Fletcher Aldredge is publisher of the Vref Aircraft Value Reference, the industry’s modern price... Read More
The used aircraft market has been stuck in a kind of stop and go cycle since 2009, notes Vref’s Fletcher Aldredge. Prices drop, activity flares up, prices freeze, activity stops. To paraphrase Ronald Reagan, “Here we go again.”
We can talk about robust activity and shrinking inventory, but that would be ignoring ‘the elephant in the room’, namely the continued erosion of prices, especially in the large cabin business jet market. Little did we know just how quickly we would become reliant on a worldwide marketplace.
Several years ago when we touted the emergence of BRIC (Brazil, Russia, India and China), we credited those economies (and others) with helping to pull General Aviation out of the quagmire called ‘The Great Recession’. Some of us quietly thought global demand practically saved the industry, or at the very least gave it a necessary transfusion. What we didn’t know was just how quickly and easily we would become reliant on a worldwide marketplace.
Piston Singles & Twin Indices
A check of the Vref Market Indices for the recent quarter shows only nominal change. Tiny bumps in late model F33A Bonanzas, Cardinal RGs and Cessna 182s moved the Complex Single Index up +0.1%. We’re talking 25-year-old machinery here! Pilots have never been ones to quit on an airplane just because it’s got a little age on it…
Average pressurized twin piston aircraft for sale values lost another 1.9% in the recent quarter. They are still a smart choice and far cheaper to operate than the nearest turbine, but the down-trend is clear.
Regarding the Turboprops for sale, generally speaking it’s “not too bad, not too remarkable” – except for the Pilatus. While most turboprops seem to be cloaked in stability, (the Vref Turboprop Index was basically flat for five consecutive quarters) PC-12s have steadily appreciated.
In the last two years the average PC-12 has gained more than 13% in value. Not remarkable you say? In an industry still feeling the aftershock of 2008, an uptrend of any kind is quite unique!
This might be a good time for some readers to look away... The market is not pretty. This might also be a good time to respond to the individual who asked us not to tell anyone prices are still trending down. Really?! There is not a credible buyer anywhere on Planet Earth who doesn’t already know the market has dropped to a new level…
While the Light Jet segment is steady or nearly flat, Mid-Size and Large Jets had another off quarter. The table below gives some of the particulars.
The takeaway is this: If last year was a good time to buy, this year is even better!
It Always Comes Down to This
Why is this happening and what will happen next quarter, next year? The ‘why’ is the easy part of the question. While many of us consider the US economic recovery to be anaemic, it might stand alone…as a recovery. 2014 was a disappointing year for growth in Europe, BRIC, and other business jet-consuming regions.
According to The World Bank, some of the tepid growth forecasts for many countries have actually been revised downward. The convenience and safety of private air transportation is, and will remain unparalleled. So, what will happen?
The fact that we’ve spoken so many times of the convenience and safety of GA should tell us there will always be buyers in nearly every country with a runway. Will it take a fair price – some would say a discounted price – to attract these buyers? Maybe… Indeed, probably!
One great advantage General Aviation has now (as compared to a decade ago) is the widespread realization we are operating in a free market, practicing free trade. The most encouraging statement we’ve heard in a long time was from a major manufacturer. Last quarter, while discussing the ‘cratering’ of the large jet market, he said, “The market is what the market is.”
We say, “Whatever the market is, demand will be there next quarter and next year — if the price is right.”