Investment research by UBS published this month shows a marked increase in both used business aircraft available for sale and in delivery positions for sale. The investment bank’s conclusion is this: “We believe the deterioration…and decline in flight activity presage what we think will be a significant slowing in new order activity. Overall, we estimate used inventory levels at the end of October were 57 percent higher from the prior year, including a more than doubling in young used inventories and a four-times increase in new delivery position inventories.”
The UBS Business Jet Update, released last week, outlines the detailed monitoring of key indicators undertaken by UBS, such as numbers and pricing of used jets for sale. It also carried out a survey of industry professionals, which showed an increasingly pessimistic outlook.
“We estimate 2,564 used business jet aircraft available for sale at the end of October (including 176 new aircraft delivery positions), 10 percent higher than the prior month and 57 percent higher from the prior year. Used inventory levels reached a new high in absolute terms, and at 15 percent of the in-service fleet, is approaching the 17-percent peak in 2002.”
Used inventories of business aircraft five years old or younger have “more than doubled over the past year, with an estimated 480 of these aircraft on the market at the end of October. This includes large increases in the number of...Global Express, Challenger 300, Premier and Citation Excel/XLS and CJ3 [aircraft available for sale].
“At this point, we believe the increase in delivery slots available for sale reflects a combination of reduced customer demand and difficult financing conditions as the run-up in aircraft values that had driven many of the recent listings is reversed,” the report also stated.
UBS has used JetNet fleet data as the basis of much of its research. This shows that when the number of new delivery positions for sale is broken down by type, at top of the list are the Eclipse 500 (31 for sale) and Citation Mustang (23 for sale), thus, there may be a VLJ distorting effect.
Comparing newer aircraft to older aircraft shows that while zero to five-year-old and five to 10-year-old aircraft have 9 percent (480) and 13 percent (440) of their respective fleets available for sale, business jets 25 to 30 years old have around 25 percent of the fleet available for sale. This is “slightly above the recent average of 20 percent,” said UBS.
UBS targeted four specific aircraft categories to monitor closely in an attempt to capture pricing trends. In October the declines in these values were as follows: super light (Cessna Citation Excel/XLS), 2 percent, medium (Hawker 800XP), 4 percent; medium large (Citation X), 3 percent; and large (GIV-SP), 3 percent. Used available inventory for all four types has increased to an all-time high, concluded UBS.