Pre-owned Update: Market Hints at Stabilization

 - August 2, 2012, 3:10 AM

Summer is typically a time the pre-owned market experiences a seasonal bump in inventory, as buyers are out using their jets to get to their favorite summer destinations and aren’t necessarily thinking of buying. This year, however, has been somewhat uncharacteristic and today’s supply of used jets is just about where it was when the year began. The lack of any wild gyrations could be a welcome sign of stability. Historically sales are slow during the summer while more aircraft are added, but so far that’s just not the case; and while summer is far from over, should we stay the course it could set the stage for an interesting fall period, when buyers seem to begin satiating the pent-up appetite for jets.

Pricing is clearly driving the market, and to that end we’ve seen some models sell in ranges that represent both lower lows and lower highs from a year ago while others seemed to have reached stabilization. The simplest of equations, that of supply and demand, rules the day as far as pricing is concerned. Consider that there have never been more GVs for sale. Even though the 19 for sale at present represent only 10 percent of that fleet, it’s double the supply of one year ago, so pricing in this segment is still under pressure. Conversely, the G550 has pared down its offerings slightly from a year ago to just 10, and when you consider that there are more than 350 in operation the current inventory represents less than 3 percent, giving sellers a bit of leverage now.

Like the GV, the Challenger 604 supply has experienced quite a growth spurt, to an all-time high of more than 60, or nearly 17 percent of the total in operation. The 604 is an example of lower lows and lower highs, with the range last year roaming from $9.1 million to $16.9 million and this year notching down to the $7 million to $14 million range. Three resellers–Bombardier among them–control one third of the used surplus. If they start to pull the plug on pricing it could be the catalyst needed to reverse the current course. The sales rate of slightly more than one a month just can’t keep pace with those that continue to flow to the market, pushing the absorption rate past 30 months. The successor model, the Challenger 605, fares marginally better. With a fleet size about half that of the 604, the 605 now presents only 15 aircraft for sale, which equates to 8 percent of the nearly 200 in operation. While that sounds positive it’s actually a sizeable build from the nine that were on the market at the beginning of this year and stems from a very slow sales rate. Pricing in this group starts at $17 million and runs to $24 million.

Recovery Among Some Models

The Citation X market has recovered over the last 18 months from an inventory of 30 for sale to only 17 today, two below its 12-month moving average. Pricing starts in the $5 million range and ascends to the mid-$11 million area and sales are closing at a rate of one a month, according to Aircraft Post. Another aircraft on the move is the Hawker 800XP, which topped 75 choices less than 18 months ago and is now down to 47, which has just about brought it back to what is generally considered to be a normal supply of 10 percent. Sales activity is brisk, with about three per month finding their way into the hands of new retail buyers. So far this year, we’ve seen pricing of aircraft sold move out as low as $2.1 million and as high as $5.2 million. A look at its successor models sees 14 of a possible 100 Hawker 850XPs for sale and 15 out of nearly 200 Hawker 900XPs. The 850XPs tout asking prices in the $5 million to low $6 million range and the 900XPs begin in the high $7 million area and ratchet up to nearly $9 million.

The Citation Excel and XLS are interesting studies in that unlike most model types their largest supply is based outside North America. Consider that there are 18 XLSs for sale, which at about 5 percent availability is in reasonably tight supply. Only two with U.S. registration are for sale. Most of what little inventory exists is located in Europe. Similarly, the predecessor Excel sits at 8-percent availability and most of them, 17, are based in Europe. Another seven call North America home and the remaining are dispersed between South America and Australia.

Keeping with the theme above, inventory of late-model (2000 and newer) aircraft is, in percentage terms, twice in Europe what it is in the U.S. Across Europe 291 aircraft manufactured in 2000 or later fare for sale, which is 14.5 percent of the 2,001 aircraft in that segment compared with 7 percent in North America, where 447 aircraft meeting that criterion are for sale out of a fleet size of nearly 6,400.