Pre-owned Aircraft 2004
Values among many pre-owned aircraft began to stabilize this year, with some even appreciating while others sought traction amid slipping prices. This year will close having sustained a trend toward lowering inventory, and the impetus for continued tightening remains in place. Though interest rates are rising, they are low by historical standards, enabling buyers to secure attractive financing rates.
Bonus depreciation, too, while considered by many to be just a new aircraft sales stimulus, offered some positive trickle-down effects on the used market. As the tax inducement begins to wane, buyers are paying even more attention to late-model, current-production used aircraft.
Right now only about 15 percent of the available used fleet is 10 years old or newer, and many in this segment have begun to experience price increases–a rare occurrence since prices across the board headed south a few years ago.
Late-model, Pre-owned Jets a Hot Property
According to figures from Utica, N.Y.-based JetNet, the Falcon 2000, 900EX and 50EX, Citation Excel, GV, Global Express, Learjet 45, Hawker 800XP, ACJ and BBJ all present fewer than 5 percent of their potential availability to the market, and pricing among them reflects this supply tightness.
The size of the Falcon 2000 supply has not been this small in four years. In fact, at press time there was only one readily available for sale, down from 14 at the beginning of the year, making the Falcon twinjet one of the hottest properties in town. Of the 146 Falcon 900EXs produced, two are for sale, and of 89 Falcon 50EXs manufactured, four are available.
Citation Excel choices stand at 14 out of a possible 372, which is on par with the availability at the beginning of the year. Current pricing runs from $7.395 million to $10.25 million.
Joining the Excel as a perennial favorite since its introduction is the CJ2. Choices have increased slightly this year over last, but so too has the size of the CJ2 fleet.
Cessna has produced about 225 of them and so the 14 currently available represent 6-percent availability. The earliest one carries a $4.495 million asking price and the latest deliverable CJ2 is priced at $1 million more.
The Gulfstream V is in short supply, fluctuating between six and nine units all year long, and currently only eight are available. Asking prices run from just under $30 million for a 1996 model up to $36.5 million for a 2002 model. The GV’s nemesis, the Global Express, presents just three of its 151 to the used market, down from nine early in the year.
Learjet 45s also make the grade, with only eight up for grabs from a continuing production run that currently numbers more than 250. Two years ago there were 20 for sale and prices softened. This year availability has run from a high of 11 in February to a low of five in August. Prices run from $6.495 million up to $9.45 million for a very late model.
Hawker 800XP production has eclipsed that of its predecessor, with 431 at present compared with 272 Hawker 800As and 800Bs. There are 17 Hawkers 800XPs for sale right now, up from a low of 13 in the spring and down from the type’s most recent high of 20 in September.
There were no Airbus Corporate Jetliners for sale at press time, nor did JetNet indicate that any of the 20 produced have ever been presented to the open market for resale. In comparison, there are three of 84 Boeing BBJs for sale right now, with asking prices in the low-$40 million range.
While the above group represents some of the most sought-after iron, there are a number of markets slowly recovering from market indifference.
One aircraft that has not enjoyed the ride so far this year is the Cessna Citation X. Its choices have swelled from eight at the beginning of this year to 20 at the end of August, the figure where the Mach-nudger currently resides. That pushes it well above its 12-month average of 12 and represents 8.5 percent of the 236 in service. One of the first copies made carries an asking price in the mid-$12 million range, while a 2003 model approaches $17.5 million. Also ticking up is the Challenger 604, which stood at 10 units in February, its low for the year, but is now at 16. Bombardier Aerospace has thinned its used stock to just one 604 at present, perhaps offering some relief to current sellers.
While in tight supply with slightly more than 5 percent of its fleet up for grabs, the 15 GIV-SP choices have nearly doubled since January. Asking prices start around $20 million and extend into the upper twenties.
Earlier this year the GIV responded impressively to a tightening supply of its GIV-SP successor by cutting its choices by more than half over two quarters. It held at 32 units throughout the first quarter of this year, a peak for the model type, but had dwindled to 15 by the third quarter. It has shed three more aircraft from the net availability figure since then, representing about 5 percent of the 214 built between 1986 and 1993.
Not quite as dramatic is the Challenger 601-3A, which reached 23 for sale late last year and now stands at 13, or a fraction under 10-percent availability, based on the 134 that were produced. The Falcon 900B, which had 25 for sale in the final quarter of last year, has dwindled to 15 at present out of a possible 125, equating to roughly 12-percent availability.
The price erosion of many middle-aged jets may finally be coming to an end, or in some cases already have ended, as many brokers report upbeat sales activity on these 11- to 20-year-old aircraft. One example is the Citation III, which was produced from 1983 to 1991 before yielding to its successor, the Citation VI and Citation VII in 1991.
Four years ago IIIs traded in a range of $5 million to $7 million, but now we are seeing deals struck in the high-$2 million to high-$4 million range and buyers are sensing value. This year started with 40 for sale, which is where availability is today. Two years ago choices grew to 50, representing 25 percent of the roughly 200-strong Citation III fleet, whereas the current stock brings the percentage figure down to 19, which is still high, but with continuing price adjustments should continue to experience a further reduction in choices.
Another example is the Hawker 800A. It began the year with 29 for sale, but has grown to 39 today, or 17-percent availability. The Hawker 800A production run spanned from 1984 to 1992 and the fleet grew to 225 before the popular Hawker 800XP supplanted the 800A. Speaking of the XP, its production eclipsed its predecessor’s total number in 2000 and will probably double it by early next year. The fact that only 4 percent of the 431 Hawker 800XPs are currently for sale speaks to the desirability of the model.
The Learjet 55 should be noted as a middle-age, medium-category jet of interest. It matched an all-time inventory peak of 33 airplanes for sale in February, (previously reached in July 2001), but has nearly halved its choices to 17 now. There were 124 Learjet 55s produced between 1981 and 1986; 117 of them are currently in service. The 17 for sale represent slightly less than 14 percent of the active fleet. The 55’s successor, the Learjet 60, which is still in production, offers about 10 percent of its 277 copies for sale now, a figure often used to define an average supply.
The 24 Learjet 31As currently on offer represent an inventory low for the year. In March that number was 31, but the continuing market heat has melted away the net figure. Based on a production run that yielded 208 aircraft, the current supply represents 11.5-percent availability. There’s about a $2 million spread between the highest and lowest asking prices, beginning at $2.7 million for a 1992 model and ascending to $4.7 million for a 2002.
Demand for Older Jets Remains Low
While the 11- to 20-year-old second-tier aircraft are starting to show signs of life, aircraft in the 20- to 30-year-old group continue to be lackluster with few exceptions. Consider the Hawker 700A: between 1977 and 1984 BAe built 181 of the sturdy midsize jets, and 177 of them are still in service. There are now 50 of them for sale, or 28 percent, which is not far below its peak of 53 reached this past July.
Based on high availability figures, the Hawker 700A has plenty of company, including the Challenger 600, the Gulfstream II and III, Citation II, Learjet 35A and the Falcon 50. Considering the prices of four to five years ago, it’s hard not to think of today’s pricing as anything other than a half-price sale.
Back then the Challenger 600 regularly carried high-$8 million to low-$9 million asking prices. Now, with about 30-percent availability, the market price has dropped considerably, to levels not seen in 10 years.
The Gulfstream II market is showing signs of life, reversing a burgeoning supply that peaked at 61 two years ago. It dropped to 46 early this quarter, a three-year low, yet that figure still represents a quarter of its active fleet of 189.
The GIII fares even better than its older sibling at 17-percent availability based on 34 of its 197 currently on the used market. With the exception of this year, when there were 34 aircraft for sale during four different months, you would have to look back to mid-2001 to find as few for sale. Most of the GIII prices are spread throughout the $5 million and $6 million range, with occasional examples above and below.
Citation Bravos and CJ2s, coupled with age, have affected the Citation II market, which has been lackluster since early 2001. That’s the first time the Citation II inventory tripped over the century mark in available choices, and it hasn’t waged an assault on that level since. Average pricing among Citation IIs is $1.7 million, with the low of $1 million and high of $2.6 million.
Speaking of the century mark, the Learjet 35A has been bouncing on either side of it for the last few years. It began this year with 98, grew to 105 by mid-year and is back down to 98 at present. The average pricing in this group is about $2 million. Beechjet 400As are in 9-percent supply based on 34 of a possible 351.
The Falcon 50 offers 32 aircraft to the used market at present, slightly more than this year’s low of 28, but well below its all-time peak of 51 less than two years ago. Pricing runs from about $5.5 million for a 1980 model, but to nearly $12 million for a 1993. The successor Falcon 50EX, mentioned above for its low supply, begins at $15.75 million and jumps to $17.5 million for a 1999 model.
Sellers of some delivery positions are enjoying the general market improvement, and if there’s any crystal ball into the future of the aircraft sales business, position sales may be it. Sales of aircraft positions, have been relatively dormant until recently. In the last few years position holders, depending upon how large the amount of
non-refundable deposit was, would either return the position to the manufacturer or sell the position for less than they agreed to pay, just to recoup a portion of a larger deposit.
Those days seem to be a fading memory thanks to the enlivened market, which has seen the return of position premiums. Part of this turnaround was spurred by the bonus depreciation legislation, but now the appetite for deliveries earlier than a manufacturer can accommodate due to backlogs have some position sellers sitting pretty.
The Citation CJ3 seems like a home run for Cessna, and Bombardier’s Challenger 300 is equally promising. Both models have begun to command premiums above their originally contracted prices. In the case of the CJ3, premiums have breached $300,000. The more expensive Challenger 300 is bringing higher premiums, reportedly between $700,000 and $800,000. The Citation Sovereign has also been reported to be commanding premiums exceeding $500,000.
As the year comes to a close, buyers have continued to affirm their preference for late-model used aircraft. A technological divide is beginning to take its toll on older aircraft. While the markets that are filled with inventory right now will eventually thin, they will likely do so via a price adjustment rather than any paradigm shift. High fuel prices continue to add insult to injury to the older, inefficient aircraft, which can only hope to seek firm footing in the market in the year to come.