Business jet valuations for pre-mid-1990 models are in “dire straits” and likely will never recover, Conklin & de Decker vice president and co-owner David Wyndham said in a company newsletter last month. While 15 percent of the active fixed-wing turbine fleet is for sale, he said that more than 25 percent of aircraft more than 15 years old are currently on the market.
“This includes popular aircraft such as the Lear 20 series, first-generation Citations, Challengers, Hawkers, Gulfstreams and Falcons,” Wyndham noted. “Almost every older business jet aircraft type has significant inventories for sale. Conversely, the newer model years have much lower percentages of the active fleet for sale.”
After studying Amstat’s pre-owned business jet inventory data, he said he found some trends for business jets built in “significant numbers.” Inventory of Hawker 800s built between 1984 and 1995 sits at 24 percent; Hawker 800XPs (1995 to 2005), 13 percent; and Hawker 800XPs/900XPs (2005 to present), 7 percent. Likewise, inventory of Challenger 600s built between 1981 and 1983 is 37 percent; 601-3As (1983 to 1993), 24 percent; 604s (1996 to 2006), 11 percent; and 605s (2006 to present), 9 percent.
Other models with long production runs follow this pattern, he said. “Many of the early, first-generation business jets are probably at or near their salvage values:
the value of their individual airworthy components,” Wyndham noted. “Given their relatively high operating costs, many of the oldest models, although airworthy, are near the end of their economic useful life.”
He expects business jet values for mid-1990 to early 2000 models to see a mild recovery, but probably not until after 2012. Further, Wyndham predicts that values for business jets less than about five years old will recover first and most strongly, meeting “much of the pre-owned demand as we recover.”
However, business aviation consultant Brian Foley of Sparta, N.J.-based Brian Foley Associates told AIN that the “notion of pre-1995 business jet values never recovering seems a bit harsh.” He added, “We do submit that the values won’t be approaching the frothy levels of just a year or two ago, but those highs were simply unsustainable and indicative of an overheated market.”
According to Foley, pre-owned values are currently depressed across the product-age spectrum. The average composite value of the pre-owned fleet ebbs and flows with the health of new sales, which he said is typically a six-year upcycle followed by six years down. “We’d expect average pre-owned values to continue their fall through year-end before stabilizing and slightly rebounding next year,” Foley noted.
Additionally, he pointed out that, despite their economic obsolescence, older aircraft continue to be bought and sold. Last year alone, Foley said 217 business jets built between 1986 and 1995 were sold, as were 278 jets manufactured from 1976 to 1985 and 112 built between 1966 and 1975.
“This leads us to believe that that there’s still a market for older business jets despite their higher operating costs,” he concluded. “It also suggests that jets at the end of their economic lives are not necessarily retired, but instead appeal to a segment of the market that’s attracted to the low acquisition cost despite the associated high operating costs,” such as for charter and various uses in second- and third-world countries.