Pre-Owned Update: Expect Strong Performance In Pre-Owned Market This Year

 - September 26, 2006, 7:23 AM

The last time used-jet offerings reachedthe current level, the number of aircraft on the market was on an ascent, whereas this time around the market continues a three-year trend toward lower ground, solidifying pricing as the trajectory dips further. It has been nearly five years since the pre-owned jet inventory held fewer than 1,600 aircraft for sale, and the reduction comes amid an ever-increasing fleet of aircraft.

Despite rising interest rates and fuel prices, many of the elements that powered last year’s robust activity remain intact, causing many to forecast another active year.

Late-model aircraft of all sizes were the focus of attention last year, and, while that’s likely to continue, few choices and resultant higher prices are causing some buyers to pause. Some long-dormant markets are now showing signs of life and beginning to suggest a recovery. For example, sales of the Westwind II have kicked up since a year ago when 22 were on the market. Its inventory now sits at 13, a level not seen since the third quarter of 2000.

Similarly, in the fourth quarter of last year Challenger 600s fell below 20 choices for the first time since late 2000, a sizeable move from a year ago when 31 cluttered the market. While this year’s figure still represents a significant percentage of the number produced, it is nevertheless a clear indication that the aircraft is back in favor with buyers,a shift undoubtedly brought about by the lower pricing and the growing price spread between it and the 601 variant.

Another slow–but steady–performer is the Learjet 35A, which has dropped from more than 100 choices a year-and-a-half ago to roughly 70 today.

Hot models continuing to sizzle are more commonplace and include a number of familiar names. The Citation Excel, with nine out of 372 for sale, is at its leanest supply level in nearly five years. Although its inventory breached 20 in late 2002, the airplane never seemed to be without a loyal following. Prices have long since firmed, with current pricing ranging from just under $8 million to the low $9 million area. The successor Excel XLS crossed the century mark in terms of numbers produced, and there is one for sale on the pre-owned market priced in the mid-$11 million range.

Many of the large-cabin aircraft remain in low supply, often with less than 5 percent of their respective fleets on the market (most consider 10 percent the more-or-less normal level). Used variants of the BBJ and Airbus A319CJ, Falcon 900EX, G550 and G450 and Global 5000 are either nonexistent, or nearly so right now. While still very much in low supply, GVs may have run up in price quicker than buyers could digest; as a result the number on the market has grown from two for sale a year ago to 10 today. Half as many Globals are for sale, at asking prices ranging from $39 million to $42 million. Challenger 604s and Gulfstream IV/SPs, Falcon 900Bs and Citation Xs, from $11 million to $19 million, continue to be hot properties with fewer than a dozen of each for sale.

Market for Midsize Jets

The Citation VII is another quick-change artist, converted from a softening market a year ago with nearly 10 percent of its 119 aircraft for sale, to a tightening one this year with only nine for sale now. Another medium-size jet percolating currently is the Astra SP and its successor, the SPX. As the market has recovered, it has lifted the Astra SP out of the doldrums, reducing the earlier Astra SP market to just two choices, well below a more typical supply of seven during the last four years. The SPX, with four offerings, is also significantly below its average supply over the last five years.

Some model types, while selling, are not moving fast enough to keep inventory levels from growing. The Learjet 60 is a case in point. Now at 40, the model’s inventory is25-percent greater than its 12-month average of 32, about 13 percent of the total number produced. Prices run from the mid-$5 million range to the mid-$9 million range.

Other models are holding steady. The Hawker 800XP, for example, offers 23 choices for sale, a number slightly above, but in line with its 12-month average and representing 5 percent of the XP fleet.

Despite higher interest rates and erratic fuel prices there still seems to be no compelling reason not to buy a jet–new or used–and the market this year looks to be starting out much where last year’s left off. Many expect an active year in aircraft sales, but few believe it will exceed expectations as was the case last year. Demand certainly appears to be continuing unabated, but the fact that fewer choices are available this year could have a moderating effect on total transactions.