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A difficult market to predict!

The fuel of economic worry has been added to the news media flame- and the recession fire burns brightly. For much of the aircraft re-sale market- a slowdown is apparent. It seems the Dow Jones Index is spliced directly into phone lines - when the Dow drops- so do phone calls.

However- the interspersed rallies make it difficult to predict next quarter- or even next week. At VrefOnline.com- seven of the eight Vref Market Indices are down. For more than a year- pundits have been saying that a downturn in the economy and aviation is imminent. It is possible that an Economic Stimulus Package or burgeoning global economies will forestall any US hardship- but we think not.

When the Dow falls- so do markets in Asia and around the world. There is a new adage. Name the two most frightening things in aviation: 1) China (i.e. offshore buyers) quits buying airplanes- and 2) Americans quit buying China’s stuff at Wal-Mart. The bursting of the housing bubble- record personal and National debt- and the Presidential election- all have to play out before a clear direction is known. Recession or not- anxiety is high and perception is everything.

Just as this segment appeared to be getting to its feet- the R-word knocked it back down. Nearly every piston single lost value during the recent quarter. The Vref Light Single Index fell 2.7% last quarter- while the Complex Single Index dropped 1.3%. The exception would be trainers - primarily Cessna trainers. A good export market has kept ready-to-go Cessna 152s and Skyhawks in demand.

Traditional airplanes - Bonanzas- 210s- Cherokees and Mooneys - designed a half-century ago are under assault by a new fleet of LSAs and Cirrus-type composites - all sporting glass cockpits. Plus there is no relief from stifling operating costs. Beech Musketeers- Sports and Sundowners are still a cheap way to fly- prices remain unchanged.

Sierras are down slightly- while all Beech Bonanzas are down- and now would be a great time to buy. Cessna 152s and Skyhawks are quick sellers- 182s are a slow market- 185 and 206 traffic has dropped off. Meantime- the 210 downtrend continues. The Cirrus market is price driven- but active- while there are plenty of Mooneys under $100k- and demand is shrinking. Four cylinder Pipers are active- but prices are off- and good Saratogas and other big engine Pipers are selling for less than they should - high-time or original panel aircraft are ‘difficult’.

Piper Arrows are down- but Malibus have seen a rare correction. One important observation for piston singles: The sky is not falling- it’s just cloudy. Sellers are motivated- but not desperate.

One dealer summarized the Piston Twin situation saying: “There is a horrible problem in piston twins.” They still fill the important niche of affordable transportation for small businesses- however- that niche is shrinking - or being invaded by turboprops- and light jets. The Vref Light Twin Index slipped 1.3% last quarter- and so did the Pressurized Twin Index. That is simply a continuation of a year-long trend.

Everything from Beech Barons to Piper Navajos represents a great value. No one we spoke with sees anything but a buyer’s market. The most expensive loaded- low-time airplane for sale can be a best buy- but sadly- these airplanes can get lost in the crowd. All Beech Barons are a tough market- and there’s no Duke market unless it is low-time and updated. Cessna’s 310 and 400 series have experienced some big drops- but a ‘tricked-out’ 421C can sell quickly- while others just sit. 14% of the fleet is for sale.

Piper Twin Comanches- Aztecs and Senecas are all down again- while unmodified or original Navajos are weak and prices down. Piston Twin Commanders are also down. Many of these airplanes are as old as the B52!

By far the most consistently ‘up’ market- has leveled out. One quarter does not make a trend- but the Vref Turboprop Index is down 0.9%. All reports from the Beech King Air market indicate a strong market- but availability is up. King Air C90A and B prices are firm. B200s have seen no change- while 300s have experienced less activity. 350s are stable.

Cessna Conquest I and IIs are down due to SID inspections- Fairchild Merlin II and IIIs are flat- while IIIBs and IVs are down. Mitsubishis are seeing some activity- but prices are mixed. Good demand is being reported on most single engine turboprops including Cessna Caravans- TBMs and Pilatus PC-12 airplanes for sale. Piper Cheyenne Is and IIs are down- IIIs and 400LSs show little change- and the turbine Twin Commander renders no detectible trend.

An overheated jet market appears to be returning to normal. Airplanes that sold in a few hours or before they even reached the aircraft for sale market - such as CitationJets- Challengers or Falcons- now have some availability. Pre-1990 and sub-$10m airplanes are flat or- in some cases- trending down. The Vref Light Jet Index was off 1.8% in the recent quarter- while the Mid-Size Jet Index dropped 0.9%.

Not surprisingly the Large Jet Index was the only up market gaining 1.6%. Ready-to-go G-IVSPs and G-Vs are almost impossible to find. International demand continues to be very strong for very late model- mid-size and large jets for sale. However- markets that rely primarily on sales within the US have cooled.

Beechjet prices are flat- while Challenger 300 business jets for sale are good. The 3R market has turned around- while the 604 market holds steady. 2002 and newer Globals are hot- while the XRS is off the chart. Cessna Citation Is and IIs are down- CitationJet 1s and 2s have been incredibly strong- but more are coming to market. CJ3s are strong- but some positions are available. Bravo activity is up- while Citation Vs and Ultras are quiet - with prices down slightly. Early Excels are down and the market is loading up- while at the other end of the scale- $1m premiums on the XLS+ are common. Sovereigns are very hot while Citation Xs are slow.

Few Falcon 2000 business jets and 2000EXs are available- but lots of Falcon 50s are on the market - and prices are down. Late model Falcon 900EXs are propped up by 7X delays. Gulfstream Astras are very slow- but early model G-IVs through G550 positions are up sharply - and are the strongest group. Westwinds and Lear 35s are now third-tier markets- and prices are down. Hawker 800A activity is down- but ProLine 21 800XPs are still strong. Lear 45XRs are firm- while Lear 60s are correcting.

In this (or any) election year- there is a laser focus on The Economy. There is no way to tell how much of an impact a recession- if there is one- will have on general aviation- but it’s never good. We can all learn from the seasoned veterans- aircraft sale dealers and brokers who’ve survived in this business for decades.

Ask them- and they will tell you - it’s all temporary - the ups and the downs. The dealers who assumed airplanes for sale always go up in value are no longer selling airplanes.

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

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