Pre-owned Update: Worldwide Inventory Continues Gradual Decline

Aviation International News » June 2013
June 2, 2013, 2:35 AM

As we approach the halfway mark of the year, the used jet market continues to show improvement in terms of sales, but at the detriment (if you’re a seller) to price. Every day for the past several years, pricing has become more and more attractive to buyers. In retrospect, it seems that no seller left any money on the table when they rolled out of their previous aircraft and turned the keys over to a new owner. That said, buyers are not cloistered away and continue to buy actively, taking advantage of values no one could have ever predicted. Sub-$20 million Globals and GVs; GIVs and 604s that have traded below $4 million! You can go right down the list, large-cabin to small, and find eyebrow-raising, head-shaking selling prices. While the above examples often represent the lowest of the low in a given model segment, they offer buyers a compelling reason to step into the market at any level, as the percentage of price degradation hasn’t discriminated by serial number, or model year, so whether it’s an entry-level buyer, or top end, the discounted fleet benefits all.

Each manufacturer’s top used offerings continue to exert price compression on the lower models. For example, consider the Global Express, which recently hit an all-time high of 26 aircraft in inventory, or greater than 17 percent of the number in operation, a decidedly soft market. When aircraft start to stack up buyers often appear to get confused by the sheer number of offerings and tend to pull back until they can make sense of it. Case in point is the 3-to-1 ratio of Globals that sold in the last six months compared with the previous six-month period. In this case, as with so many other models, a price adjustment takes place, making the aircraft seem like such a great value, it makes no sense not to buy. Someone recently suggested that with the Gulfstream G650 eroding Bombardier’s lock on the wide-cabin domain, you might witness greater brand swapping going forward. Given the fact that this occurred just as G650s begin entering the fleet, it will be interesting to see if this unfolds in the months and years to come. The bottom line is that Global prices are adjusting, which is just the elixir needed to get that segment moving again.

GVs are close behind, with only about a handful fewer for sale than the Global offers at present. The 21 for sale today represent about 11 percent of all GVs in operation. Speaking of percentages, eight of the 25 Globals for sale at present reside in Europe. That’s 32 percent of the number operating in Europe and compares with about 14 percent of GVs for sale in Europe.

Inventory Shrinks in Midsize Sector

In the mid-cabin segment, the Citation Excel stands out, and with 27 for sale it is at pre-crash inventory levels; yet pricing continues to trend lower, with average asking prices dipping into the upper-$3 million range. The Hawker 800XP offers twice as many, but not for the reason you may think. Hawker Beechcraft’s bankruptcy filing last year had no apparent negative effect on inventory, which initially ratcheted down, possibly attributable to post-election anxiety release and year-end buying. Pricing too held fairly steady, with average asking prices in the low-$3 million area. The perception of many is that there are so many Hawkers in the fleet that parts and servicing will not be an issue. This of course doesn’t transfer across all Hawker brands, but for those models that were produced in great numbers the bankruptcy filing seemed to be a non-event.

Inventory of the Learjet 60, another member of this venerable market segment, dipped to 37 recently, a level not visited in five years. Average asking prices are in the low-$3 million range, but anyone can tell you many have moved into the $2 million range, no different from some Hawker 800XP and Excel outliers.

The G200 super-midsize is acting somewhat schizophrenic considering there were 24 for sale a year ago, attracting a wave of buyers who swooped in and snapped up many early serial-numbered offerings priced in the $5 million and $6 million area, driving down the inventory to just 16. After harvesting this low-hanging fruit, however, they seemed to vacate the premises and the inventory has climbed back up to nearly 30.

It seems that in a normal market when inventory is reduced sufficiently, such as in the case of the G200, buyers might absorb a reasonable price bump, further reducing market choices, if they believe prices could rise at an accelerated pace. But this market seems to be characterized by fits and starts. Despite this anomaly, generally and gradually, overall worldwide inventory seems to be inching to lower and lower levels month after month.

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