Pre-Owned Update: Before summer slowdown, pre-owned market experiences brisk business

 - September 20, 2006, 6:17 AM

Last month continued the trend toward supply rebalancing as the rate of used aircraft placed on the market outpaced those that were sold. The steady increase this year should come as no surprise as last year’s burst of buying drove choices of many types to extremely low levels, leaving no other direction to go but up. As we near summer, perceived by many to be the slowest time of year for aircraft sales, it is likely the trend will continue.

It’s no secret that the late-model segment garnered the lion’s share of buyer attention last year, but changes are afoot here as well. As of this writing there are 18 GIV/IV-SPs for sale, triple the number available last June, when the Bluebook values were ascending rapidly. In fact, some sellers have taken advantage of the high prices, selling at what they predict is the top of the market, or at least banking on there being more downside risk than upside. Some, as they await their new factory delivery, are opting for interim lift in the form of low-cost, viable alternatives such as a GIII. Interestingly enough, the GIII market dipped to 26 a few months ago, a figure it hasn’t visited since early 2001. Pricing in the GIII market falls mainly within the $5 million to $7 million range.

Excusing the highest- and lowest-priced GIV-SPs, we find the model’s range runs between $22.9 million and $28.5 million. The market for the earlier-variant GIV is one driven by perception. The fact is that the 23 GIVs for sale today represent one fewer than in the same period a year ago. Last year, GIV choices were on a descent to 14, whereas this year the near return to last year’s high level has everyone listening for the stall warning to sound. Yet in the month of June two years ago, there were 23 as well, or about 10 percent of the number in service, a percentage that is generally used to define an average supply.

A relative newcomer to the pre-owned scene is the Citation Sovereign, which shows up on the used market with four for sale of nearly 70 produced so far. Its apparent popularity reportedly has resulted in two of the four going under contract, which should further firm pricing on the remaining two, which has been finding footing in the $15 million range. Also qualifying to go under the heading of “slim pickings” are a number of Falcons. The only Falcon 900EX on the pre-owned market is plastered with “sale pending.” There are a couple of 2000EXs and some 50EXs, but that’s all.

Another rare sighting in the used market is a lone Airbus A319CJ touting a $40 million asking price. While its arrival to the market came in January, the specified date to delivery was listed as June 1. While introduced to the used market in early 2001, its counterpart, the BBJ, rarely presents more than a few offerings, with two right now. The Global Express is a qualifier as well, offering up for sale only four of its nearly 150 built, with pricing from the high-$38 million range to the high-$48 million range. Choices of its equivalent, the GV, sit at eight out of a fleet of 193, with prices ranging from $33 million to $38.9 million.

High Availability for Medium-size Aircraft
The only medium-size aircraft with less than 5-percent availability is the Citation Excel. While choices have doubled in a two-month time span, the 10 for sale now represent but a small percentage of 372 built between 1998 and 2004 before the model was succeeded by the Excel XLS. Current pricing among Excels is in the high-$7 million to mid-$9 million area. Only two XLSes are on offer for immediate delivery and are priced in the mid-$11 million range. Three others are offered for delivery later in the year, and buyers reportedly have no leverage when it comes time to negotiate on these highly sought-after airplanes.

The influx of Falcon 2000s that was predicted earlier increased inventory from the two that held stable through the last quarter of last year to 11 today. Pricing runs from the mid-$17 million to the low-$20 million range. The total represents a small percentage of the more than 225 built since 1995.

A couple of models no longer produced and seemingly stagnant for the last few years appear once again to be in favor among buyers. The Learjet 31A is a case in point, having lost about one-third of its choices since a year ago, from roughly 30 then
down to 20 now, reducing inventory to 10 percent. Prices begin around the high-$2 million range and extend to the low-$4 million area. Another example is the Challenger 601-3A, which last year offered up 19 aircraft for sale. Last month it dipped to nine, with pricing firmly in the $10 million to $12 million range.

While last year buyers hit the ground running, this year seems a bit more fickle, first decidedly slow and then a perceptible perking up beginning early in the second quarter. This year buyers seem content to wait for the deal to come to them, rather than chase the market up any further than they already have.