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Pre-Owned Aircraft for Sales Trends
Forget the past - this is now!

Anything that happened prior to October 1- 2008 is ancient history and has no bearing on the present times. Buyers know this- and aircraft owners are beginning to understand it. Numerous crises- any one of which is dire- combined to bring the aircraft resale market to a near standstill. As we move into 2009- a few deals are being pieced together - but at prices well below the historic highs of early 2008.

What happened? Who- or what- is to blame? In elections lost or markets destroyed- it is customary to point fingers. In the case of the general aviation marketplace it is a buyers market- which means buyers set the prices. Brokers- banks or books are not the villains. In early 2008- inventories started to creep up. No real problem - every OEM had a huge order book; the dollar was weak- enticing plenty of European- Chinese- Indian and Middle Eastern buyers. It seemed that money was no object.

Then money became everything. Credit- which had been running like a Lamborghini on the Autobahn- shifted into reverse and the damage was severe- giving us a global economic meltdown. Now inventories are higher than ever and growing daily- with nearly no buyer interest - truly an unprecedented situation.

What has to happen? Right or wrong- the US Government is trying to force feed capital into the system- and will almost certainly inject more and more. Seems pleasant enough- being given money! At least two big hurdles remain though- and a third one is lurking. Banks have returned to that old-time concept of qualifying loan applicants and requiring a down-payment often 20% or more. It might be sound lending- but it also can be a deal killer. It is difficult to say just how long it will take borrowers and financial institutions to reach common ground. Some say the value of an airplane is the amount you can borrow on it. We hope not.

The second problem is related to the first- and that is a universal confidence problem. From Main Street to Wall Street- consumer confidence is pathetic. A fresh stimulus package and a popular- articulate President to sell it should be a positive factor. Then- there is always the possibility there will be a sea of change in consumer habits - driving a tenyear- old car- or patching jeans instead of buying new ones with holes built in. No - what were we thinking?!

The third spectre is terrorism- even the threat of it remains a heavy financial burden.

At a time when reduced fuel costs should be boosting sales- owners are very reluctant to endure the myriad of other costs- and they are putting their planes up for sale. Aircraft brokers in this segment estimate the number of listings to be nearly double from one year ago. As always- the exception is the creampuff airplane. Those with new paint and interior- zero since major overhaul and a new Garmin panel continue to attract buyers.

Most of the deals reported do not have a loan involved. The export market is pristine and while late model Cessna Skyhawks remain 'still ok'- just about everything else is slow. All Vref piston indices are at historic lows. The Vref Light Single Index- for example- shed 10.8% of its value- while complex singles fell 10.6%.

Not surprisingly- the piston twin market continues in a depression state. The Vref Light Twin Index fell 8% - the smallest drop of any segment- and the Pressurized Piston Twin Index fell 10%. To cut to the chase- it is a great time to buy a Beech Bonanza- Baron- Cessna Cardinal- 421- Mooney- Piper Archer- Cherokee Six- Navajo....... or just about anything with wings.

While not yet in freefall- the average turboprop lost 11.4% in the recent quarter. This was a large drop- but the business turboprop aircraft for sale market is nowhere near its historical low of 2003. Inventory has skyrocketed. In January 2008- 68 Beech King Air B200s were for sale. As of November 2008- that number stood at 120- and rising.

At the moment- there seems to be a slight dampening effect from jet downsizing. That $1m Cessna Conquest looks a little better on the balance sheet than a $10m jet. One item worth noting is that there has been an on-again- off-again US government contract for King Air 300s and 350s- and a different contract for the Pilatus. Government sales (to any government) can be hundreds of thousands of dollars higher than normal market.

The downturn is fully developed in the jet resale market. A logjam is growing due- in part- to the gulf between asking prices from the olden days and ridiculous offers. Amazingly- some deals are holding together- though many have fallen apart due to financing and buyer nervousness. Light and mid-size jet prices are at historic lows- and large business jets for sale are almost there.

The Vref Light Jet Index fell 12.8% in the recent quarter - the biggest drop in general aviation. Availability is staggering. January of 2008 saw 22 Beechjets for sale on the market. Now- there are upwards of 50. Cessna Citation Jets for sale grew from 23 available in January 2008 to more than 55 today.

The Vref Mid-Size Jet Index also fell- losing 10.6% in value. At the beginning of 2008- the Citation XLS business jet was one red-hot airplane with only six for sale. Now- according to JETNET/AvData- there are over 20. Hawker 800XPs went from 20 to more than 50 (52 in November 2008). In the recent quarter- large jets took a very much-expected drop- off 12.7% in average value. Newer- long range airplanes which brought legendary premiums only months ago lost millions in value - seemingly overnight. The table included above shows the reason why.

The number one question that we have been asked lately is- 'Is this the worst market you've ever seen?' The short answer is 'Yes.' Never before have we seen such a surplus of inventory coupled with a scarcity of buyers due to global economic malaise. Bailouts have been administered practically worldwide with little noticeable improvement.

If money is not allowed to flow - if it is not borrowed and spent- sooner rather than later- the situation could get much worse. Almost everyone we talked with is expecting most of 2009 to be a difficult year - without significant recovery until 2010. We will- however- say what we've always said- 'Forecasts are guesses.'

Another topic is President Obama - will he hurt or help? It matters little if 'that one' or 'the other one' is in the White House. The U.S. is like a giant super-tanker with a tiny rudder. It is very difficult to change course- or stop.....or start. Right now we are nearing a stop- and everyone is throwing fuel into that engine. The ship will start moving again- but never as quickly as we would like.

For more information- or to view the Vref Indexes referred to within the preceding article- visit www.vrefpub.com or www.vrefonline.com 

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