857.

 $3,034,211.

 $2,299,087.

 $4,080,909.

 $11,356,250.

 $26,400,000.

CURRENT OR NEAR CURRENT PRODUCTION AIRCRAFT

With all that said I believe you can see that the market is progressing and should you be condsidering
the next step please review
Globalair.com - Aircraft Exchange.  Very current with aircraft, tools to use
such as A.Buyer and comparison tool.  If you are thinking it you might want to use Globalair.com.

See you next Month!

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Aircraft For Sale | Jeremy Cox

(When) Will Business Jet Values Recover?

by David Wyndham 1. November 2010 11:36
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The 2010 NBAA Annual Meeting finished up less than two weeks ago. For the most part it was a success. At our booth on the convention floor, we saw a lot of good, quality traffic. People were generally upbeat. From talking with folks all year long, and especially at NBAA, here are a few comments on where aircraft values may be headed.

Big Iron. Global business jets are recovering, if they are newer. At the top, the GV/G550/ Global Express families currently show about 4% of the active fleet as “for sale” according to AMSTAT. Vref shows that values flattened out over the summer and have started to drop a bit in recent months, but with a low number for sale, I’d say the market for this category has hit recovery mode.

Long range business jets, they are not doing quite as well as their big brothers and sisters. The Falcon 900EX shows 7% of the active fleet for sale and for the G450, it has 4% of the active fleet for sale. The Challenger 604 shows 11% for sale while the newer Challenger 605 shows 4% of the fleet for sale. So while numbers for sale are getting tight, values in this big cabin/long range market have not recovered (yet). As you look at older models in this category, the numbers (as a percent of the active fleet) increase, and values tend to show less of a recovery. In general, older big cabin and long range business jet values have not showed signs of a recovery.

Super mid-size values remain soft, but again the numbers for sale show a tightening up in the market. For the Challenger 300, 8% of the active fleet is currently listed for sale.  Challenger 300/ G200 values are flat as are Citation X and Falcon 50EX values.

Midsize jet values like the Hawker 800XP family, Lear 60, Citation 650s are flat. Percentages of their active fleet for sale are in the 12 – 22% range. Again, I am not seeing any recovery here yet.

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David Wyndham



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