EBACE Convention News

Brokers Say Market Is Still “Flat”

 - May 15, 2012, 11:00 PM

With Europe facing fresh financial turmoil with a possible fresh squeeze on capital and VAT tax rules still causing importation headaches, is it any wonder that it’s hard to adopt an optimistic outlook on the market for preowned aircraft? Here at the EBACE 2012 show, the consensus among brokers was generally that the market in this part of world is flat, flat, flat.

Last year saw a slump in deliveries of new aircraft to Europe. Data from research group Jetnet (Stand 571) shows 177 new business aircraft came into the continent in 2011, comprising 120 jets and 57 turboprops. This equates to a 47-percent drop in jet deliveries and a 33-percent dip in turboprops from the all time peak of 2008.

According to broker Jay Mesinger, the European sector is about where the U.S. market was three-and-a-half years ago. “I heard at the show that one in five aircraft in Europe is for sale. If that is the case, where will they all go?” he said to AIN.

Things are not much better across the Pond. “The market this year has been spotty,” said Texas-based broker Janine Iannarelli. “Since 2012 is an election year I’m not surprised that people are a little cautious. However, every year for the last three years I’ve heard that things will get better this year. So far they have not.”

Even in China, the Holy Grail for manufacturers, things are not as buoyant as they were last year. Mesinger said, “People in China want new aircraft, so it will take some time for the first wave of aircraft to age and for people to sell them on.”

New rather than long range is the latest trend Iannerelli has identified. She said, “Last year I’d have said we were getting more requests for long-range, large-cabin aircraft. Today people seem to want low-hour, newer aircraft as a priority.”

Things are likely to remain sluggish for the near future, said Mesinger. “People will sit on the sidelines even if they have the finances, as they want to pay the right price.” However, all of Europe is not equal. Mesinger said he had heard that five used aircraft went into Turkey, and he added that demand from emerging markets in Africa, such as Nigeria, should bolster the sector.

But UK-based broker Steve Varsano does not share the gloomy assessment of his colleagues. He recently opened The Jet Business in central London as a new approach to giving prospective buyers the chance to evaluate all available options independently.

“The industry is doing fantastically at the top end of the market, in pretty much the same way that it is for real estate,” he told a press briefing last month. “Between 5 and 14 percent of aircraft are available for sale across all types and in some cases that means barely 10 aircraft in each category available across the world.”

European-registered pre-owned aircraft, especially those that meet JAR-OPS requirements, are currently in vogue with jet brokers, panelists said at a jet broker session during the National Aircraft Finance Association annual meeting in Savannah late last month. A weaker euro and the desire of some European operators to shed business aircraft during times of austerity have created a ready supply at reasonable prices, they said.

Guardian Jet president Mike Dywer also said he prefers JAR-OPS aircraft because they are better equipped from an avionics viewpoint, insulating buyers from having to spend money to upgrade them in the near-term. “JAR-OPS aircraft meet future U.S. equipage requirements,” he noted, “so having these additional avionics increases their resale value should the buyer want to dispose of the aircraft in another three to five years.”

Kirby Ramsey Aviation Group co-founder Paul Kirby agreed that European aircraft are better equipped and said that there are “lots of good values in Europe right now.”