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Prices off only slightly in the piston sector this past quarter Corporate airplanes are exceedingly convenient- safe and efficient. They are time machines- making each day vastly more productive- more competitive- more secure- and - sometimes - more fun. None of that applies to an overcrowded- dirty bus ride called the scheduled airlines.

Then why - nearly a half century after the first corporate Sabreliners and Lears entered service - is corporate aviation still a whipping boy?

Because when general aviation gets bad press- we blame the press. AOPA is engaged in an excellent ongoing effort on behalf of piston aircraft owners. It is clear that all of us- need to do more to logically explain and promote the virtues of corporate aviation.

On a day in February- jobless claims soared to a 26-year high. Retailers reported dismal January sales. On that grim news-day- the Dow industrials rose more than 200 points. What a disconnect! There is no such dichotomy in aviation. Inventory continues to climb- and - with few exceptions - prices continue to slide. There are pockets of activity- but the entire market is price driven. All eight Vref Market Indices were down again- but at somewhat gentler rates than the final quarter of 2008.

Note to sellers: Every potential buyer has access to the 24-hour news media- the internet- The New York Times- the aviation media- etc. Everyone knows that the world is in recession. Buyers are better informed than ever before. Denying any part of that and clinging to eight-month-old asking prices will not get your airplane sold. On the other hand- if you really do not need- or want to sell - now may not be the best time.

Note to buyers: A verbal offer at 50% of asking price is not an offer - it’s just a phone conversation. If you really expect to be taken seriously- include some cash with your offer. “But I want to buy at the bottom of the market-” you say. Well in some markets today- you will be saving 30-40% compared to prices from a year ago. That would give you bragging rights on any golf course. More importantly- the cheapest airplane is not always the best deal. A damaged hightime airplane that is lightly equipped would take away those bragging rights.

Note to self: Quit stating the obvious.

The good news is that prices were off only slightly in the piston sector this past quarter. After many years of softening prices- there is not that much room left. Some older- higher-time complex singles and twins are nearing salvage value.

The Vref Light Single Index only lost 2.5% in the first quarter of 2009. Complex singles were down 2.4% in value. Dealers report a slowdown for just about everything. Nothing is recession proof- but the best activity is with the $50k and under airplanes. These are the airplanes that don’t cost much to fly- and don’t cost much to park.

The piston twin aeroplanes for sale market is still very distressed - more airplanes and fewer qualified buyers. However- if it’s the cheapest or the best airplane- there is activity. Pilots moving up to twins have always had tougher insurance requirements to deal with- and now it’s more stringent loan requirements. The Vref Light Twin Index fell 2.4%. Pressurized twins dropped only 1.9% in average value. There may be a stabilizing factor from turbine downsizing.

The turboprop segment far outpaced other groups- gaining 33% between 2003 and 2007. From the fourth quarter of 2007 to now- turboprops have given back more than 20% in average value (see www.vrefonline.com). In the first quarter of 2009- the Vref Turboprop Index shed 8% in value. This is a big drop- but still keeps the average turboprop well above the lows of 2003.

As some companies race to distance themselves from their flight departments- a turboprop is a good one to keep. A King Air or Conquest is an excellent short- to medium-range hauler- and it’s unlikely that CNN would recognize it as a corporate aircraft.

Distress sales of yesterday make the market of today - but there is a market. There are signs of life in just about everything from GVs to Westwinds. The few buyers who are brave enough to jump in are getting some great deals.

Determining value remains a challenge. If the asking price of a certain airplane is $39m- the value of that airplane is not $45m. In some markets- with few if any sales- the value is not necessarily what the last one sold for- especially if the last sale was July of 2008. This applies equally well to Gulfstreams- Cessna Citations- and Piper Twin Comanches. Some say a house or airplane is worth only what someone will pay.

It has been more than a year since someone has paid more than asking price for an airplane. In an attempt to be the next one to sell- some owners have dropped asking prices 10% to 15% below market. The good thing about sensible asking prices is that sales are happening.

In most turbine markets- however- we are many months away from making a dent in the massive number of airplanes for sale. It seems that when two sell- three more come to market. In the first quarter of 2009- the Vref Light Jet Index fell 9.7%. Mid-size jets lost an average 9.5% in value- and the Vref Large Jet Index lost 11%- slipping below 2003 prices.

The rosiest forecasts say that prices will bottom out- and actually show some upward movement before the end of 2009. Again- that’s a rosy forecast. That best-case scenario is unlikely because of several ominous issues- though. While we might reach bottom in 2009- a more likely guestimate of recovery would be well into 2010. Again- these are guesses. After the recession loosens its grip- there is still a lot of inventory to sell off.

One of the most serious impediments to recovery is financing. While many banks have money to lend- they have been very cautious about who gets how much- at what rate- and for which airplane. The return to sound lending practices is very difficult for borrowers to handle after years of easy money.

The world watches as Washington works to fix the damage done by years of fiscal misconduct. That entire sentence is scary: America and the globe wait to be stimulated.

To end on a positive note- President Obama currently enjoys one of the highest approval ratings in Presidential history. He is doing a respectable job of selling his economic plan to consumers.

Furthermore- since consumer confidence is the key- it is probable that consumers will pull us through - just as we always have - in due course.

More information from www.vrefonline.com or www.vrefpub.com

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