How well do you know the market? When the market goes up, everyone knows it and accepts it, and prices rise; when it falls, everyone recognizes the need to adjust. But if you’re a buyer or a seller, how good is your information? Right now the market is in what could be a transitional phase, making it a challenge to decipher its signals, no matter what side of the fence you’re on. We recently heard of one buyer shelling out seven figures more than he could have paid, had he known virtually anything about the market. There was also some feel-good information put out recently about a 5.5-percent average increase in asking prices, and while I’m sure that figure is accurate, I’m not sure that it would be true if all the aircraft considered had asking prices advertised. At the very least, you would have to see what jet population drove that figure of 5.5 percent. Was more heavy iron for sale with posted asking prices versus small or medium jets that just had “Make Offer” attached to them instead of an actual number?
Cause for Optimism
While the last few years have been all about seeing aircraft establish ever lower lows and lower highs, at some point this will stop and the long bull run for buyers will transition, as hard as that might be to fathom right now. There are some signs that this could be occurring. With the U.S. election and part one of the fiscal cliff in the rearview mirror, and the fresh start a new year can bring, there seems to be an upbeat attitude among buyers that has the potential to permeate the market by the second quarter, should a few looming economic hurdles be cleared.
Some notable activity has been occurring in the G200 market. The super-midsize segment, with few exceptions, seemed to be snubbed by buyers over the last few years, and the G200 was one of the hardest-hit models, clobbered not only by the broad market deterioration but also by cessation of production and the introduction of a new and improved sibling, the G280. But that has turned around now, with G200 choices at a five-year inventory low of 16, or just 6.5 percent of the nearly 250 in operation, second in this segment only to the marginally tighter supply of Challenger 300s. Much of the buying has occurred during the last six months, with buyers at both ends of the price spectrum infiltrating the market and sopping up deals in the $5- to $6 million range for early serial numbers and just as many opting for $9 million and higher for newer examples.
Speaking of the Challenger 300, the fleet will reach 400 this year, neck-and-neck with the production run of the Sovereign, but inventory of the Canadian airplane on the used market is three percentage points lower. Sales of Challenger 300s over the last six months have moved from a low just below $10 million for the earliest and highest-time offering up to almost a “good old days” high number of $18.5 million for a 2011 model. Both of those transactions took place in last year’s fourth quarter. During the same period Sovereigns moved from a low of $7.8 million for a 2005 model to $14.7 million for a low-time 2011 model.
Citation X choices fell to five-year lows midway through last year and have added a handful since. Considering the fact that during the past five years the inventory had reached nearly 40, the Citation X is another seasoned super-mid that has vastly improved its market status. The low-level sold prices in the Citation X make one do a double take. There have been many asking prices in the low, mid and upper-$3 million range. All but one of the recent sales were priced at less than $7 million. Current asking prices sink as low as $3.9 million and rise to nearly $20 million for a 2012 model.
The Falcon 2000 deserves honorable mention in this segment, having reached multi-year inventory lows in 2012. It is now perched slightly above those levels as sales over the last six months pulled back, but as buying season fuels up we may see buyers wage an all-out assault on the inventory lows achieved last August. Pricing dipped as low as $6.8 million for the earliest variant that sold, a 1999 model with nearly 10,000 hours, and reached more than $12 million for a 2005 model with fewer than 3,000 hours. With 9.5 percent of its fleet currently on the sales block, the aircraft represents the super-mid with the largest number available in terms of percentage.
Action is picking up in other segments as well, and while worldwide inventory was fairly static last year, in the early going it seems to trending lower and the mood among a diverse collection of brokers seems decidedly upbeat.