The annual NBAA convention routinely serves as an appropriate time to reflect on activity in the pre-owned market for both light jets and single-engine turboprops. As we look back at the year that has passed, it’s fair to say that while these markets have not set any blistering records, some calm is in the air.
An old axiom for Wall Street players advises to “sell in May and go away” and clearly most investors would have done well to follow that advice last year, as the stock market began a several-month slide. The correlation of the stock market to the vitality of the aircraft market is easy to see when looking at used inventory levels from May and June a year ago and the ups and downs experienced since then.
The business aviation industry has now passed rock-bottom in what has been a cyclical dip of historic proportions, but the pace and extent of its recovery remain far from clear. This was the main area of consensus among delegates to the International Corporate Jet & Helicopter Finance conference held in London in mid-February.
The market for pre-owned business aircraft will remain flat for at least another 12 to 24 months and may not completely emerge from the down cycle until 2013 or 2014, according to Freestream Aircraft chief executive Alireza Ittihadieh.
Business aircraft trading has started to move more freely, but the fallout from the financial crisis continues to cast a shadow over the market, according to JetBrokers Europe. The UK-based group says brokers are having to work harder and be more inventive to get deals closed. And buyers are facing much closer scrutiny from lenders.
During a time when careful shoppers might be expected to make every effort to save money, the charter brokerage business has continued to grow, despite the fact that there is nothing stopping consumers from contacting charter providers directly and negotiating their best deal.
Despite teetering over the abyss of economic collapse and having to overcome negative public perception surrounding corporate jet ownership, the used aircraft market has battled back, slowly and perhaps surprisingly consistently, chipping away at a glutted market. Month after month since late 2008, buyers have stepped into the market and pared back the numbers to arrive at the lowest inventory level in a year-and-a-half.
As used aircraft values got pummeled over the last few quarters, it seemed that the buyers had all but disappeared. They hadn’t. Now that the inventory of most model types is at unprecedented highs and prices are at unprecedented lows, buyers are reemerging in more noticeable numbers and scoring big time on CJs to G550s, often executing a trade some 30- to 50-percent below the prices accepted at this time last year.
The flow of used aircraft to the market is slowing fairly dramatically, and some may wonder if that’s because all the aircraft for sale are already on the market. It might seem that way to some, but the more than 3,000 aircraft for sale right now–while not an insignificant number–represent only a fraction of the more than 16,500 jets currently in operation.
Sources for financing of corporate aircraft purchases may be harder to find this year than last, but Toennies von Limburg, director of international sales with Bank of America Corporate Aircraft Finance (Booth No. 394), said there is value to be had in what has turned rapidly from a buyers’ to a sellers’ market.
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