All posts tagged 'Aircraft sales'

Business Aviation & NextGen, Part II: Upgrade, Sell, or Do Nothing?


Image: Creative Commons/SempreVoldano

For aircraft owners, there are still a lot of issues surrounding the FAA's NextGen program. Determining what you should do to remain compliant without drowning in the high costs associated with the new avionics involved is challenging, to say the least.

Last month, in part one of our NextGen series, I discussed avionics equipment and mandates associated with the NextGen program, including what equipment is already mandated, what will be mandated come 2020 and what could potentially become required in the future. These scheduled and proposed mandates have become an important factor to consider for aircraft owners, especially when it comes to deciding whether to upgrade their aircraft's avionics or upgrade to a new airplane altogether.

Here's a rundown of what some aircraft owners have experienced, including how much cash you may need to shell out to get up to speed:

The Trends:
While some business jet operators have a little bit of time to think it over, others are already finding it necessary to upgrade their airplanes to ADS-B and FANS-1/A for international operations. And others are choosing to upgrade early to get it over with and avoid the consequences of not being ready for the 2020 ADS-B mandate.

"What I'm seeing is people using the cost of NextGen to justify an aircraft replacement sooner rather than waiting," says David Wyndham, President and Co-Owner of aircraft consulting firm Conklin & de Decker. "They are fearful of the cost of the upgrade on their older aircraft, or having an older aircraft with little resale appeal if they don't upgrade."

The resale value of an old airplane is one thing. The cost of new, mandated equipment exceeding the cost of the aircraft itself is another reality that aircraft owners must face.

But not everyone shares the opinion that upgrading now is the best option. Some aircraft owners are willing to wait it out with the preconception that the FAA won't be able to meet its own mandate in 2020, and with the hope that the cost of equipment will decrease as more manufacturers put their solutions on the market and better options start to emerge than exist right now. This plan could backfire, though: According to Duncan Aviation's website, as the deadline approaches, the cost of ADS-B will likely go up and aircraft owners could find themselves on a wait list for installation, and, ultimately, grounded.

The Challenges:
Equipment upgrades for NextGen have become a bit of a headache for aircraft owners, as much of the newer technology isn't compatible with what's currently on board aircraft, especially aircraft older than 10 years.

Jeremy Cox, Vice President of JetBrokers, Inc says there are problems at the manufacturer level when it comes to compatibility. "The main problem with ADS-B compliance…is that both Collins and Honeywell are still working on their FMS modifications to enable the ADS-B functionality."

"Worse, there will not be any weather depiction through most of the large aircraft FMS units, as they will not support the frequency," Cox says.

Add to this the possibility of STCs and required waivers for some equipment upgrades, and aircraft owners are experiences delays and down time for expensive equipment that they didn't want to begin with.

The Real Cost:
There are numerous options to consider when it comes to upgrading an airplane for NextGen, which is why every aircraft will be different when it comes to determining the cost of NextGen upgrades.

International operators will be hit the hardest, according to Cox. A full NextGen-compliant upgrade for an international, long-range business jet could likely mean numerous equipment upgrades, such as a new GPS, NAV system, FMS, transponder, Multi-Function Display (MFD), SATCOM, cockpit voice recorder (CVR), or a datalink printer.

Some owners will have additional options to consider, like whether to install ADS-B In along with ADS-B Out equipment. (As of now, the FAA is only mandating the use of ADS-B Out.)

Cox says the cost could add up to millions for business jet owners. "A Gulfstream IV will cost about $1 million to comply. A Falcon 900 will cost anywhere from $1.1 million to $3.5 million. A Challenger 601 will cost more than $1.5 million. Add to this the cost of in-flight SATCOM data that will always be turned on when operating within FANS and CDPLC airspace."

The Silver Lining:
If there's a silver lining to the cost of NextGen equipment, it's that the safety and efficiency that comes with these upgrades will benefit everyone who participates.

While the initial installation is no doubt costly, some people (depending on the type of ADS-B equipment used) will get satellite weather and traffic information at no cost. For those used to paying fees for satellite weather and GPS subscriptions, the high initial price of ADS-B might be worth it in the long run.

And still others see the value in NextGen overall. Pilots are all different when it comes to what they find necessary or valuable in avionics, and many see ADS-B and other equipment upgrades as a welcome and necessary part of the flying world.

Aircraft owner Neal Clayton says the technology is worth it. "I am not a weekend-afternoon local flyer. If I fly I'm going somewhere, at least across state lines, maybe at night, maybe in IMC, or maybe both. So things like synthetic terrain, weather display, and GPS steering are more than toys to me."

Cutter Aviation, Southwest U.S. Dealer for Quest KODIAK, to Deliver First KODIAK in December

FOR IMMEDIATE RELEASE

November 3, 2011

 

Cutter Aviation, Southwest U.S. Dealer for Quest KODIAK, to Deliver First KODIAK in December
Cutter Aviation Aircraft Sales, the Authorized Dealer for Quest KODIAK in Texas, New Mexico, Arizona, S. Nevada and S. California will take delivery of KODIAK, s/n 100-0061 in December

 

PHOENIX, AZ. — Cutter Aviation is happy to announce that it will be accepting and delivering the first Quest KODIAK for the Southwestern U.S. dealer territory from Quest Aircraft Company in December 2011.  Cutter Aviation Aircraft Sales was announced as the Authorized New Aircraft Dealer for Quest KODIAK for the Southwest U.S. in August 2011 at EAA AirVenture by Quest Aircraft Company. Cutter Aviation Aircraft Sales is excited to bring KODIAK s/n 100-0061 to the region and demonstrate the KODIAK’s modern, rugged and powerful STOL capabilities while carrying high useful loads to every runway from modern urban airports to remote backcountry airstrips.

 

Powered by the reliable Pratt & Whitney PT6A-34 turboprop engine, the Quest KODIAK can take off in under 1,000 feet at full gross weight and climb at over 1,300 feet per minute.  Configured for straight cargo or up to 10-seat in a passenger layout, the KODIAK features the latest Garmin G1000 flightdeck and can easily handle unimproved airstrips.  Additionally the KODIAK is configurable for water operations with floats or amphibs without structural upgrades as the airframe was designed for such operations originally.

 

“The Quest KODIAK is truly a perfect aircraft for owners and operators in the Southwest United States” said R.D. Wooten, Regional Quest KODIAK Sales Manager for Cutter Aviation Aircraft Sales. “The vast stretches of sparsely populated and rugged landscape in Texas, New Mexico, Arizona, Nevada and California requires a flexible utility aircraft like the KODIAK to get the job done.”

 

Wooten adds, “Combine it with the challenging terrain and the number of remote ranches, drilling and mining operations, outposts and even communities in the region that are only easily accessible by air and it’s easy to see why the KODIAK fits the needs of our customers in the Southwest.”

 

The Quest KODIAK s/n 100-0061 being delivered in December by Cutter Aircraft Sales will feature premium options such as the larger 29” Tire upgrade package, four additional Timberline passenger seats, air conditioning and the Garmin GDL 69A-XM Data Link with Audio Infotainment package to give it the utmost utility capabilities for customers within the Southwest.

 

Cutter Aviation Aircraft Sales is an Authorized New Aircraft Dealer for Quest Aircraft Company and represents Quest KODIAK in Texas, New Mexico, Arizona, Southern Nevada (Clark County) and Southern and Central California (following counties: Fresno, Imperial, Inyo, Kern, Kings, Los Angeles, Madera, Mariposa, Merced, Mono, Orange, Riverside, San Bernardino, San Diego, San Joaquin, San Luis Obispo, Santa Barbara, Stanislaus, Tulare, Tuolumne, Ventura).  For more information on Cutter Aviation Quest KODIAK Aircraft Sales, please visit: https://www.cutteraircraftsales.com/Quest-KODIAK.

 

About Cutter Aviation

Founded in 1928 by William P. Cutter, Cutter Aviation is a full-service aviation company, offering aircraft fuel/line services, maintenance and avionics solutions, aircraft charter and aircraft sales and management. Cutter Aviation operates from eight major airports in five states within the Southwestern United States including: Arizona (Phoenix-Deer Valley and Phoenix-Sky Harbor), New Mexico (Albuquerque), Colorado (Colorado Springs), California (Carlsbad) and Texas (Dallas-McKinney, El Paso and San Antonio). The company is a member of the Pinnacle Air Network, National Business Aviation Association (NBAA), and the National Air Transportation Association (NATA). Cutter Aviation is the oldest continuously family-owned and operated FBO (Fixed Base Operator) in the United States with over 83 years of serving the General & Business Aviation industry. For more information about Cutter Aviation, please visit www.cutteraviation.com

Last Quarter 2011 Market Condition Report

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:
https://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!

Aircraft Inflation: Where are Aircraft at in the "Global Financial Crisis" scheme of things

Back in 1991 I was the Vice President and head of sales for an FAA Certified Repair Station that specialized in major modifications and repairs for a variety of aircraft that included the Sabreliner and Falcon. We were a new company that erected its shingle in a highly competitive market. Our timing was good because at about the same time the FAA really jumped on the Ageing Aircraft issue thanks to the Aloha Airlines convertible incident coupled with the clamp down on unapproved parts.

Corrosion was a big money-maker for us, and just like cancer in the human body treated with a scalpel or laser, we filed, sanded and ground aircraft alloy parts and components away until all of the black oxide and associated cracking was gone and the base metal was polished smooth and clean. Next came either the repair or part replacement before everything was repainted. The Sabreliner was naturally a battery from its birth thanks to North American Rockwell’s decision to use stainless steel married to aluminium to in-build added strength without having to go too exotic in the design.

Other than being a dedicated sheet-metal repair company, we made a name by offering a very competitive labour rate. In fact our magazine advertising in the aviation press was centred on this low rate, which at the time-twenty years ago was set at $40 per man-hour. Equivalent shops were at that time charging $55 per man-hour. Today equivalent rates have risen three times that figure and at some shops it is not unusual to pay close to $200 per man-hour for specialist service work.

This trip for me down my memory lane really makes me think about inflation and its impact on the aviation industry. The questions nagging in the back of my mind are: “Have prices risen in-step with the rest of this countries ‘goods and services?’”; and “Where do business aircraft fall into all of this?”

If I apply the simple way of calculating the amount of inflation seen by using my 1991 labour-rate example; I do this by subtracting the old cost per man-hour rate from today’s rate, and then dividing this result by the old rate from 1991 (($120-$55)/$55 X 100 = 118%) I find that the cost of aviation labour over the past 20 years has risen by 118%, or alternatively it has risen by almost 6% every year.

Okay now let’s apply this simple method to a business aircraft. I will pick a machine that I know is still in production after more than 20 years, i.e. the Beechcraft King Air B200. So in 1991 according to the Aircraft Bluebook Price Digest a B200 of that year model sold in a standard equipment configuration ‘New’ for $3,188,800. This same, but considerably updated version, the B200GT sold at the end of 2010 for $5,584,000. Therefore:

(5,584,000 – 3,188,800)/3,188,800 X 100 = 75%, or almost 4% every year.

Let’s try this on three more aircraft so that we can obtain an average number to be applied to the business fleet as a whole. This time I will pick both the Cessna Citation 560, the Falcon 50/50EX and the Gulfstream IV/G450. First the Citation:

In 1991 a standard equipment configuration ‘New’ CE560 was $4,438,800. In late 2009 it was $8,864,000, thus:

(8,864,000 – 4,438,800)/4,438,800 X 100 = 100%, or 5% every year.

In 1991 a standard equipment configuration ‘New’ Falcon 50 was $14,650,000. In late 2007 (the last year that one of these aircraft was built) it was $22,700,000, thus:

(22,700,000 – 14,650,000)/14,650,000 X 100 = 55%, or almost 3% every year.

 

Lastly, in 1991 a standard equipment configuration ‘New’ GIV was $21,900,000. In late 2010 its later equivalent the G450 was $38,250,000, thus:

(38,250,000 – 21,900,000)/21,900,000 X 100 = 75%, or almost 4% every year.

If we take all resultant percentages for the aircraft examples, and add them all together and then divide by the number of figures added together, we shall arrive at an average (I shall also average the years to arrive at an accurate divisor for annual increase):

(75% + 100% + 55% + 75%)/4 = 76%

(20 years + 19 years + 16 years + 20 years)/4 = 19

76%/19 = 4% per annum.

Summary:

On average, turbine business aircraft have seen an annual inflation rate applied to their factory ‘new’ prices that equals 4% per annum.

 

According to the U.S. Government, inflation has averaged about 3% per annum.

Although this is interesting information, what about the value of the U.S. Dollar? How has the buying power/value of this unit of currency also faired over the past twenty years?

So let’s take that venerable King Air B200 and compare what the 1991 price of $3,188,800 in cash is equivalent to in today’s value of the dollar. By searching the internet I found a variety of historical “comparative value of the dollar” calculators and charts. It appears that the 2010 U.S. Dollar is now worth about 0.63 cents compared to the 1991 U.S. Dollar if taken as having a ‘then’ value of 100 cents, therefore the purchase price of a B200 in 1991, if made in 2010 U.S. Dollars would in fact cost $4,368,656. The 2010 price of the B200 at $5,584,000, if paid in 1991 dollars would really only cost $3,517,920 which is only about 10% more.

Summary:

The dollar has lost 37% of its buying power in the past 20 years.

 

Since we are all living ‘post GFC’, it is interesting to see how all four aircraft in their 1991 production year-models are now worth today on the free-world used-market, according to AMSTAT Corporation’s database, and the Bluebook.

B200

Somewhere between 1,200,000 to 1,970,000 depending on engine times and condition; let’s call it $1,585,000.

 

 

Citation 560

Somewhere between 1,300,000 to 2,100,000 depending on engine times and condition; let’s call it $1,700,000.

 

Falcon 50

Somewhere between 3,700,000 to 4,300,000 depending on engine times and condition; let’s call it $4,000,000.

 

GIVSP

Somewhere between 7,100,000 to 14,100,000 depending on engine times and condition; let’s call it $10,600,000.

 

The issue of ‘residual value.’

Okay so we have original purchase prices from 1991, and we also have 2010/11 values of today for the same aircraft, twenty years hence. Let’s analyze these numbers to see what the residual value of each aircraft is compared to its original price, and then lets average this:

The B200 was $3,188,800 and is now $1,585,000; therefore its residual value is about 50% of its original price. If the dollar value is adjusted by 63% (the real buying power of today’s dollar, then the adjusted residual value is about 31%.

The Citation 560 was $4,438,800 and is now $1,700,000; therefore its residual value is about 38% of its original price. If the dollar value is adjusted by 63% (the real buying power of today’s dollar, then the adjusted residual value is about 24%.

The Falcon 50 was $14,650,000 and is now $4,000,000; therefore its residual value is about 27% of its original price. If the dollar value is adjusted by 63% (the real buying power of today’s dollar, then the adjusted residual value is about 17%.

The GIV was $21,900,000 and is now $10,600,000; therefore its residual value is about 48% of its original price. If the dollar value is adjusted by 63% (the real buying power of today’s dollar, then the adjusted residual value is about 30%.

(50% + 38% + 27% + 48%)/4 = 41%

(31% + 24% + 17% + 30%)/4 = 26% Adjusted for the decline in the value of the U.S. Dollar.

Summary:

On average, over a 20 year period, turbine business aircraft have been seen to retain a residual value of about 41%, or about 26% in real dollars.

 

The What-If of a ‘Non-GFC Economy’

So let’s imagine that the Global Financial Crisis never took place. Where would these figures stand today if the new paradigm of values had not come into play?

If you scroll back to my March 2009 Globalair.com article titled: “The Not So Great Depression”, you will see that effectively post GFC tipping-point market values have dropped between 40% and 60%. It is absolutely true to say that the ‘Large Cabin’ market is the precursor, by performance today, of an improving outlook. However I want you to imagine just for a moment, what the average residual value percentage could-would have been without GFC, somewhere between 50% and 80%.

What does all of this mean to you?

Final Conclusion:

Business Aviation sees about a 4% per annum inflation rate.

 

The U.S. Dollar is losing 1.85% of its buying-power/worth every year.

 

All resale/used aircraft are currently trading somewhere between 40%, to 60% below their ‘historical norm.’

 

If you have a hankering for a new aircraft and you are a tenacious-tax-tiger, remember that you are able to write 100% off in the first year due to the Bonus Depreciation legislation enacted by the House.

 

My advice is that you ‘dump’ your old aircraft now, and buy up into a newer aircraft that prior to GFC was probably well and truly out of your price-range. Take the hit on your trade-in while you find great peace of mind in the knowledge that you have a bargain that can only accrue in value  compared to its initial purchase price today (baring another GFC of deeper proportions). Pray that Quantative Easing and the Printing Presses of the Federal Reserve Banks don’t continue to devalue the U.S. Dollar.

 

In-short: ‘Out with the Old, and In with the New. SELL now and then immediately BUY now.

Trickle-Down is where the action is in Aircraft Sales

Today it is very easy to comfortably wear the rut of community despair that fits so snugly across yours and everyone else’s shoulders, while walking from meeting to meeting with a look of long and painful sorrow and a low-hanging head while muttering phrases like: “I can’t believe these values”; “my aircraft is barely above its salvage number.” “Nothing is selling”; “woe is me”, etc.

Well ladies and gentlemen please listen very carefully: There exists a business aircraft market that is zinging from real and deadly serious business that is being conducted in tens of millions of dollars every single day (or at least on the days that the FAA Registry is open for business.) This very same market shall also soon provide you with the salvation that you had so long ago given up on ever hearing it knocking at your door ever again.

Trickle-down wealth is the path to economic nirvana, and believe-me the golden tentacles of the few, are already seeping down and restoring the faith and confidence amongst the many. Have I got your attention? So where can salvation be found you may ask? Two words: ‘Large Cabins.’

The large cabin business aircraft used market woke-up last summer, and quickly went from a pipe and slippers to wearing running shoes in the blink of an eye. I believe that three factors caused the Atropine shot to this market’s heart:

1. Asking and selling prices hit their lowest point after the aircraft that had to be sold were actively being advertised waiting for a buyer, long after the casual     sellers had pulled their aircraft from the marketplace

2. Corporations and the mega-rich alike, decided that they had-had about enough of the politically-correct moratorium on private flying and decided that flying was okay again

3. The DOW Jones Industrial Average started trekking northward to conquer new dizzying heights

To support my assertions please allow me to show you the numbers:

I as well as the good folks at AMSTAT Corporation define a large cabin as any aircraft that has a maximum take-off weight greater than 40,000 lbs.

In May of 2010, the average asking price of the composite of all ‘used’ large cabin business aircraft dropped to a low of $12,750,000. In June this number started climbing until it crested in December at $13,800,000. The reason for the crest is that by the end of last year all of the ‘best-deals’ had been snatched up by hungry deal-makers. Now we shall again see this composite asking price climb again in the second wave buying spree that is already underway.

Two years ago, in February 2009, the Percentage of Active Fleet For-Sale (Large Cabin) peaked at 15.3%. Today that has dropped to 11.4%. Specific models chosen as a snapshot are at the following numbers:

Falcon 2000EX  =  9.6%
Challenger 604 =  11.3%
Falcon 900EX =  7.2%
Embraer Legacy =  9.2%
Gulfstream V =  3.6%
Gulfstream G550 =  3.5%
Global Express =  10.2%
Global XRS =  7.3%
Boeing BBJ =  7.4%

Remember that a normal healthy market for most used business aircraft (all sizes and classes) is 10%.

Since a peak number in August 2009, the number of large cabin aircraft that were available for purchase has dropped by 20% (from 635 down to 510.)

While the House, Senate; and most prospective used business aircraft buyers and sellers settled down to their long, quiet and lazy summer holidays, the DOW began its climb from 9,700 points to well over 12,000 points today. The large cabin buyers then made their long awaited jump into the used business aircraft market as soon as the climbing ascent of the DOW became a certifiable trend.

Unfortunately the majority of all aircraft in the Midsize and Smaller markets still remain stalled today, and some are plumbing the depressing depths of even lower values. Regardless of this I can confidently argue that the time is definitely coming nigh for everyone in all categories below the large cabin segment. It is distinctly a simple law of nature that ‘trickle-down’ gold will eventually make it to the absolute bottom of the deepest of all subterranean markets. All you have to do is slough off your coat of misery, rise up your head, think positive, be positive, and most importantly live positive, and soon the world about you shall change and blossom into greatness as it passes through our long lost friends: ‘it’s alive’, ‘it’s getting up’, ‘fair’, ‘average’ and ‘good.’ Trust me on this. So, will you please stop moping about and making the market look bleak and untidy, and instead cheer-up and again restart living the dream?

Another good point to look at is the number of aircraft with "Real Pricing" listed on Globalair.com's Aircraft Exchange.  More and more listings are getting into the "Real market value" than ever before.  It might surprise you to know that we are getting back to business!

While the numbers are showing an upswing what have you seen to prove me right or wrong?  Pilots, bankers, brokers, dealers, CFO's what say you?

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