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Is It a Good Time to Buy?

by David Wyndham 1. July 2006 00:00
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It is said that the optimist and the pessimist agree on only one thing, "This is as good as it can be." This applies to today's turbine aircraft market. The optimist is thrilled at the selling prices they can get for their client's used aircraft, and the pessimist is proven correct when they look at the selling prices they have to pay to get their client a good used aircraft!

New or used, the overall story is about the same. A friend selling new aircraft wanted to hire a new salesperson. They couldn't because the manufacturer is sold out well into 2007. With no new planes to sell and deliver this year, they won't hire someone to sell airplanes they can't get. Many of the new aircraft available, including the nascent Eclipse and Mustang, are sold out for several years (2009 said Cessna for the Mustang). Take a number, send us a check and we'll call you.

I took a look using the AMSTAT aircraft for sale database of turbine airplanes. As of this past week, 11% of the entire active turbine fixed wing was for sale. As a rule, this indicates an overall balanced market between buyers and sellers. However, the full story is hidden.

For current production models, only 3.2% of the active fleet is for sale. This indicates a very hot market for late model turbine airplanes. This also means that there is a weak market for older aircraft. As I see it, you actually have three markets ongoing right now:

New and nearly new turbine airplanes – about 10 years and newer are very hot. This is a seller's market. Folks who can't get into new equipment right away are looking here for aircraft. Prices remain strong and interest isn't likely to wane for some time.

"Middle-aged" turbine fixed wing – between 10 and up to a maximum of 20 years of age. This is a balanced market. There are so good deals and some not so good deals to be had. Aircraft with updated avionics, RVSM, current aging aircraft inspections, and Stage 3 noise compliance are doing OK with reasonable prices if you are patient. This is a balanced market.

Older aircraft – about 20 years and older and/or non-RVSM/Stage 2 noise. It isn't doing well, hasn't been doing well, and isn't likely to improve much. Sure, there are some decent aircraft in here, but buyer beware. There aren't many buyers looking at these so either you are a bargain hunter with hard of hearing neighbors at your airport, or can't afford anything newer! Seriously, residual values of this group aren't great. Many are approaching their "scrap value" where their values are highly dependent on engine status and any recent maintenance. If they are non-RVSM, they have been sitting for sale for a while – many well over one year.

As an example for each group, I'll use the Citation family. Not to pick on them, but there are many models to choose from and production goes back quite a number of years so there are some good examples. One of the newest, the Cj2, shows 15 aircraft for sale with an average days listed of only 88 days. Go to the Citation Ultra, 22 are for sale with an average listing of 181 days. The oldest model, the Citation 500, has 75 for sale with an average days listed for sale of 761! The older models are taking much longer to sell.

So, the pessimist is right and the optimist is right. It all depends on what you are selling or looking for. If you buy a newer model, expect to pay close to full retail, but you'll be able to sell it in a few years. Buy a much older model; you'll get a bargain but plan on keeping it until the wings fall off (figuratively).

Have you or your company recently completed an acquisition?  What are your feelings toward the market trend right now?  Did you find a market that was very tight (and drove prices up) but was an older aircraft?


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