Pre-owned Aircraft Report: Prices for used jets are falling, but bargains are still few and far between

 - November 13, 2006, 12:09 PM

This year quickly established itself as one of “rebalancing” of used business jet of inventory and aircraft pricing. A string of back-to-back quarters of falling supply and corresponding price increases came to an end, but not before inventories dipped to their lowest levels since 2000. The about-face was predictable and measured and, while inventory now stands at roughly 1,750 airplanes, it is well below the five-year average of 1,900 used aircraft for sale worldwide–this, despite an ever-increasing fleet size as new aircraft continue to join the jet population.

Similarities with last year abound, as fuel prices and interest rates remain under the watchful eye of buyers, but seem to have exerted little to no influence on buying activity. The appetite for late-model, low-time aircraft has not waned either, and while pricing this year has fallen in many categories, it hasn’t affected nearly new aircraft and certainly not positions on any aircraft with extended backlogs.

The Citation Excel XLS, the Gulfstream G550 and the Challenger 300 are just a few examples of models that buyers are willing to shell out big bucks to own. In many case from sellers who hold such coveted positions. paying more than the factory-equipped price to secure an earlier delivery position.

Sellers Get Premiums for Delivery Positions

Depending on the targeted aircraft, seller premiums have ranged from $250,000, typically on smaller aircraft, to a few million. The alternative is to pay far less but wait anywhere from a year to three years until one of the most sought-after choices delivers. Without any ramp-up in production and based on current backlogs, sellers can expect to command premiums for quite some time.

Consider Cessna’s Excel XLS. There are eight for sale, but only three are aircraft that have already been built and placed into service. The other five are delivery positions and all except one are slated for delivery next year. One, the first serial number produced, carries an asking price above $11 million and everything else ascends from there. That’s out of nearly 150 in operation and nearly 200 built.

The high demand for a specific model often benefits sellers of the predecessor model, in this case the highly coveted Citation Excel, which before yielding to the XLS, grew to a fleet of nearly 375 between 1998 and 2004. Today only 12 are for sale, and two of those have a sale pending. Current pricing ranges from the low-$8 million area to the mid-$9 million range.

Two other Citations drawing buyer attention are the Sovereign and the Citation X. Now approaching a fleet of nearly 100, the Sovereign appears to be in high demand, with asking prices set in the upper-$15 million area for used variants and spilling above $17 million for a nearly new aircraft or delivery position. The Citation X, though it has been around since the late 1990s, is also actively trading with only 15 of its fleet of 266 for sale. Pricing in this segment runs from about $11 million to $19 million.

About 100 Challenger 300s were in operation as of the beginning of this month and only two are currently available on the used market with another two 2007 delivery positions for sale. The two operational aircraft, both 2005 models, carry asking prices just below $20 million and have accrued fewer than 500 hours.

G550s Scarce

While there have been a couple of sightings of G550s on the open market this year, they are a rare find indeed. Though the fleet size recently eclipsed 100, at present there are neither used variants nor any delivery position offerings for sale. If there were, one might expect to fork over anywhere from $3 million to $5 million in premium money, which could easily bring the total price very close to $50 million.

As with the Excel/XLS relationship, the GV pricing is holding firm and availability is low, due in great part to the G550. There are only six for sale, a decrease from 11 last January and nearly three aircraft below their five-year average. The current offerings represent about 3 percent of the GV fleet, which is just shy of 200 aircraft.

The G550 is not alone as a short-supply example, as the other rebranded Gulfstreams are also in high demand. Consider that out of 342 Gulfstream G100, G200, G300, G350, G400, G450 and G550 models in operation (425 produced), only 14 are available for immediate sale. Remove the super-midsize G200 and the smaller G100 (formerly Astra SPX) from the equation and you’re left with only one large-cabin aircraft, a sole G450 for sale. A second G450, a delivery position, is also available.

The G200 continues to gain market acceptance. Two years ago, 20 used choices were available at a time when the fleet size was just crossing 100. There are now 10 for sale, which is right about where the figure has been all year; however, that lower amount compared with two years ago comes in the face of a fleet that now totals 150 aircraft. That’s a drop from 20 percent to less than 7 percent availability in 24 months, and is certainly a testament to Gulfstream’s involvement with the program. Pricing today runs from the $13 million area up to the low-$19 million range.

Astra SPX Sputters

The predecessor to the G100 nameplate, the Astra SPX, has begun to sputter of late. Of 59 aircraft for sale, a great number show up on the pre-owned market. Currently 12 are available, or 20 percent of the fleet. Pricing runs from a low of $6.995 million for a 1998 model to $8.75 million for a 2000 model. Of the 22 G100s built, three are listed for sale on the used market and are priced from $9.95 million to $10.25 million.

Bombardier’s Global Express rivals the GV’s low number of choices with only three for sale out of nearly 150 produced (and one of those has a sale pending). A few months ago there had been six with prices from $38.5 million to $48.7 million. As for the rate of turnover, all of the Globals that had been for sale this past June have since sold, or have otherwise been removed from the market. Not surprisingly, none of 34 Global 5000s produced so far are for sale.

Not to be outdone, the Falcon family– which seems to be perennially in low supply–began the year much the same way and has held true to form. Out of nearly 600 Falcon 50EX, 2000 and 2000EX, 900C and 900EX bizjets in operation, only 16 are for sale. The breakdown is as follows: Falcon 2000s and 50EXs: six each; Falcon 900C and 900EX: two each. There is about a $2 million spread in 50EX pricing from $16.5 million to $18.5 million. Falcon 2000s can run from $17.6 million for a single-digit serial number 1995 model to $21.9 million for a triple-digit 2002 offering. Falcon 900Cs hover in the $25 million to $27 million range, while Falcon 900EXs have been sighted in the high-20 millions and into the 30s.

Last January a lone Airbus A319CJ arrived on the used market, and it is still available at $39.5 million. Its competitor, the Boeing BBJ, is also in scarce supply with a pair available at present. Due to the niche market, rarely do more than one or two of either model surface on the used market at the same time.

Some Markets Are Cool

Another hot spot for Cessna, the CJ3, is in paltry supply on the used market, with two operational aircraft for sale out of a fleet that recently passed 100. Delivery positions account for another three offerings, with one of those priced at slightly more than $7.5 million, which builds in a premium above the base price of $6.85 million, plus options.

The increase in CJ3 deliveries might be casting an eerie shadow on the CJ2 market as well, which until now has seemed impervious to market forces–yet it has experienced a noticeable buildup. Used offerings have mushroomed to 26 from 10 just 12 months ago. The 10 for sale last year at this time was right in line with the average between 2001 and 2005.

The current availability exceeds 10 percent of the CJ2’s fleet, a record for this model. Pricing currently falls between the mid-$4 million level and the mid-$5 million range and has not fluctuated as much as one might expect, considering the jump in availability.

Availability of the original CJ has fluctuated between 25 and 33 aircraft during the last year and is currently at the top end of that spectrum. Pricing ranges from the low- to high- $2 million area. The follow-on model CJ1, introduced in 2000, picks up in the high-$2 million area and carries to the low-$4 million range for a 2004 model.

Another model worth keeping an eye on is the Hawker 800XP. In 15 months its used choices have doubled, from 17 to 35. However, with nearly 450 produced and current availability at about 8 percent, this probably illustrates how active last year was more than anything else. Prices range from $6.895 million up to the mid-$11 million level.

The GIV also doubled its used choices with 14 for sale last October and 30 on the market today. Prices are adjusting and currently run from just under $15 million to just under $20 million.

The venerable Falcon 50, after pinging off 50 aircraft for sale a few years ago, edged lower recently, dipping below 30 aircraft for sale since January of last year. Twenty-two are currently available–one less than the last 12-month average. Pricing runs from the mid-$6 million range up to $11 million. Only two of 22 for sale are over S/N 200, again showing buyers’ preference for the later models.

Another sky veteran, the GIII, exhibited similar market behavior. It too had reached 50 offerings and the death knell seemed to be ringing in the distance, but as a price adjustment filtered its way through the market, buyer interest rekindled to where inventory is now nearly half of what it was at the peak. Posted asking prices are situated in the $5 million to $8.395 million range.

Eleven Premier Is, out of a possible 134, are for sale at present and pricing runs from the low-$4 million range into the very low-$5 million area. The model is a relative newcomer, and none of the aircraft have more than 800 hours. The one with the least time, a 2004 model, is listed with just 115 hours.

Another light jet, the Learjet 31A, has seen its selection ratchet down slightly from a year ago, when inventory stood at nearly 30, or roughly 14 percent of the active fleet. Now with 23 for sale, it is at close to 10 percent availability, a benchmark often cited to describe an average supply.

After experiencing a dramatic increase in Learjet 45 inventory two years ago, when choices quadrupled over a 12-month period, the market has stabilized. The current stock stands at 20 for sale, placing the model squarely at its 12-month moving average and representing about 7 percent of the Learjet 45 fleet (excluding the later XR derivative). Prices here run from the low-$6 million level up to $11 million.

Further up the product line is  the Learjet 60, whose supply is nearly 40, a few ticks above its 12-month average. Since the Learjet 60 entered service in 1993, more than 300 have been manufactured and the current stock amounts to about 12 percent of the fleet. Prices run from $5.25 million to $11.8 million.

Beechjet 400As are holding steady at their year-ago level of 34, which represents just under 10 percent of the fleet. Examples can be found as low as $2 million and as high as $5 million. Availability of Hawker 800As reached 44 earlier this year, a level it saw shortly after 9/11. It has since backed down slightly, but is still at a two-year high in terms of availability, equaling 17.5 percent of the active 800A fleet. Pricing runs from about $4 million up to $6.4 million.

While 12 Hawker 1000As for sale may not sound like many, the airplane has one of the softer markets, considering that only 44 were produced, placing its availability at 27 percent.

The NBAA Convention usually acts as a springboard from which buyers shift into high gear. This year appears to be no different. Sales activity has been brisk and the elements needed to keep the fourth quarter living up to its reputation as the busiest seem to be in place.