Pre-owned Update: September 2014

 - September 2, 2014, 12:40 AM
Legacy 600

The typical summer slowdown that the used market has become accustomed to seems to have taken a summer vacation. While worldwide inventory has ticked up slightly in response to seasonal variances, the inventory of 2000 and newer jets fell during the past couple of months. As the fleet has aged, the broader number of aircraft for sale has to be looked at closely. Consider that aircraft that are 25 years old or older account for more than one third of the market currently for sale, and these aircraft are often lumped in to the total figure to define the health of the market.

In a cursory look at pages upon pages of aircraft in this group, a couple of things jumped out. First is the number of aircraft that are priced below (and some a lot below) $1 million. In fact, it dawned on me that there are a few jets available for less than what I sold a Bonanza B36TC piston single for back in the mid-80s! The other thing that was notable is where most of them are based. In the U.S., we often think that once aircraft have outlived their usefulness they are exported, yet of the nearly 900 for sale, 80 percent carry N registrations. There’s nothing wrong with this group of aircraft, but I’m not sure it should be used as a leading indicator to formulate the strength of the used jet market, or to forecast new aircraft sales.

Different Story Among Newer Models

Fast forwarding to the late-model segment, the G550 has increased three-fold the number of offerings from one year ago. I have been involved with six transactions (two sales, four acquisitions) since then, and it seems just as hard to find the right aircraft now as it did then. One reason could be that they are scattered about the globe, nine in Europe, nine in Asia, three in South America and eight in North America. So while the overall availability is just over 6 percent, the North America availability sits 3 percentage points lower. The lower availability is keeping prices buoyed, with the average sales price sitting around $37 million, according to data sourced from AircraftPost. While a couple of options are priced just below $30 million, nothing has traded below that level in the last six months. This strengthening of prices may be one reason there has been a flurry of activity in the GV, which until June and July had been dormant. The widening spread between the two models is affording value buyers similar performance for $15 million less.

Speaking of value, the Challenger 604 tipped the scales with 19 percent for sale roughly 18 months ago and credit buyers zeroing in on an oversold market. In the last 12 months a tad more than 40 have sold, and inventory is down to just 6 percent. The breakdown between continents shows only three percent in North America and 15 percent in Europe. Neither of the two most widely used value guides indicated any up or down value trends, but clearly buyers will be paying more for a 604 in the months ahead if the inventory maintains or further tightens from current levels. Right now, prices run from $5.25 million for a 1996 model up to $12 million for a 2006.

It seems odd to report that in percentage and number terms, there are more Challenger 300s than there are 604s. There are 33 for sale, up from 19 a year ago. The current stock equates to 7 percent of the number in operation, so that’s in line with an average supply. However, this model has been a shining star in the market since the downturn, and to see prices adjusting down seems out of character for this popular buyer choice. Prices range from a low of $8.49 million for one of the first ones produced up to nearly $17 million for the latest one available for sale–a 2011 model. Average pricing is in the mid-$12 million area.

The Legacy 600 is another model on the move. It started last year with nearly 18 percent of its fleet for sale and has since carved that figure down to just under 10 percent. Of the 17 aircraft for sale three are based in North America. Of those three, one is available for lease and another has a sale pending, leaving just one for sale. It’s probably one of the few aircraft that has more registered in Europe than in the U.S. Pricing runs from the high $7 million range to the high $13 million range.

So as the market approaches the final quarter (historically the most active sales period), we should see buyers continue to flock to the most desirable aircraft and a further tightening of the supply. The breadth of price stabilization that has already occurred could turn to a broader-based price appreciation, something that has been relatively nonexistent over the past several years. As active as the market has been recently, it’s surprising we haven’t seen this happen already.