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Pre-Owned Aircraft Sales Trends

A bottom has been reached- and for some airplanes... a bounce.

More than a year of falling prices and lowered expectations have pulled the real buyers off the sidelines and into the market. Activity continues to improve almost industry-wide. Low offers keep coming in. However- on most airplanes the sellers sense the worst just might be over- and the bottom is no longer made of quicksand! Is it too early to talk about What’s Hot? Yes- but remember ‘Hot’ is a relative term.

WHAT’S HOT:

• Very late models;
• Totally refurbished- low-time and made to look like a very late model;
• Excellent pedigree with no squawk list;
• Current generation- still in production with a glass cockpit;
• Priced so low it can’t be ignored.

WHAT’S NOT:
• Still has an asking price from the 2007 marketplace;
• Old generation – hasn’t seen an avionics shop since Reagan was President;
• Low-time and no damage- but can’t really tell because the logs are missing;
• A squawk list the size of the Andromeda Galaxy.

Dealers with pristine- no-excuses airplanes are reporting good activity. It doesn’t seem to matter whether it’s a Cessna Skyhawk or a Bombardier Global 5000. What a huge difference from only one year ago when even the best airplane at a reduced price was a very tough sell.

PISTON SINGLES
After coming in for a smooth landing last quarter- both the Vref Light Single Index and the Complex Single Index bounced a little - not a hard bounce- but the wheels are clearly off the runway (see Vref Market Indices at VrefOnline.com).

Demand from emerging markets outside the U.S. continues to be strong. Some of the best light singles are moving to Mexico and South America. The Bonanza and Saratoga markets are reported as stable. Cirrus and other complex singles are selling if priced right. As more buyers move in to take advantage of a perceived bottom- there is an unusually wide range of selling prices. Some of the spread is due to time or condition- but it’s also possible that a few might pay a lot to be able to say they bought at the bottom.

PISTON TWINS
This perennially distressed market finally appears to be at or near a bottom - and clearly- no bounce. Obviously- the run-outs and repos are still trending down. However- the Vref Light Twin Index was off less than a percentage point last quarter- and the Pressurized Piston Index was flat. Well-maintained Beech Barons- Twin Cessnas and Piper Navajos do so much for so little.

TURBOPROPS
Counted out in previous recessions- Beech King Airs are showing no signs of staying down. Thanks to very attractive prices- activity is up. There is no change in the Vref Turboprop Index this quarter- after some very sizeable corrections in early 2009.

Cessna Conquests- MU-2s- Piper Cheyennes and Twin Commanders did not get too overvalued in the up-market. Prices are flat again as the ready-to-go airplanes start to go.

JETS
Buyers don’t have to take a number and stand in line yet- but things have improved. For most of 2009 it has been obvious what prices were doing...falling rapidly. Now- as we move into 2010- it is not so obvious. The jet segment includes the full range of market conditions from stagnant to ‘moving off the bottom.’

In the ‘Stagnant-Unless-Priced-Really-Right’ category you’ll find all the old- out-of-production turbojets; the Hawker 1As- 400s- 600s- Sabre 40s- 60s and Lear 20 series. Salvage yards are filling up with these airplanes - on their way out long before this recession.

Thankfully- most jets fall into the ‘At-Or- Near-A-Bottom’ category. Activity has steadily improved for nearly all airplanes with current inspections- low time- and excellent paint and interior. And- oh yes- it must have a late-2009 asking price. Lacking any of the above will move it back into the ‘Stagnant’ category.

There are a small but growing number of jets that fall into a third- emerging class of ‘Hit-A-Bottom-Hard-and-Bounced’. In most cases- these are the airplanes that were overvalued- selling at a premium- in 2007.

When the recession found its way to aviation before the end of 2008- most of these hyper-inflated airplanes rolled off a cliff with no one at the controls. Now many are showing a spike or a rebound. Jets that posted a price increase this quarter include Bombardier Global 5000 and XRS- Cessna CitationJet 525 and CJ2- Gulfstream G450- GV and G550.

You may have noticed that “this update is brought to you by the letter ‘A’”. There is still an awful lot of inventory out there- and a lot of economic uncertainty to go with it. While we may have reached ‘a’ bottom for most airplanes- no one can know if it is ‘the’ bottom.

The Stock Market plows onward and upward- oblivious to unemployment rates and repossession statistics. It may be the lack of jobs and the staggering number of foreclosures is not important for now. But- at some point- people (and companies) have to get their financial lives in order if they are to be good consumers.

There are two important positives for the world of aviation:

1. During the last bubble (housing- sub-prime- whatever) an enormous amount of wealth was created. This wealth is national- global- personal and corporate. Never before have so many been able to afford so much.

2. Much of this new money is being spent on lift. And- an eroding U.S. dollar is making U.S. owned airplanes nearly irresistible to off-shore buyers.

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


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