The DOW is flirting with 13,000 and will likely hit an all-time high soon. The FDIC just reported that many banks are showing all-time profits. Even housing and unemployment statistics are improving somewhat. Mitt Romney just won the Michigan and Arizona primaries. The 1% are on a roll!
All kidding aside, the general economic conditions are improving, especially for corporations and those high-net worth individuals. Aircraft sales figures are slowly improving and the resale market is improving for the newer models.
If you have been waiting, now is the time to upgrade. This means either acquire and aircraft or upgrade what you have. Here’s why.
- Most of the new aircraft sales forecasts indicate that 2012 will turn the corner on sales. GAMA’s 2011 sales report indicates that total units delivered were down 3.5% from 2010, but total billings were up up 0.4%. This shows that the larger, higher priced models are starting to do better. The Original Equipment Manufacturers (OEMs) generally show limited backlogs on their popular models. For new aircraft, prices are still reasonable. But, if the sales forecasts hold, new model sales will continue to improve. When that happens, price flexibility will start to decrease and delayed price increases will start to be put into effect. If you are waiting for new, act now.
- Most indications are that turbine flight hours are increasing. Hours billed for engine guaranteed maintenance programs are up. As flying hours increase, the active aircraft will need additional maintenance. Non-critical items that have been delayed will be scheduled. Right now, many Maintenance Repair & Overhaul (MRO) shops are not booked to near capacity. This means they have the schedule open for maintenance. Schedule it now if you can.
- Just as aircraft sales are hurting, so are airframe, avionic and engine upgrade sales. If you are looking at the latest flat panel display, cabin entertainment, interior refurbish or engine upgrade, these facilities are ready and have the time now. Which means that pricing and scheduling should be favorable to the buyer.
The only negative to buying or upgrading now seems to be a lack of financing, real or perceived. The financial institutions do have the money to lend (or finance leases), but the are more strict as to their requirements. The deal must make fiscal sense to them. So as a buyer, you need to have that relationship with your financial institution, as well as a healthy balance sheet/downpayment.
If you buy or upgrade now, you should get fair prices. As the market improves, pricing should firm up (as it has for the larger, newer jets). I don’t see aircraft values appreciating like they did in 2007, but values should hold or improve slightly for the popular models. Buying now should result in good value, and when you look to sell down the road, you should be able to avoid nasty residual value surprises.