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Pre-Owned Aircraft Sales Trends
Time to come out of the bunker...


It was a summer spent fishing – bottom fishing. Buyers searched for the bottom- while sellers just tried to snag a fish – preferably a fish that didn’t require financing.

The good news is that the fishing trip was largely successful- no lie. Activity is up marginally in nearly every segment. Can the worst recession in history be fading in less than a year? Just a few months ago- some were predicting Great Depression II.

PISTON SINGLES
Much of the piston single market appears to be bottoming. We are finally seeing the better airplanes bringing closer to what they deserve – no longer confused with the multitude of mediocrity out there. The Vref Light Single Index lost only 1% in value during the past quarter. Complex singles fell only 1.6%.

Turnkey is the name of the game. No one wants a squawk list to fix. The list of airplanes with no price change in the past two or more quarters is very long. The Beech Sierra- most Bonanzas- most Cessna Skyhawks- Cardinals- Skylanes- Cessna 210s- Piper Warriors- Archers- Dakotas- Cherokee Sixes- most Arrows and most Saratogas were all unchanged through two of the darkest quarters in aviation history. To us that tells of good ongoing demand and long-term viability for general aviation.

Indeed- recent innovations - like synthetic vision and an auto land system for the Beech Bonanza - point to some very forward thinking… forward to a time when our children (or grandchildren) will board a light- single-engine jet in Kansas City and say- “Phoenix please.”

Many half-century-old airplanes will eventually become extinct- finding their way to the salvage yard. These dinosaurs will be replaced by Cessna Columbia 400s- Cirrus SR22s and Piper Malibus- which will have morphed into jets - with autopilots on steroids.

PISTON TWINS
Not so much good news here. The Vref Light Twin Index dropped 2.5% in the recent quarter. The Pressurized Twin Index fell 1.5%. Those are relatively small changes. Most piston twins are ridiculously cheap- yet some are still a tough sell. Operating costs and a troubled economy continue to be a drag on this market. It takes a special buyer to appreciate the added safety compared to a single- and the thriftiness compared to a turboprop.

TURBOPROPS
Overall- this segment was down only 1.6% during the recent quarter. This drop is due in large part to the King Air 200- an airplane that seemed to launch all turboprops into orbit during the bull market between 2003 and 2007 (see the Vref Turboprop Index at VrefOnline.com). Now there are more than 250 for sale- and prices slipped nearly 10% in just the last quarter.

There is a lot of price compression- and this is apparent in older jets like Citations- Lears- Westwinds as well as turboprops. The oldest models can’t go much lower because they are nearing salvage value. This seems to put 1979-80 models in about the same price range as 1982-83 models. At present- Cessna Conquests and Piper Cheyennes have stabilized after losing ground early this year.

JETS
Buyers- if you jump in now you might be able to touch bottom. The jet market - ravaged by the recession - remains price driven- but is showing signs of stability. Inventory levels are flattening out- and prices are- too.

This cautiously proffered good news comes at a time when the Jet market is normally vacation quiet. For some airplanes – Challenger 300s- Citation Excels- early CitationJets- GIV-SPs- and later model Hawker 800XPs - there is pricing traction or a base. For example- the last one that sold brought about the same as the one before.

This is not to say that some airplanes are not still settling. Gulfstream III asking prices continue to fall as owners try to unearth a buyer. It is difficult to predict where G200s- early GIVs or Citation Xs will end up because activity is miniscule. Obviously- time and condition have to be factored in. If it has double the normal time or half the avionics- it’s a whole different market.

Older- light and mid-size jets continue to be way too plentiful. According to JETNET- there are more than 200 combined Citation IIs and Vs available. The Vref Light Jet Index was off 13.8% in the recent quarter. Prices in the mid-size segment fell even more- down 15.8%. Larger jets appear to be rounding out - the Vref Large Jet Index slipped only 9%. That is half of last quarter’s drop.

The G550 – If it’s good enough for your Congressman- it must be good enough for you.

HOW LONG UNTIL WE ARE OUT OF THIS?
You’ve probably heard that same sentiment at night- in thunderstorms. Prognosticators and armchair economists abound. Strict credit and an alarming number of bank repossessions remain a big anchor in this ocean of airplanes. That is keeping the cork in the bubbly. Otherwise- a stock market run up and continually improving economic news makes us optimistic.

At this early stage of recovery there is an upturn in activity- but no price increases. Additional buyers have to arrive- and more airplanes have to go for that to happen. Some of the brightest spots in aviation have been during bubbles- (i.e. dot-com and housing bubbles).

Until very recently it seemed as if we were banking solely on a bailout bubble. Now- it looks like the next big wave might be ‘green.’

Since there is nearly no prospect of an electric Learjet- it is unclear how a green revolution will benefit GA. In the near-term- however- the business of buying and selling is clearly moving forward. It’s time to come out of the bunker.

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

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