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International Markets:
ExecuJet and the pre-owned business aircraft boom.

Zurich-based ExecuJet Aviation - a leading global business aviation organization offering a diverse range of bizav services and solutions on four continents - is experiencing so much demand for pre-owned business aircraft that it recently created a dedicated division. Sales representatives are based in Australia- Europe- South Africa- the Middle East and soon in the US too.

“We are currently interviewing staff for dedicated researcher roles specifically to target and locate aircraft in the US- due to the currently depressed market- with the aim of selling them internationally-” revealed Nicholas McHaffey- Head of Global Pre-Owned Sales who is based in Dubai- UAE. “I hope to have somebody online shortly.”

The US business aircraft market is pretty much saturated according to ExecuJet. “Five years ago this would have had a massive effect on aircraft values and perceptions worldwide- but that was when 70% of all business aircraft transactions were US-based. Today we are competing in a global market – and we have seen the US market dip to just 40-45% of all transactions-” observed Andrew Hoy- ExecuJet’s Executive Director- Group Sales- based in the company’s new office at Canary Wharf- London.

Accordingly- World Aircraft Sales Magazine decided this was an opportune time to talk to the company to find out exactly what it sees as trends in the pre-owned business jet market- and what drives its philosophy of enlarging its pre-owned operation across all business jet models- given the current world financial climate.

ExecuJet identifies that pre-owned demand is being led primarily by the Middle East which is growing by 20% each year- and also by India and China where the company recently opened offices in Mumbai and Beijing. Last year ExecuJet Middle East pre-owned aircraft sales represented nearly 50% of ExecuJet Middle East’s transactions in the region during the past twelve months.

“The pre-owned market in the Middle East alone is possibly worth an estimated $500 million- based on our own assessment of what aircraft have come into the region over the last twelve months. These include Legacys- Challengers- Globals and Hawkers. Last year- we successfully captured 70% of the pre-owned wide body Bombardier aircraft market such as the Challenger and Global Express-” explained McHaffey.

Recent ExecuJet transactions have seen a year 2006 model Challenger 604 sell for $2 million more than its original price- and a 2005 Challenger 300 also sell for $2 million more than its original price tag- both due to demand. “Even now- customers are placing multiple orders to meet their future needs- with some prospects in the Middle East and Asia booking aircraft positions for as late as 2014-” McHaffey reports.

“On the back of these transactions ExecuJet Middle East has gained seven new aircraft under management- which have since joined the fleet-” says McHaffey. He also said that ExecuJet Middle East is receiving one new enquiry per week with demand largely focused on wide-bodied aircraft.

One of our biggest issues at the moment is meeting customers’ needs and offering solutions. The new emerging regions such as the Middle East- India- and the Far East are driving the pre-owned market. Consider the massive lead times on new build aircraft (2011 for a new Learjet; mid 2012 for a new Challenger 605 and 2014 now for a Global) it makes sense to look to the pre-owned market.”

Furthermore- demand has put a premium of up to 15% on late model aircraft due to the lack of supply and existing owners not being willing to sell.

“If we’re looking for a fairly new pre-owned Challenger 604 today- there are very few around-” McHaffey continued. “We had a 2006 model Challenger 604 which we sold in under a month and it fetched over $28 million which probably brand new cost $26.5 million. If we were to look on-line today- the newest machine today is a 2003 pre-owned Challenger 604 priced at $24.5.million- and it also looks to have a ‘deal pending’- so we may now have to go back and offer a 2002 model.

“Given our wide remit for pre-owned aircraft it gives us the ability to give our customers a solution and later hopefully introduce them to a Bombardier product.” By standing in these transactions- ExecuJet offers additional value to the customers by assisting with being able to bring these aircraft under management if required as part of its fleet to simply assisting buyers with pre-buy and aircraft registration.

Global collection
McHaffey adds that pre-owned aircraft are coming from a mix of continents including South Africa- the US- Middle East and Europe. “Aircraft are really coming from all over the world- and predominantly our wide-body aircraft sales are going into the Middle and Far East regions.”

And the company philosophy is to get more of these arriving aircraft into ExecuJet’s management fleet. “Two to three years ago we had six to eight aircraft on management in the Middle East; we now have 26 aircraft under management- with a further ten under maintenance management- and another seven aircraft coming in the next three months- so by the end of the year I expect we’ll have just under 33 aircraft under management in this region. Not a bad record in just under three years. We’ve got a mixture of people coming on board bringing Global 5000s- Embraer Legacys and further Learjet 60s to the management pool.”

McHaffey adds that a recent National Aircraft Resale Association (NARA) meeting in Dallas- Texas- turned up some interesting trends. “The American market is concerned that older models are not selling despite the boom in business abroad. Over 60 percent of their mid size jet enquiries are now coming from the overseas international markets. The whole market has changed and the strict EASA certification issues is pushing people to buy newer products.

“People are looking for newer machines- 2000 model or newer have become the European/Middle Eastern benchmark for buyers. There is definitely a trend- which is caused by new buyers entering the market- whether they’ve come through fractional ownership programs or other routes. They all want newer aircraft – they don’t want a 1970s Hawker- they want a Learjet 60 which is under three years’ old and under 2-000 hours-” he emphasized.

“Some of the dealers in the States say that aircraft such as the older Hawkers and Beechjets just aren’t moving- but the good stuff that comes to market is sold instantly. I think everyone’s moved up a level – gone are the days when a Hawker or a Citation I was seen as a large machine and the Challenger was the be-all-and-end-all of VIP travel. In the Middle East- the Challenger has become the standard-sized charter aircraft; much like the Hawker was six years ago.

“This region needs aircraft like the Challenger 604/605 which has the ability to fly non-stop to London. At the NARA meeting someone said ‘What are we going to do with all these older aircraft?’ Before they used to be sold south of the border- but that’s not the case now as Mexico and South American customers in general are taking newer products-” McHaffey observed.

“ExecuJet was asked to market a 1999 Falcon 900EX from Mexico- its owner having already bought a brand new Falcon 7X. So those markets are upgrading themselves and some of the older aircraft are finding their way back to the U.S. and staying there.

“The Americans think there’s a definite downturn in their region with prices softening- but anything that is good [pre-owned] is being taken out and is heading for the Middle East- the Far East or Russia. I think there is a natural balance occurring worldwide. I’m currently trying to get inventory to market – anything under five years would be nice but it’s very difficult to get hold of stock.

“We’ve currently got people looking into some older Challengers which we could use as stepping-stones into newer aircraft. Obviously it’s better for us if we can find a client who wants to buy a Challenger 604 which may be a steppingstone to a newer Challenger 605 or Global-” McHaffey explained.

The company found a couple of these aircraft last year and through its completions consulting business- gave them new paint jobs and new interiors- a full overhaul and then sold them on and placed them in its managed fleet. “I think people are spending their money to up the image of their aircraft now and are quite easily spending $1 million on a refurbishment completion.”

Newer or older?
So is ExecuJet putting an age limit on its pre-owned aircraft? “We try to put customers into aircraft that are going to be hassle free- so we do try to move customers into newer aircraft which have less maintenance and downtime. We haven’t had many enquiries for the older Challengers from the mid 1980s- the 600s and 601s- and certain countries such as Jordan already stipulate that aircraft on their register have to be under 15 years old. I believe that the Indian authorities are also close to following this lead.”

McHaffey says that around 90% of his deals are now financed in the Middle East- but before this it was very much a cash-buyers market. “Our first Global Express in Dubai was financed through Credit-Suisse- now we use RBS- Citibank and UBS (a half dozen transactions have been completed to date through UBS) and now Middle Eastern banks are starting to look at financing corporate aircraft. The market is becoming much more open towards financing products onto Middle Eastern registers- whereas before that they would much rather have preferred U.S. or European registered aircraft. Because the market has exploded- local banks are also looking to finance these aircraft.”

None recourse finance is also proving an attractive solution to buyers in the region who don’t wish to disclose their assets- and Guggenhiem Aero Finance has started to attract new business- using the aircraft purely as collateral. ExecuJet is just about to close a pre-owned Learjet 60 with them this month.

McHaffey has been based in Dubai for three years and says- “I’m centrally situated which is very useful when visiting our operation in South Africa as well as India. Quite a lot of our Indian customers either transit through here or are basing themselves in tax free Dubai. The ramp here has 70-80 aircraft on it and shows the amount of traffic that is passing through the region. It can be difficult to find a parking space at times-” he concluded.

More information from www.execujet.net


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