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What’s Good About Used Aircraft Sales? Market Changes Could Stimulate Used Jet Sales…

Article written by and with permission:
Michael D Chase
Principal
Chase & Associates
1628 Snowmass Place
Lewisville, TX 75077
www.mdchase.aero
Cell: 214-226-9882 • Office: +1.972-966-1440
services@mdchase.com

Questions about the Business Aviation recovery still linger as there has not been much market movement to date. With most of 2017 behind us, however, we may be on the ‘cusp of change’. ‘For Sale’ inventories are down and aircraft transactions are up, while business jet prices remain weak.

Real gross domestic product (GDP) increased at an annual rate of 3% percent in Q3 2017, according to the ‘advance’ estimate released by the Bureau of Economic Analysis. In Q2, real GDP increased 3.1%. This is welcome news because, as we have historically seen, when GDP is at the 3% growth mark (or higher) Business Aviation traditionally does well.

These quarterly GDP changes between 2009 and 2017 can be viewed in Table A. Highlighted in yellow are the quarters that GDP was 3% or higher. Historically, we have not seen two back-to-back quarterly GDP increases of 3% or more since Q2 and Q3 2014.

 

 

The ‘For Sale’ Inventory

Chart A illustrates that the ‘For Sale’ inventory of Business Jets has decreased steadily from a high-point in July 2009 (2,938) to 2,225 jets in September 2017. That’s a reduction in the percentage of the in-service fleet from 17.7% in July 2009 to 10.4% now. This is a positive sign as the inventory ‘For Sale’ is dropping, albeit slowly.

Today’s market remains good for buyers because the aircraft ‘For Sale’ inventory remains over 10%. If jet owners are retaining their business jets longer since the downturn began in 2008, perhaps that would help explain why the used business jets ‘For Sale’ inventory has remained at such high levels since the Great Recession.

The percentage ‘For Sale’ has dropped from 11.0% in January 2017 to 10.4% at the end of September 2017. Indeed, most aircraft business jet dealers and brokers today would tell you that the pristine used jets that were on the market a few years ago have become more challenging to locate.

 

 

Used Full Sale Transactions (Including Whole Sales & Leases)

Further analysis of January-September 2017 shows mixed results for the six segments reported by JETNET in the September 2017 YTD Market Information release that included full sale transactions increase for business jets (5.9%), turbine helicopters (5.7%) and Commercial Airliners (8.8%) in YTD numbers (YTD September 2017 versus YTD September 2016).

The remaining three segments reported double-digit decreases in transactions with piston helicopters (-14.1%) showing the largest drop in YTD 2017 vs 2016.

Charts B & C depict the 12-Month used business jet and turbine helicopter moving average, displayed for the full retail transactions from January 2012 to September 2017.

From January 2012, used business jet transactions steadily increased until 2014—from 2,300 to over 2,800. A leveling-off followed in 2015, and 2016 produced mixed activity (while remaining well above the 2,800 line of transactions).

Since dropping to 2,652 transactions in January 2017 the used business jet market segment has shown a sharp recovery through September 2017 (2,833). This could be a result of built-up demand in the US after the newly-elected government administration finds its footing and the stock market continues to climb to record highs.

 

 

Since reaching a low point in January 2017, the used turbine helicopter market segment has shown a very rapid recovery leading into September 2017 (see Chart C). This is great news, and could indicate better days ahead for the turbine helicopter market.

 

US Jet-A Fuel Price

As of November 6, 2017, US Jet-A average price was $4.76/gallon and appeared to be on the rise. This fuel cost increase could have a negative impact on some of the progress we have been making in business aircraft flight activity. Nevertheless, today’s price is still around $2.00 less than the 2012 record fuel price of $6.84/gallon, as shown in Chart D.

 

The past 12 months of flight operations from September 2017 have been running 2.3% ahead of last year. Flight operations have not reached the peak of 2007 yet, but the trend is a positive sign nonetheless.

 

 

In Summary

Historically, the fourth quarter of the year reflects the most sales growth over the other quarters. We expect to see further growth in Q4 2017 to round out a very good year for used business jets and turbine helicopters. ‘For Sale’ inventories are slowly coming down and sales transactions continue to trend in a positive direction. We keep our fingers crossed and will continue to monitor business aircraft activity through future articles.

Residual Values To Drop for Non-ADS-B-equipped Aircraft

Owners of business aircraft that are not ADS-B-compliant or in the queue to have equipment installed risk seeing already depressed residual values fall even further in advance of FAA’s Jan. 1, 2020 deadline, according to GAMA president and CEO Pete Bunce. “The value of your asset is going to start dropping even before 2020—this is for rotorcraft and fixed-wing—if you don’t have a slot to upgrade,” he said last week during a panel at the National Air Transportation Association’s Business Aviation Conference. “If you’re in the business aviation category and you hit 2020 [without an upgrade], the price [of your aircraft] is going to just plummet.”

While the FAA is adamant that the ADS-B deadline will not be pushed back, Bunce said that too many operators are holding out hope that the date will slip. “Because of that belief, right now, we are not on pace to get the fleet equipped by the 2020 mandate,” he warned.

GAMA is working with the aircraft-valuation community to collect data that will help quantify the problem, Bunce said. The association plans to make the data available to encourage equipage while there is still time to shift momentum. “We have the industrial capacity to get the fleet modified,” Bunce said. But, he cautioned, “If everybody waits until 2019, then it’s not going to happen."

By Sean Broderick – June 8, 2017
AINOnline

5 Major Items Pilots Miss During Their Preflight Inspection

Perhaps the most critical part of any general aviation flight is the preflight inspection of the aircraft. For most pilots, the preflight inspection follows a checklist along with a routine flow around the aircraft. Most pilots and student pilots perform what would be considered a sufficient inspection, following their checklist and routine items.

Surely 100% of pilots would be able to find discrepancies if they were present right?

Well...not exactly. Sit down, strap yourself in and get ready to read some interesting real-life statistics!

Every year at the Sun N Fun airshow the FAA partners with a local flight school to host the Project Preflight event. The purpose of the event is to test the preflight efficiency of pilots and student pilots of all ages, hours and experience. A flight school volunteers one of their airplanes for the event. Participants are invited to preflight the aircraft like they would before any other flight – checking the fuel, oil, tire pressure and anything with blue tape is unnecessary. The catch is, the aircraft has several intentional discrepancies, some are major squawks! This year we hosted the event and gathered the data from 144 total participants.

Here are the results...

Water Bottle Lodged Behind Rudder Pedals – Out of 144 participants only 30% found this major discrepancy.

Cotter Pin Missing In Right Wheel – Only 28% found this one!

Elevator Nut Missing – 39% found the nut to missing from the right side of the elevator.

Rag Behind The Alternator – Easy to spot but only 63% of participants found the rag!

Cotter Pin In Control Lock – Only 42% found a small cotter pin in place of the control lock, hard to miss but deadly if left in.

Interesting right?! The statistics are concerning to say the least, but what a great insight into a previously unknown sector of general aviation that can be used to educate pilots and future pilots.

So how can we improve these statistics?

Yes, of course we can say “pilots need to be more thorough in their inspections” or “we need to apply more focus and attention to detail during a preflight” but what are some other realistic strategies we can implement to actually achieve that?! Here’s one – maybe it’s extreme and definitely hypothetical but it’s worth pondering.

Again, hypothetical but let’s break it down. We need pilots to perform thorough inspections, how can you put yourself in that “attentive” frame of mind? If you’ve ever rotated the tires on your vehicle yourself, isn’t it likely that you’ll double check and triple check the tightness of the lug nuts before you call it a job done? The theory is that you’ll be taking more responsibility for the state of the aircraft rather than assuming the mechanic or previous pilot left the aircraft in an airworthy condition. This doesn’t mean you should become an aircraft mechanic or add an hour to your preflight, the goal is to find a way to improve our attention and focus when preflighting an airplane.

Project Preflight was certainly educational and we had an absolute blast hosting the event. On behalf of SunState Aviation we would like to thank all of the 144 participants for stopping by and giving us your time, without you this educational piece and the safety of future pilots would not be a reality!

By Alec Larson – May 8, 2017
Flight Training, SunState Aviation

University Life 101

As we are only 13 days away from graduation, I thought it would be fun to pass on some university life knowledge that might be helpful for our readers, or students that they know.  As I am about to finish my second degree and, hopefully, add another certification to my resume, I guess one could say I have picked up a few tips in academia.  So, here are my three tips for keeping your cool in school (pun intended).

#3: Never Underestimate the Power of Sleep

For all of you more experienced readers, I am sure you are shaking your head because I am suggesting getting more sleep and skipping class – yes and no.  While I am a morning person, and a firm believer in not wasting the day, I have also learned the hard way that not getting enough sleep or rest is physically damaging and can only be maintained for so long.

We have all heard that a solid eight hours is recommended especially the younger you are.  I have learned on several occasions that I need at least seven hours, if not eight.  However, anything less than seven is really pushing it – especially if I maintain that for several days.  It is important to figure out your threshold for sleep early on in college, because things only get busier after Freshman year.  Also, when you are scheduling your classes, flight labs, or work hours, be aware of when you do your best work.  For instance, I know that I am a morning person, so I would rather be at work at 0730 than going into an eight hour shift at 2pm.  The great thing is you have a lot of control over your schedule in college, so use that to your advantage, because after graduation you are there when the boss says, regardless of how little you slept.

#2:  Schedule Time for Fun

I learned in college that people had very definite ideas of what “fun” was and it was not the same for each person.  Do not worry if your idea of fun is a book versus your roommate’s plans to have a party in your dorm room.  If you want to spend your free time introverting, or working out, that is OK.

You will find that there will be pressure to do this and that in during your free time (in fact, that is when the fun things seem to always happen).  If you are an extrovert, go hang out with your friends – play basketball, see a movie, etc.  If you are an introvert, it is OK to sit in your room to unwind.  I am an introvert and sometimes it is difficult to explain to others that after being around people all day, I do not want to be around people.

However, do not just introvert your life away.  If you can get out for a movie, or dinner, or coffee, do that!  It is important to rest and recharge and sometimes all it takes is a few hours away from your room or apartment or house (or roommates).

#1:  Build Good Habits Now

This a fairly open-ended tip, so I will just cover a few good habits to have that will benefit you for years post-graduation. 

Learning to write well is a good habit I have carried with me since high school.  I remember my parents urging me to write about one of my experiences when volunteering with the Civil Air Patrol (CAP) and 10 years later, it is one of the most important habits I have.  It is also shocking to learn from Seniors that expecting them to write like Seniors in a Senior-level class is an “unrealistic” expectation – if you want to argue with me on this one, I can argue every way until Monday that learning to write well is one of the most important skills and habits a young adult should have.

Learning to schedule your time wisely is something you will take with you for a lifetime.  I cannot count how many times people have been surprised and astonished when they see the calendar in my binder, or my day planner.  Truth be told, I have about four different calendars, which may be overload, but it helps me remember everything.  You do not have to be that organized by any means, but just having a place to put down every activity and knowing when that activity will occur will help you make good use of your time.

Put in the effort now, so you can enjoy your free time later.  My parents always stress doing a job well and putting in the effort to produce excellence.  I cannot tell you how many students comment that “Cs get degrees” or that no employer will ever look at your Grade Point Average (GPA).  Wrong!  Your first few jobs after graduation you won’t have quite enough experience to take your GPA off your resume and it is a good indicator of how hard you worked in college.  Building the habit of putting in the effort to learn and do well translates into life after college in more ways than one.  Hard work is how people get promoted, get job offers, and get the jobs they really want.   

The End?

Now, if you are thinking that I have just handed you the comprehensive checklist to university success, think again!  Just take all I say with a grain of salt and realize what works for me will not always work for you.  However, I think these tips are generic and easily scalable to your daily lives.

My last piece of advice for this week is to develop these good habits and to find your student/work/life balance – honestly, that might take a lifetime to achieve.

Images courtesy of Google.com.

Private aircraft for sale under 5 million, what to buy?

 

What kind of private jet can I purchase for 5 million dollars?

We hear that question alot!  The quick answer, there are all kinds of private jets that can be purchased for 5 million or less.  But, there are many factors that you must consider first.  The most important decision you must make is what is your “Mission Profile”? Just like cars and trucks what are you going to do with it? You buy a truck to haul stuff, you buy a Volkswagen to save gas, you buy a van to haul kids. All three could be priced exactly the same given the year of manufacture and condition. If you don’t know your mission profile I will promise you that the 5 million will go right out the window and maybe without ever flying what you purchased.

Questions to consider (just to name a few); Are you carrying a lot of passengers or is it going to be you and your cat? Are you going to fly it or hire professional pilots. Are you flying cross country or over the Atlantic once a week or just going to a vacation spot once a year.

The second thing to consider is the cost to operate and cost to maintain. Most single aircraft (not all) corporate flight departments in general have an operating expense of one million US dollars per year (again depending on several different factors).

So with that all said here is a list that you can review:

Gulfstream IV - Priced in the 4–5 million dollar range. This aircraft can fly from Chicago to London non-stop on almost all conditions. Carries around 15 people in jetsetter style. Maintenance though is going to be well over a million plus each year.

Gulfstream IV private aircraft under 5 Million dollars

 

The new “Fly it yourself” aircraft the Cirrus Vison SF50 - holds 3.5 people comfortably and you fly it yourself. Other wise know as “Dr. Killers”. Around 3 million.

Cirrus SF50 private aircraft under 5 Million dollars

 

Another newbie on the block the Hondajet - Base price is about 4.5 million. Seats 4–5 comfortably and has a range around 1200 nm at about 420 knots.

HondaJet private aircraft under 5 Million dollars

 

If you are looking at an aircraft with less cost to operate but shorter in range and capacities then the Pilatus PC12 is a good choice.

Pilatus PC 12 private aircraft under 5 Million dollars

 

We could go on and on about what to buy for 5 million bucks. Bottom line there are several different types of aircraft to choose from. Your best bet right off the bat is to look on line at an aircraft for sale website like Globalair.com, and look at the many different type aircraft there are. Then do yourself a favor and hire a good qualified aircraft broker that can help you figure out what you mission profile is. That in itself will save you at least a million!

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