Pre-owned market remains strong through summer

 - October 5, 2006, 10:50 AM

August is typically a slow month for sales activity on pre-owned aircraft, but growing backlogs for new aircraft are keeping the pump primed for used-aircraft sales this summer.

One of the biggest transitions of the last 12 months has been the shift from talking about lowering price floors to talking about rising price ceilings. Sales activity, even through the traditionally slow summer months, has been upbeat. The benefits of corporate travel (security, convenience and cost effectiveness) have to this point overcome the disadvantages (rising fuel costs, war risk insurance rates) and have guided the used market back on track, where it appears to be picking up steam.

With the backlog for new Gulfstream models extending into early 2007, heat on earlier variants is increasing. Consequently, both the GIV-SP and GV inventory curves have taken nosedives recently, reducing the already low supply of used offerings.

Only a handful of each is currently available for sale on the pre-owned market, and two of the five GVs have sales pending. Pricing for the GIV-SP starts just below $20 million and extends to $27 million. GVs, while too few to cite a meaningful range, are currently huddled around the mid-$30 million mark. Based on their respective active fleet totals, both models now have fewer than 2 percent available for sale.

In contrast, the GIV offerings nosed up slightly to 24 last month, though with a few sales pending, the airplane remains a sought-after commodity. Pricing in the group runs from the high-$14 million range to the low-$19 million range.

Large-cabin envy has also struck the market for Bombardier’s Global Express and Challenger 604. Six Globals are up for grabs, about 4 percent of the fleet of roughly 150. Two of those are labeled “sale pending”; if they leave the market, availability will drop to about 2.3 percent, or about the same as that for the GV.

Just 12 of the fleet of 324 Challenger 604s are currently for sale, or less than 4 percent, slipping from a couple of years ago when availability reached 20, yet with fewer in the fleet. Pricing begins at $16.4 million for a 604 and increases to $23.5 million for a November delivery position.

Nineteen Challenger 601-3As reside on the used market right now, a high-water mark looking back 18 months. Asking prices have been running from roughly $9 million to $11 million. Right now the used fleet availability for the Challenger is 14 percent, compared to nearly 11 percent for the GIV.

Five of 222 Falcon 2000s are for sale, or slightly more than 2 percent. The larger and longer-range Falcon 900EX is in the same ballpark, with four of its fleet of 153 up for sale, equaling about 2.5-percent availability. About 7 percent of the predecessor Falcon 900Bs are for sale, a tightening from a year ago.

Perhaps the only surprise in the Falcon 50 market is why the airplane took so long to stage a comeback. A little more than two years ago the market was saturated with some 50 of them, or 21 percent of the fleet. A steady tightening has reduced the market offerings to 21 aircraft, or 8.5 percent.

A handful of post-10,000 hour airframes carry price tags of less than $7 million. Prices rise to more than $10 million for the latest model available. The last fifth of the Falcon 50 fleet has been avoiding the used market, so expect the price range ceiling to increase when one of the roughly 50 eventually surfaces for sale.

The market for the Citation VII is also a perplexing one. A few months ago there were 19 for sale, or nearly 16-percent availability. It was hard to figure out why, with such attractive pricing, these airplanes were stacking up on the used market. Something finally clicked, and within three months buyers drove the number of choices down to eight, with two of these not deliverable until late this year.

The earlier version of the airplane, the Citation III, stands at about the same availability figure the Citation VII did in March and may be poised to imitate the performance of that airplane. The Citation III has been knocked about during the past four years and finally has a predictable trading range. A few years ago there were 50 on the market, but it has since made a slow retreat to 37 at present.

In the past there were a number of sales at prices below $3 million, but the range now seems to be more established between $3 million and $5 million. While the tightening of the Citation VII market may draw attention to that for the Citation III, it appears that it has a long way to go before the price range ceiling will move higher.

The Hawker 800A market also appears to be awakening. Since December last year the airplane experienced a consistent six-month drop in used choices from 40 to 26, and four of those have sales pending. That’s a drop from 18 percent availability to 11.5 and likely heading lower in the short term. In the unlikely event the same results occur during the next six months, prices would exceed the low $6 million price ceiling