After gold hit $1,000 an ounce last month and oil reached $110 a barrel on the same day, financial markets continued to experience the turmoil that started the year. All the doom and gloom causes one to take an introspective look at the health of the aircraft sales market. So far, the biggest angst that might be plaguing industry participants is survivor’s remorse as this sector seems to be navigating the economic malaise with aplomb.
Aircraft sales might have backed off a while ago were the market supported only by U.S. interest, but sales of new and pre-owned aircraft have continued, buoyed by international demand–driven in part by the precipitous fall of the U.S. dollar against many major currencies. As manufacturers’ order books have filled, with backlogs extending in many cases into the next decade, the flow of pre-owned aircraft to the market has stemmed but is perhaps now more orderly.
Many in the pre-owned arena have been expecting a pullback. The surprise right now is how resilient the market has been. Certainly, the market is seeing a spike in used inventory, as it currently sits about 100 aircraft above the average number over the last 12 months.
The heat remains concentrated on the late-model segment, where fewer than 6 percent (roughly 450 aircraft) of the aircraft manufactured within the last 10 years are for sale. Positions for sale currently amount to 77, a figure that bears watching closely over the next few quarters as it might act as a futures indicator.
While delivery positions have been a market hot spot, some think we could see premiums evaporate, but so far there has been no evidence of this; quite the contrary, in fact. Position holders on aircraft from the CJ3 to the G550 are continuing to capture historic premiums and should continue to do so, as long as there is no slackening of manufacturers’ backlogs.
Consider that amid the backdrop of a weak economy there are only two used G550s for sale, with asking prices well into the $50 million range. There are also two delivery positions for sale. That’s out of a growing fleet that’s nearing 175. As for the G450, two of the three currently for sale have sales pending, and that’s out of a fleet approaching 100. Most of the G450s are occupying the mid-$40 million area. Only one of nearly 200 GVs is for sale.
The story is the same among Bombardier models, with only four of 150 Global Expresses for sale, ranging in price from $45 million to $57 million. Only two Global 5000s–out of a fleet of 50–are for sale. A single Falcon 7X position for delivery next year is for sale. Only four of roughly 200 Falcon 900EXs are for sale, and prices are huddled around the low $30 million area.
Not all segments are faring as well. The GIV market, which rose in price and fell in inventory last summer, has since settled back. Six months ago there were 10 for sale and today there are 24, about where it stood a year ago and still below the high of 30 reached in the last quarter of 2006. While inventory has settled back to year-ago levels, average asking prices have not, currently standing near $20 million, or more than $3 million more than last year’s average.
The Falcon 50 market is consistent with last year’s figures both in terms of average asking prices and in number for sale, about 29 then and now with the average asking price a tick higher than $9 million.
The Hawker 800XP has seen a flurry of activity of late. It had reached 34 last summer and held above 30 into early fall, but has fallen to 20 now, a level it hasn’t visited in about two-and-a-half years. Average asking prices are a tick under $10 million, with a range running from $7 million to nearly $12 million. These airplanes are sitting on the market for about four months before selling.
Bombardier’s Challenger 604 is also seeing a tightening of supply, dropping to 18 from 25 a year ago. Four of the current offerings have sales pending, which could push the airplane’s supply to a two-year low. Prices run from about $18 million to just over $24 million and, like the Hawker 800XPs, Challengers are also moving within four months.
Cessna CJ1 inventory has grown significantly from its dip below 10 aircraft last summer to 27 today–twice the 12-month moving average, perhaps a victim of the successor CJ1+. Pricing in the CJ1 market currently runs from the low $3 million range to low $4 million area. There are about the same number of the original CJs for sale, down 13 from a year ago. Considering the CJ’s significantly larger fleet size, however, (359 versus 198 for the CJ1) it equates to 7 percent of the CJ and 13.5 percent of the CJ1 fleet.
Certainly the year is young and everyone is trying to figure out what direction it will take. From time to time I field inquiries from stock analysts who cover the corporate jet market to anticipate its direction. One such call came in the middle of last month, not so coincidentally, after the upheaval at 85-year-old and fifth largest U.S. investment bank Bear Stearns. Witnessing a nearly 95 percent move down in the stock’s price in a 10-day period left him wondering what’s ahead for aircraft sales. While there seems to be no shortage of calamity in the U.S. financial markets, bizav, fortunately, is no longer solely U.S. driven and has so far remained more resilient than some would have imagined.