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Business Jet Market Overview - December 2018

As another big year in Business Aviation draws to a close, what is the condition of the new and used jet and turboprop sales markets? Rolland Vincent reviews the latest trends and indicators…

Rolland Vincent   |   3rd December 2018
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Rolland Vincent Rolland Vincent

Rolland Vincent is President, Rolland Vincent Associates. He has almost 30 years of experience...
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As another big year in Business Aviation draws to a close, what is the condition of the new and used aircraft sales markets? Rolland Vincent reviews the latest trends and indicators…
 
 
The month of December is upon us once again, and with it hope for a successful year-end as aircraft sales and marketing teams push the throttles all the way forward in the race to the bell on December 31.
 
Our expectation is that this year will end with the strongest orders for new business jets in more than a decade, as measured in the volume - but especially in the value - of transactions.
 
We further expect that 2018 will be the year that the ‘Big Five’ business aircraft OEMs (Bombardier, Dassault, Embraer, Gulfstream and Textron) collectively report book-to-bills above 1-to-1, a bellwether indicator that demand and supply forces have finally swung back into balance. [Note: A book-to-bill of 1-to-1 implies that new orders are exactly matched with new deliveries in a given period.]
 
Order backlogs at the Big Five have finally stabilized after consecutive years of decline, with at least a couple of the competitors recently announcing modest Year-over-Year (YoY) increases. This is good news indeed, but likely not yet enough to cause leadership teams to push their production rates upwards just yet.
 
 
Solid Used Jet Sales

Sales of used business jets were solid through the first half of 2018, keeping pace with the almost torrid pace of 2017 when more than 2,750 retail sales and leases were recorded by JETNET.
 
These transactions were off about 10% YoY in the July-September 2018 period, however, which we believe reflects the diminished quality/long-in-the-tooth status of the overall inventory, and the limited time left in the year to both buy and sell an aircraft in order to take full advantage of the still-new US tax and depreciation laws.
 
With several new aircraft certification programs in progress, anxious buyers and brokers are no doubt eagerly awaiting a fresh pipeline of trade-in aircraft to prime the used jet supply pump once again.
 
With about half of the existing for-sale business jet inventory now aged more than 20 years, there is little doubt that the used market has now begun to slow down, if only recently.
 
Are you desperately seeking a late-model, one-owner, N-registered Cessna Citation X, Citation XLS+ or Citation Sovereign+ that was only flown on Sunday and hangared every night? Are you keen to put pen to paper and close on a relatively new big cabin Bombardier Challenger 605? As they say in Wichita, Montreal and places in between, ya’ll come back later… (et bonne chance, mon ami).
 
The reality is that aircraft brokers and dealers have been scouring every corner of the planet in search of the best available inventory, but it’s clearly become more difficult to find the match that keeps both parties in the transaction feeling like they’ve done well.
 
 
North America-Centric

Pretty much anyway you look at it, the worldwide business jet market remains very North America-centric. In fact, the based fleet of business jets in the US and Canada surpassed 14,000 aircraft at the end of Q3 2018, an all-time high, representing 65% of the world total.
 
The latest JETNET iQ forecast of business jet deliveries and retirements projects that North America’s share will decline only slightly over the next 10 years, reflecting the ongoing strength and resilience of the North American economy.
 
Through mid-November 2018, JETNET records indicate that about 59% of new business jet shipments year-to-date have been to customers based in North America.
 
 
Popular New Jet Models

At press time, the Gulfstream G650/G650ER was the most delivered business jet worldwide in 2018, a remarkable feat for an aircraft program at the top end of the market. By mid-November 2018, there were already 325 Gulfstream G650/G650ER jets in service based in 40 countries, with the program averaging almost 55 deliveries per year since entry-into-service in 2012.
 
Through mid-November 2018, the Bombardier Challenger 350 and Citation Latitude were in a neck-and-neck contest for bragging rights as the most delivered Mid-size business jet of the year, while the perennial volume leader in the Light Jet segment remains the Embraer Phenom 300/300E.
 
The much-anticipated General Aviation Manufacturers Association (GAMA) aircraft shipments report for Q3 2018 indicated that there were 403 new business jet deliveries in the first nine months of 2018, down 4% YoY, excluding the single-engine Cirrus SF50 and twin-aisle Boeing airliners.
 
We expect that OEMs will be very busy in Q4 2018, taking in year-end orders and completing and delivering aircraft right until the December 31 year-end deadline. Our latest forecast is that 2018 business jet shipments will come very close to matching, and may even slightly exceed 2017’s totals, although this depends to some extent on the timing of certification, entry-in-service, and production ramp-up of several new programs including the Citation Longitude, Global 7500 and Gulfstream G500.
 
 
In Summary

With so few late-model business jets on the used market, buyers are wise to consider one of the many new models on offer from the various OEMs, most of whom have reserved at least a few unsold delivery positions in the hope of closing year-end deals.
 
Turning these late-in-the-year orders into actual deliveries in just a few weeks is no small feat, and one that is indeed worthy of year-end celebrations across the industry. Let the sales bells clang!
 
MI www.navigating360.com
 
 
 
New Jet Manufacture at Dassault Falcon
 
Honeywell & JETNET iQ Give New Jet Delivery Forecasts

Honeywell and JETNET iQ released their latest forecasts of business jet deliveries for the coming decade. Honeywell expects around 7,700 jet shipments worth ~$251bn between 2019 and 2028, while JETNET iQ projects 7,807 aircraft between 2018 and 2027…
 
The outlook from Honeywell proved very similar to last year’s. For the seventh year in a row its forecast represents a disappointment to those seeking improvements in the market.
 
While the company projected that some improvement could be seen next year, it forecast the same last year - a prediction that clearly did not materialize. This was partially the result of delays to new aircraft programs, it suggested.
 
Honeywell’s forecast figure for sales of around 7,700 jets worth approximately $251bn between 2019 and 2028 excluded Bizliners and Very Light Jets. The company said Bizliners would number approximately 200 additional units (worth ~$19bn) but it offered no estimates for Very Light Jets.
 
Those with good memories will notice that this year’s 10-year forecast number is significantly different to last year’s (when Honeywell projected 8,300 airplanes worth $249bn would be sold by the end of 2027).
 
Previous forecasts spanned eleven years, incorporating the current year plus the following ten. Honeywell now only looks at the upcoming ten-year period.
 
While this offers no basis for comparison against last year, because we don’t know what last year’s numbers were, Honeywell asserts that this year’s ten-year number is around 2% higher (in dollars), and 1% higher (in terms of units) than last year’s.
 
According to Honeywell, this year’s jet sales will total 630-640 units. If that prediction is accurate, this will be the lowest jet sales total since 2004 (592 units). Honeywell projects 2019 should see “high single digit growth” in delivery levels, however, supported by production ramp-up on new models entering service at the end of 2018 and in early 2019.
 
Specifically, Bill Kircos, vice president of global marketing for Honeywell Aerospace, said the company expects “an eight to 10 percent higher delivery level in 2019 as the industry transitions to new models in a better used aircraft market environment,” which could put deliveries for 2019 in the 690-710-unit range (approaching levels not seen since 2015).
 
 
JETNET iQ Prediction

Since 2011, JETNET iQ has been gathering data and analyzing the market. JETNET iQ updates this forecast quarterly, with the latest version being released in conjunction with Honeywell’s.
 
For either Honeywell’s or JETNET’s forecast (for a total 7,807 aircraft between 2018 and 2027) to prove accurate, the overall market for business jets is going to need to accelerate markedly. Honeywell’s number supposes an average annual market for the next 10 years of 770 aircraft a year, while JETNET’s number requires an annual market of 781.
 
According to Honeywell, the trend for larger cabin aircraft is likely to continue, with 62% of aircraft ordered (totaling 87% of the billings) expected to be in the Large Cabin Jet category. Interest in Large Cabin Jets is higher in 2018 than in previous years, observes Honeywell, which says Mid-size Jets should account for 10% of sales (7% of billings) while Small Jets are expected to make up 28% of the market (but only 6% of billings).
 
 
New Jet Manufacture at Embraer
 
Regional Demand

By region, Honeywell expects 61% of sales in the next five years to be in North America; 16% in Europe; 12% in Latin America; 7% in Asia/Pacific Rim; and 4% in the Middle East.
 
The European number represents a 33% increase over what Honeywell projected in 2017, although only 10% of the European purchases are expected next year, as they will be impacted by Brexit negotiations and slow economic growth in the EU, suggests Honeywell.

In North America, some 36% of operators expect their purchases over the five-year period to come in the first two years, down 3% from 2017 but still above the 30% worldwide average.
 
The purchase plans of Latin American operators are down by seven percent from last year despite a recent uptick in the Brazilian market. Purchase expectations are down in Mexico, however, perhaps related to uncertainty over continued participation by the United States in the North American Free Trade Agreement (NAFTA).
 
Meanwhile, purchase expectations in Asia are at their lowest level in five years, impacted by exchange rates and geopolitics.
 
Worldwide, 14% of purchases are expected to come by the end of 2019 with an additional 40% in the two years that follow. Honeywell says 20% of its survey fleet is expected to be replaced or added to in the coming five-year period.
 
 
Utilization Forecast

JETNET iQ’s forecast presents a lot of interesting data that is not addressed in the Honeywell forecast. Among the factors listed in the JETNET iQ forecast are data on business aircraft utilization, as well as reasons that drive increases or decreases in utilization.
 
JETNET iQ also has a measurement for “market optimism” which it defines as the net difference between the percentage of respondents who believe the industry is past its low point in the current business cycle, and those who believe the low point is still ahead.
 
According to JETNET iQ, optimism that we are past the low point has now reached 55%, compared with only 28% two years ago. Net optimism is also higher in North America and Europe than in the rest of the world, it says.
 
 
A Word on Recruitment…

In a factor increasingly affecting Business Aviation, more than 67% of JETNET iQ respondents worldwide agreed or strongly agreed that they are experiencing difficulty recruiting or retaining aviation-related staff, including pilots, mechanics and technicians. The total was highest in North America, where 72% agreed or strongly agreed, and in Europe (60%).
 
MI www.honeywell.com and www.jetnet.com
 
 
 
Asian Business Aviation Review
 
Asian Sky Group: Dramatic Q3 Market Changes

In its recent Asian Sky Quarterly report, Hong Kong-based Asian Sky Group (ASG) notes the business jet market in Asia-Pacific has changed dramatically in Q3 2018 from the beginning of the year…
 
Jeffrey Lowe, ASG managing director, explains: “Pessimism is slowly on the rise overall across the region, but nowhere more dramatically than in China where optimism has plummeted by a whopping 46%. This is a direct result of the US-China trade war and worsening economic conditions impacting sentiment in China.
 
“We have also witnessed an uptick in inventory values and a slowdown in sales. More aircraft are on the market this quarter, a probable result of year-end opportunists, and some distressed sellers mixed-in too,” Lowe adds.
 
“Regarding the slowdown in sales, we need to remember an awful lot of aircraft were sold off through the first half of the year, especially good aircraft at good prices, of which there are simply fewer now.”
 
MI www.asianskymedia.com
 
 
Avinode: Real Evidence of US BizAv Recovery

Harry Clarke, senior commercial analyst at Avinode Group, says the North American Business Aviation industry is finally recovering after many difficult years.
 
“We are seeing real evidence, not just hope, of Business Aviation genuinely fighting back – globally, in Europe and, critically, in the key market of North America,” says Clarke.
 
“We’ve been analyzing flight requests submitted through Avinode [for the period 14 August 2017 – 14 August 2018, compared to the previous 12 months] and the results are very encouraging.
 
“The growth shown reflects both increased industry activity and increased use of Avinode. Our data reveals, for example, all the leading North American destinations are enjoying increased demand for private air charter traffic.”
 
Every airport in the top 10 most-requested North American destinations has shown YoY growth in demand. Highlights include McCarran (up 75%), Teterboro (up almost 100%), and Van Nuys (up 103%).
 
Likewise, every airport in the top 10 for number of requests (from passengers flying intercontinentally into North America), has shown YoY growth in demand, with Teterboro up 56%, and Opa locka Executive up 140%, among the highlights.
 
“We are seeing rising numbers of charter requests for large-cabin, long-range and ultra-long-range aircraft,” Clarke says. “A sense of renewed and justified optimism is building throughout the industry. Not only are we watching statistical growth in Business Aviation, we are also seeing critical changes in the way the industry operates.”
 
Clarke believes the question of whether customers will book private charter flights online has been answered. “They do. As such, mobile phones will undoubtedly play an increasingly important role in Business Aviation and I expect to see a growing number of bookings being made through smartphone apps.”
 
MI www.avinodegroup.com
 
 
 
Bombardier Global 6000 jet
 
Is Financing Driving the Shift to Larger Aircraft?

Analysis from Global Jet Capital reveals the important role financing is playing in driving the growth of Business Aviation. But how far is it driving a trend towards larger aircraft?
 
Since the beginning of 2016, Global Jet Capital estimates that there have been more than 8,600 new and used business aircraft transacted around the globe, with the value of financing used to support those purchases totaling almost $23bn. Notably, over 60% of that financing has been directed towards acquisitions of new and used large/heavy aircraft.
 
This financing has helped increase the proportion of larger aircraft within the global fleet, the company suggests. Since 2016, the total number of mid-sized aircraft around the world has fallen by 8% (415 airplanes). This number corresponds almost exactly with the increase in the number of larger models, the heavy/large jet segment having grown by 419 aircraft (a 6% increase).
 
As the average purchase value of new aircraft in this larger segment exceeded $48.2m between 2016-2018, compared to an average of $12.5m for the balance of the market, this focus on larger aircraft provides a significant boost to the overall industry.
 
The overall value of deliveries of new large or heavy jets since 2016 totals $26.4bn, compared to a total figure of $14.3bn for the balance of the market.
 
Dave Labrozzi, chief operating officer at Global Jet Capital, explained: “The figures provide a clear focus of where we are seeing expansion in the sector, and the importance of financing in supporting industry growth. The flexibility afforded by operating leases is especially beneficial in helping clients move on to higher-value, new model aircraft without having to remarket their existing aircraft.”
 
Global Jet Capital estimates that operating leases to the value of over $5bn are held against new and used aircraft transacted since 2016. The company says it has seen a significant increase in enquiries for operating leases, with clients attracted by advantages including flexibility and reduction in residual risk. Global Jet Capital expects to see growth in operating leases over the coming five years, helping drive further aircraft acquisition.
 
MI www.globaljetcapital.com
 
 
AMSTAT: Used Market Shows Continued Improvement

A review of the business jet and turboprop markets shows that aircraft resale transactions for the first eight months of 2018 are mostly above levels seen in the first eight months of 2017.
 
Among the Heavy Jets, 6.4% of the fleet turned over compared to 5.5% in 2017 and 5.0% in 2016. This increase is reflected across all Heavy Jet age segments, with the biggest YoY improvement coming in the mid-age segment, which increased from 6.3% to 7.6% of the fleet transacted (January through August).
 
In the Medium Jet group, 7.0% of the fleet turned over, compared to 6.7% in the first eight months of 2017 and 5.7% for the same period in 2016. The YoY growth was closer in the various age segments, except the older Medium Jets where the percentage of active fleet sold in the first eight months increased from 6.0% in 2017 to 7.0% in 2018.
 
The Light Jet group showed smaller changes in transaction activity with 6.6% of the fleet turning over so far this year, the same percentage as for the same period in 2017. This flattening was mirrored by the respective Light Jet age segments.
 
In the Turboprops, 5.4% of the fleet turned over, which was a modest increase from 5.1% in the first eight months of 2017. The various Turboprop age segments also showed modest increases YoY.
 
 
Contracting Inventory

Today, 6.8% of the Heavy Jet fleet is for sale, the lowest percentage since 1998. All Heavy Jet segments show lower percentages for sale compared to a year ago.
 
Similarly, the percentage of Medium Jets for sale has fallen from 8.8% in September 2017 to 8.5% today. Within this group, the newer Medium Jet segment has 4.6% for sale, the lowest percentage in this segment since 2008.
 
In the Light Jets group, 10.8% of the fleet is for sale, down from 11.5% a year ago. All Light Jet age segments saw YoY inventory contraction except the older Light Jets which remained largely unchanged.
 
The percentage of Turboprops for sale has also contracted YoY from 8.0% to 7.5%. However, it is worth noting that the inventory of Turboprops for sale in all age segments has increased modestly over the past few months.
 
 
Cessna Citation Sovereign+
 
Upbeat Seller Sentiment

In the Heavy Jet category the average asking price for newer models has increased 17% YoY due (in part) to some recent high-priced additions to the market.
 
Within the Medium Jet group, the newer segment is the only Medium Jet age segment that has seen increases YoY (13.5%) and YTD (4.6%).
 
The Light Jet segment has seen noticeable increases in the newer age segment (up 5.2% YTD) and mid-age segment (up 6.9% YTD). The newer Turboprops segment has also seen an increase of 6.8% YTD, whereas the mid-age and older segments have shown little change.
 
MI www.amstatcorp.com
 
 
Flight Activity - North America

October flight activity in North America reversed the negative trend of September, due mainly to an increase in Part 91 and fractional flying.
 
 
North American Flight Activity Trends, October 2018
 
TRAQPak’s review of Year-over-Year (YoY) flight activity indicates that October 2018 saw an increase of 0.9% over October 2017. Fractional activity posted the largest increase while Part 91 flying was also up. In terms of aircraft categories, Mid-size Jets posted the largest increase from 2017.
 
 
Month-over-Month

Month-over-month activity increased 8.9% from September 2018. Results by operational category were all positive for the month, with the Part 91 segment posting the largest monthly increase. Aircraft categories were all positive as well, with Mid-size jets posting the largest increase.
 
 
November Forecast

TRAQPak analysts estimate there will be a 0.2% decrease in overall flight activity YoY in November 2018.
 
MI www.argus.aero
 
 
Flight Activity - Europe

There were 77,197 Business Aviation departures in Europe during October, up 5% YoY, according to WingX Advance. Business Jet activity accounted for a 60% share of the flights for October and is up 4% YoY versus October 2017.
 
Overall, European activity is up by 3.2% YTD 2018. Most of the top six markets had some growth this month, with Germany adding the most (flights up by 8%) taking the YTD trend to +6%. Italy was flat, while UK departures were up 3%, and France and Switzerland gained 5%. Flights from Spain were up by 11% YoY.
 
Additionally, there was 7% growth in Czech Republic, 9% in Greece, 12% from Netherlands and 24% growth in Finland. Among the declines in October were Turkey (4% YoY, -5% YTD) and Poland, down 10%.
 
Of note, there was robust growth in Business Aviation flights within Europe which were up by 4.9% YoY during October. The transatlantic market is coming back, up 10% against a negative YTD trend of -1%. Arrivals from Middle East were down 2%, but from Africa they were up 15% YoY.
 
Richard Koe, managing director of WingX Advance, comments: “[Growth for October] would be much higher but for the collapse in VLJ activity since the demise of Blink. Super Mid-size activity was up 12%, and Ultra-Long-Range flights were up 9%, with close to 20% growth in AOC flights on these aircraft.
 
“Despite this, most of the market growth came on short trips, and Small Jets had the most overall demand, with Light Jet Charters up almost 10% in the last 12 months,” reported Koe.
 
MI www.wingx-advance.com
 
 
JSSI Flight Index Points to Sustained Growth

The JSSI Business Aviation Index for Q3 2018 has been released and shows that, for the second consecutive quarter, average flight hours exceeded 30-hours and reached levels not seen since 2008…
 
“This positive trend in aircraft utilization demonstrates a high level of confidence in current economic conditions,” notes Neil Book, president and CEO of JSSI. “The continued growth this year, with back-to-back quarters of flight-hour averages not seen since 2008, and a YoY increase of 5.7%, is a testament to today’s demand for private travel.”
 
The JSSI Business Aviation Index tracks and reports on the global flight activity and utilization of business aircraft, including jets, turboprops and helicopters. Key findings in the Q3 2018 data include:
 
  • Average aircraft utilization of 30.34 hours for Q3 2018, the first time in more than a decade that flight activity has averaged over 30 hours in back-to-back quarters.
  • The helicopter industry continues to rebound in 2018, with a 21.9% increase in average flight hours in Q3.
  • Of the nine industries analyzed, six reported an increase and three reported a decrease in Quarter-over-Quarter (QoQ) flight activity. The largest growth was in the Healthcare sector, which reported a 7.9% increase in flight activity compared to Q2 2018.
  • The largest YoY decreases in flight activity were seen in the Manufacturing sector, with an 11.8% reduction.
  • Seven key regions are sampled in the index. Significant QoQ increases were reported in the Middle East (+39.4% in average flight hours) and Africa (+37.6%). South America also experienced an 11.4% increase.
  • Decreases were seen in Central America (-15.7%), Asia-Pacific (-8.7%), and Europe (-1.4%).
  • North America flight hours increased 1.6% QoQ and 6.8% YoY.
  • Average flight hours increased 5.7% YoY.
MI https://jetsupport.com/insights/
 
 
 
Cessna Citation Latitude
 
JETNET: Marked Drop in YTD 2018 Transactions
 
JETNET’s latest Market Summary has reported that between January-September, 2018 there were 6,781 pre-owned jets and helicopters sold, a decrease of 681 (or 9.1%) in the number of transactions compared to January-September, 2017
The noted downturn occurred across all market sectors. Commercial airliners and commercial turboprops showed the largest declines at 16.1% and 13.1%, respectively.
 
Meanwhile, fleet for sale percentages for all market sectors (except Piston Helicopters) were down when comparing September 2018 with September 2017, with a drop of 7.5% (nearly 500 aircraft) overall.
 
Business Jets showed the largest decline in the percentages of aircraft for sale, standing at 8.9% compared to 10.4% last year at this same time – a drop of 1.5 percentage points. The decline in Business Jets for sale is “very good news,” according to JETNET, “and clearly shows we are below the 10% mark and firmly in a seller’s market.”
 
Inventories of pre-owned Business Jets for sale have decreased and are now below the 2,000 mark, at 1,934.
 
Business Jets saw a decrease of 1.6% in pre-owned sale transactions (including leases) in the first nine months of 2018 compared to the same period in 2017. Also, Business Jets are taking 27 fewer days to sell, 285 days on average, compared to 312 days last year.
 
Business Turboprops average days on the market, meanwhile, dropped by 27 days compared to last year, while sale transactions declined by 0.9%.
 
Pre-owned Business Jet, Pre-owned Commercial Jet, and Turbine Helicopter market sectors have surpassed the 1,000 mark for YTD sales. These aggregate to 65% of the total compared to the other market segments.
 
MI www.jetnet.com
 
 
In Service Aircraft Values & Maintenance Condition

Asset Insight’s market analysis covering 93 fixed-wing models and 1,589 aircraft listed for sale on October 31, 2018, revealed a 2.3% decrease in the tracked inventory fleet (36 units). So how did the fleet fare, specifically…?
 
Medium and Small Jet inventories increased 3.7% and 5.5%, respectively; Large Jet inventory remained unchanged; and Turboprop inventory decreased 2.4%.
 
With inventory scarce for younger, low-time Large Jets, and Asset Quality at a 12-month peak for Small Jets, the two groups pushed the Asset Insight (AI) tracked fleet’s average Ask Price higher during October.
 
 
Inventory Fleet Maintenance Condition

Large Jet transactions of mostly younger airframes increased Maintenance Exposure for the remaining inventory, while Medium Jet transactions were of mixed asset quality. Small Jet trades and fleet additions helped improve their inventory figures, while buyer focus on lower quality Turboprops – presumably due to seller pricing concessions – helped improve that fleet’s available inventory statistics.
 
Business Jet Fleet Maintenance Condition - October 2018
Overall, the AI tracked inventory posted the following figures:
 
The Quality Rating remained within the ‘Excellent’ range, improving to 5.344 (another 12-month best), on a scale of –2.5 to 10. This change was due to a reduction in both the number of upcoming scheduled maintenance events and their average cost, according to Asset Insight.
 
Not surprisingly, Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) improved, albeit by a nominal amount, with the figure coming in at just above the 12-month lowest (best) Exposure of $1.379m, a clear signal that upcoming maintenance events are expected to be less expensive.
 
 
Maintenance Exposure to Ask Price (ETP) Ratio

The ETP Ratio is a useful indicator of an aircraft’s marketability. It is computed by dividing the asset's Maintenance Exposure (the financial liability accrued with respect to future scheduled maintenance events) by its Ask Price.
 
Business Jet Model ETP Ratios - October 2018
 
‘Days on Market’ analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s time on the market increases, usually by more than 30% and, during Q3 2018, assets whose ETP Ratio was 40% or more were listed for sale nearly 34% longer (on average) than aircraft whose Ratio was below 40% (280 versus 374 Days on Market).
 
Asset Insight’s October analysis revealed that 50.6% of all tracked models and 60.0% of the tracked fleet posted an ETP Ratio above 40%.
 
The tracked fleet’s ETP Ratio decreased (improved) in October, for the second consecutive month, registering 65.1% versus September’s 67.1%. Turboprops again accounted for the lowest (best) ETP Ratio, at 49.1%. Large Jets followed at 62.7%; Small Jets posted a 12-month best (lowest) figure at 63.4%; and Medium Jets improved marginally to 77.5%.
 
 
Market Summary

With inventory asset quality at a 12-month high and Maintenance Exposure at a near 12-month low (best), it would be difficult to conceive a better environment for aircraft trades, especially during Q4 2018, traditionally the peak transaction period.
 
Higher asset quality potentially offers sellers the opportunity to optimize their investment’s value. With some buyers demonstrating a willingness to pay more for higher quality aircraft, the next two months should be interesting. The challenge for buyers, as always, is to distinguish between ‘low price’ and ‘good value’.
 
 
Large Jet Fleet Condition - October 2018
Large Jets: Inventory figures remained unchanged for this group, as did asset quality. However, Maintenance Exposure increased (worsened) to a 12-month high, while Ask Price increased 5.3%.
 
This apparent conundrum can be explained through the ongoing pricing dichotomy whereby young, low-time models are able to command a premium, while older aircraft are unable to transact at anywhere near what most sellers are willing to accept for their asset.
 
 
Medium Jet Fleet Condition - October 2018
 
Medium Jets: The tracked fleet’s inventory increased by 18 units in October. Transactions were of mixed asset quality, and the available fleet is now offering aircraft that have fewer maintenance events upcoming, while the average cost to complete those events increased by 1.3%. Ask price decreased 1.5%, and the group’s values are down 16.4% this year.
 
Considering the number of sellers competing for buyer interest, Asset Insight says it does not anticipate that prices will dramatically recover in the near future.
 
 
Small Jet Fleet Condition - October 2018
 
Small Jets: Inventory increased by 25 units, and this group is poised to experience a very strong Q4. Asset quality and Maintenance Exposure posted record best and 12-month best figures, respectively, primarily due to the lower cost of upcoming maintenance events.
 
Sellers are seeking to capitalize on this value, with Ask Prices rising 7.0% to a 12-month high. “There are some great deals to be had within this group, assuming buyers understand their target asset’s current maintenance status and future event costs,” says AI.
 
 
Turboprop Fleet Condition - October 2018
 
Turboprops: Assets carrying a lower than average Quality Rating were the ones primarily transacting in October, as the AI tracked fleet’s inventory decreased by seven units. The group’s marketability figures are quite strong, featuring the lowest ETP Ratio among the four groups, along with a 12-month low (best) Maintenance Exposure due to lower cost for near-term maintenance.
 
“With average Ask Prices remaining flat, serious buyers are advised to move quickly, as high-quality aircraft are unlikely to last long during the fourth quarter rush to close,” notes the company.
 
MI www.assetinsight.com
 
 
 
Read the latest AvBuyer digital edition here

Read more about: Business Jet Maintenance | Turboprop Maintenance | Used Aircraft Sales Trends | Used Jets for Sale | Used Turboprops | Turboprop Market Analysis | New Jet Shipments | New Jets to Market | Rollie Vincent

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