All posts tagged 'Aircraft sales' - Page 2

Piper increases in shipments, billings in 2010

AOPA Pilot reported yesterday, Piper Aircraft released its 2010 shipment and billing figures Feb. 22, reporting an increase in both areas. The news came the same day as the General Aviation Manufacturers Association’s State of the Industry address, which reported a continued decrease in GA shipments but an increase in billings.

 As GAMA had reported, emerging markets worldwide contributed to the increase in billings. The same was true for Piper, which delivered 47 training aircraft to four foreign countries—Australia, Malaysia, South Korea, and Qatar—and the United States. Piper said that it also expanded its overall market share in deliveries of piston and turboprop aircraft from 10.5 percent in 2009 to 20.1 percent this year.

Piper deliveries increased 75 percent in 2010, with 160 aircraft. Billings rose nearly 38 percent to $120 million, the company reported.

Of Piper’s eight models of aircraft that were shipped in 2010, each saw double-digit numbers, except for the Arrow. The Mirage and Meridian accounted for the most deliveries, with 26 and 25, respectively. The company shipped more than 20 of the Warrior III, Archer III, Seneca V, and Matrix. It delivered four Arrows and 16 Seminoles.

Shipments and billings in the fourth quarter gave Piper a boost, with 53 deliveries and $42 million in billings.

While Piper expanded its market share in piston and turboprop aircraft, it is eyeing the business jet market with the PiperJet Altaire. Piper announced a redesign of the PiperJet, along with the new name, during the National Business Aviation Association annual convention in October. As AOPA previously reported, the first flight is scheduled to take place in 2012, with deliveries beginning in 2013.

In January, Piper left a new segment of the aviation industry—the light sport aircraft market. It ended its one-year relationship with Czech Sport Aircraft, which built the PiperSport LSA, because of a difference in business philosophies.

2011 Business Aviation Outlook

2011 Outlook

New Year’s Eve was an early night for me. I was fighting off a nasty cold and despite the intake of grape-related products, ran out of energy before 2011 said hello.  But as I didn’t sleep much either, I guess I was awake for the New Year. With some drugs in my blood, the cold’s effects are waning as I write this. If my outlook for 2011 is a bust, I will claim it is the after-effects of decongestants!

2010 was a year of what I’ll call a stagnant recovery. Economic signs were generally positive. The US stock markets finished 2010 with double digit gains versus 2009. NASADQ was the biggest gain up almost 17% over the year. However, rising corporate profits and stock indices have not resulted in job gains here in the US.

Business aviation is tied in with corporate profits, so that much bodes well for our industry in 2011. Aircraft sales are expected to be (relatively) strong for the last quarter of 2010 if the December activity of aviation tax and legal folks are any sign. Flight hours flown seems to be on the rise as well as charter activity. But again, new jobs and rehires are not showing strength just yet.

So here go my picks for 2011:

Business aviation activity will continue to show steady, but slow, growth. I think aircraft sales will slowly increase here in the US, be flat in most of Europe, and show some strong growth in the Middle East and Asia. As with the past several years, I think more than half of the new aircraft sales will be outside the US.  So for US-based aircraft brokers with International experience, this should be a better year for you.

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Used aircraft values will stabilize. Popular, newer models will likely show some appreciation as the correct for being under-valued. Older business aircraft values will be stable. I don’t look for any appreciation in first generation business jets as these low prices are the new normal.

As one banker said to me about aircraft age, 15 is the new 20. In other words, financial institutions will continue to be wary of lending substantial amounts on older aircraft. Full disclosure and down payments will continue to be required as credit is available to the well qualified.

Fuel prices will rise considerably in 2011. Crude is inching to $100 per barrel. While some have forecasted up to $150 per barrel for this year, others think the increases will be much lower. So $6 to $7 per gallon may be on the near horizon. This will have negative effects on business aviation as I doubt budgets are increased for many operators. So if you don’t have a wallet full of fuel discount cards, better sign up now! And don’t forget to
use Max-Trax to map out your fuel stops en route.

Jobs. I don’t see a lot of hiring in new manufacturing within aviation. The OEM’s are still hurting and will be very cautious in re-hiring employees until they start getting a solid order book. Even with Bonus Depreciation here in the US that is still a ways off. MRO’s should see a good year as operators that have put off maintenance and refurbishments need to have the work done. That should bode well for jobs in that sector.  As flight hours pick up, that should mean more jobs in the cockpit. Again, I suspect companies will be cautious and slow to re-hire. Do more with less is the mantra for aviation managers (again) this year.

So what does this mean for the typical operator? I hate to repeat myself, but managing and controlling your costs will be job #1. Which means that you will need to understand your costs, track your costs, and budget wisely. I hope we can be a help.

Tips To Maintain Your Aircraft's Value

It is a process, not an event.

First off, maintain the aircraft.

A well-maintained aircraft will always have a higher residual value than one that is not. Well-maintained in this case refers to an aircraft that is maintained beyond what the minimum regulatory standards require. Airworthiness is related to safety, not value. 

Being well-maintained means more than keeping up with the required inspections and component overhauls. It means the aircraft has its equipment in functioning order, non-critical wear and tear items are taken care of, and cosmetics are recognized as important, too. There may be optional service bulletins that add to the functionality and maintainability of the aircraft. These optional service bulletin items should be chosen with maintainability and mission effectiveness in mind.

The aircraft exterior should be kept clean and polished. Interior comfort and convenience items need to be maintained in good working order and updated as required. A clean aircraft is not only more appealing, but problems and issues are spotted earlier and thus, may be easier and less costly to remedy. Paint and interior should be kept in good condition continuously, not just in the week prior to putting your aircraft up for sale.

The best ones to maintain the aircraft, if possible, are your own in-house maintenance staff. A well-trained, dedicated maintenance staff is your first and best opportunity to keep the aircraft in top condition. Your choice of a major MRO (Maintenance, Repair and Overhaul) facility is important as well. Picking an MRO is more than just going with the lowest bidder. The MRO must have the knowledge and skills to perform the required maintenance, and when necessary, troubleshoot and repair your aircraft. They must do so in a manner that inspires confidence in their work. They do this by meeting schedules, communicating regularly, and by returning your aircraft in such good condition that follow-up work is minimal, if at all required. In-house maintenance plus an MRO with a top reputation for your aircraft type is a one-two combination for maintaining your aircraft value.

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Maintain the aircraft records.

Maintenance records are the health record of your aircraft. Detail beyond "Required inspection complied with" helps with maintaining your aircraft value by providing a written record of the quality of your aircraft. When I see my physician for my annual checkup, I want to hear more than "looking good, see you next year." What is my weight, blood pressure, cholesterol, etc? The aircraft maintenance records not only need to be a true and exact representation of your aircraft, they are also the written proof as to the quality of the maintenance. This is the tool to use to communicate the health of your aircraft to your maintenance staff, MRO, and any future buyer. Missing and incomplete maintenance records call into question even the basic airworthiness of an aircraft. 

Be careful with upgrades.

As aircraft age and the production numbers get sufficiently high in number, there are always third party companies that seek to enhance the aircraft in terms of functionality, performance or looks. When evaluating an aftermarket upgrade for your aircraft, you need to consider the impact on the aircraft's value. 

Does this upgrade represent a step forward in technology closer or equal to that of a new variant? If the current production models have a particular feature that is also offered as an upgrade to your model, then that likely adds value to your aircraft. An example might be upgrading your old avionics to the current production model's avionics suite. 

Is it something that is going to be commonly accepted by most buyers? One-of-a-kind is great in art, but not with production aircraft! If your aircraft is one of a few upgraded with a particular modification, then where or who will be able to work on it? Why isn't that feature more commonly requested or installed?

While first and foremost, an upgrade has to make sense for you and your aircraft mission, you also need to be aware of its impact on the future value of your aircraft. 

A clean, well-maintained aircraft will tend to be more reliable in its day-to-day use. Along with its records, this will speak volumes to a future buyer that they are indeed getting a quality aircraft.

Looking at the 2010 business aircraft sales market

Gulfstream V business aircraft

Business Jet Traveler recently weighed in on the year that was 2010 in the realm of used business aircraft sales. It still is somewhat obvious to most in business, whether aviation related or not, that markets remain timid. However, some segments of the private jet market have fared better than others.

Furthering a trend seen in new models presented at the NBAA Annual Meeting & Convention in Atlanta this October, large-cabin long-range jets continue to move.

The BJT article notes that buyers went after these aircraft, such as the Gulfstream V at prices below $20 million and the Gulfstream IV/SP under $12 million, and Gulfstream IV under $10 million.

The article notes that these prices hover around half the value for these aircraft three years ago, when the industry saw its pre-recession peak.

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Many of the used business jets advertisements placed at GlobalAir.com seemed to reflect that trend, although this is unscientific and based only on memory. Marketing among larger Hawker and Falcon Jet models for instance, in addition to the above-mentioned Gulfstream aircraft, appeared more agressive than with some other models.

The BJT article says other business jets, such as the Learjet 60XR, saw a tougher time in a sometimes-stagnant used-aircraft sales market.

Read the full report here.

(When) Will Business Jet Values Recover?

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.

[more]Small jets: percentages of the fleet for sale vary by model. In general, newer models have a smaller percentage of the active fleet for sale. Overall, this market is still soft and values have not shown much of a broad recovery. Values are bouncing around at the bottom. Again, popular, newer models are doing better than older models.

For business jet values, the newer, bigger aircraft are leading the way with a soft recovery. Anecdotally, I’d say this is likely to continue. With a relative tightening up in the number for sale, values will strengthen for these jets in the coming year.

As you move down in size, things are not as healthy for residual values. While a general recovery is under way, it will take longer for values to recover, but only for the newer models.

For business jets older than 10-15 years of age, I just don’t see a lot of evidence of a recovery in terms of sales and residual values. I do not have confidence that the situation will see much improvement for these older jets. I think that what you see in residual values for the older business jets is the new normal. Why?

·     Banks are not into lending for older business jets. They do not want the residual value risk for a 20 year old aircraft, nor do they wish to sell it if it comes back to them after lease end or a default. Yes, you can get financing, but with impeccable credit and a significant down payment. 

·     The market recovery seems to be led by sales outside the US. In recent years, more and more new business jets were being sold outside of the US. These markets are no longer “dumping grounds” for the aging business jet. The can afford and want the newer models.

·     The last several business boom cycles saw a large increase in aircraft production rates. Thus, the used aircraft buyer tends to have a large number of relatively new aircraft to choose from.

By most economic prognostications, it will take 12-24 months for the recovery. Some global regions are well into a recovery while others lag behind. The supply of used aircraft will take time to draw down. Meanwhile new deliveries will continue to occur. I don’t see enough growth forecast to generate the market demand to clear out the older business jets’ inventories. Theese older jets will continue to age. I do not think their values will recover with many of the oldest business jets only maintaining their salvage value.

I've seen Richard Aboulafia of the Teal Group present his firm's aviation sales forecast on several occasions. As he said one time, "If you don't like my forecast, feel free to make one up on your own." So don't worry so much about the future, but just take care of today. If you need a jet, go get one. If you need to sell your current jet, go get a good broker to represent you.  

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