Pre-Owned Update

 - March 26, 2007, 7:02 AM

Resembling a turbine engine, the pre-owned market in the first quarter of last year sucked wind. What a difference a year makes. All of a sudden everyone needs a corporate jet, demand that is pushing inventory levels of pre-owned stock lower and delivery dates of many new aircraft out farther. There are about 50 fewer aircraft available today than there were this time last year. Of the 1,667 aircraft listed for sale, 34 are delivery positions and half of those are offerings from the fledgling VLJ segment.

The lull in activity that sometimes unfolds with the new year has not happened this year, and 2007 is rolling along heartily, maintaining, if not increasing, the momentum established during the previous, and nearly always most active, quarter in terms of aircraft sales.

With some exceptions, used, one-off predecessor models continue to be in high demand, especially among the super-midsize and large-cabin segments. With Gulfstream G450 backlogs on the cusp of delivering into 2010, prices of GIV-SPs have skyrocketed, with 2000/2001 models climbing into the high $20 million range.
In fact, one owner, who easily could have sold the aircraft himself, instead recently awarded a broker a listing because he was deluged with calls and receiving unsolicited offers. “It’s like trying to take a sip from a fire hydrant,” he said. When supply reaches 3-percent availability, as is the case with the GIV-SP, sellers control the equation at the negotiating table. The low supply of nine aircraft for sale currently is down from a 12-month high of 22 during late summer and half of the 12-month moving average of 18.

Gulfstream V sellers are enjoying much the same circumstance, with GV prices reaching $42 million at the high end. Here again the likely culprit is the new flagship replacement for the GV, with deliveries reportedly out to 2010. In-service and delivery-position G450s and G550s are commanding healthy seven-figure premiums over what they sold for new. Used (but hardly) G450s are bringing in around $37 million, give or take, and G550s have nudged $50 million, but so far we haven’t confirmed any at or above that level.

Challenger 300 positions are still hard to catch, though there are a couple, as well as two in-service aircraft for sale currently. I ran into a position buyer at the Bombardier Service Center in Tucson last month, who reportedly paid a reasonable premium. He had intended to add another to the fleet until he found that the price of positions had jumped by a couple of million as it was now the only game in town.

The Challenger 604, which at 25 for sale has never offered more choices than it does now, sits at five above its 12-month average. The 25 for sale account for 7 percent of the fleet. This aircraft model started out last year in much the same way, increasing to 23 at the end of the first quarter and then staying below that level for the rest of the year. Pricing runs from about $17 million to $22.5 million. All three variants of the earlier 601 model, the-3R, -3A and -1A, have 15 percent of their respective fleets up for sale right now.

The super-midsize Falcon 2000 market continues to generate heat, with only four of 231 for sale at the moment. There were five 2000s, but a single-digit serial number has a sale pending and had been touted at $17.3 million. The next closest option in price and serial number is about one million dollars higher, and the last available tops out at $22.5 million. The successor model, the 2000EX, sits at just two offerings of a possible 103, pushing availability to less than 2 percent of both models.

In the larger-cabin arena, the Falcon 900B/C is also in short supply, as is the successor 900EX. The five 900Bs available (one is for lease) represent half the 12-month moving average, whereas the four 900EXs for sale are in line with the average number over the last year. Pricing in the EX market starts a tick below $30 million and runs through $34 million. The Falcon 50 market had been holding steady in terms of available choices until last month, when inventory jumped from 23, its 12-month average, to 29.

The Learjet 60 continues to wage an impressive assault on its 12-month inventory average. Last year began with 43 for sale, and right now there are 28; one of those has a sale pending and another is a 50-percent-share sale, effectively lowering the availability by 5 percent over little more than a year. This has pushed the low-end trading activity from the high $4 million and low $5 million range into the mid- and upper-$5 million range. The Learjet 45 and Learjet 31A are both in line with their 12-month average supply.

While it’s early to make predictions, if it turns out that the first quarter sets the pace for the quarters to come, this will be another stellar year. Alas, there is no shortage of moderating factors that could, at any time, cause the unbridled buying to take a breather, if not stop dead in its tracks, but for now the market seems to have the wind at its back and is enjoying the ride.