First, we should define what the word ‘recovery’ means. In markets of old, it meant prices were rising so rapidly that one could buy a Bonanza or a Learjet in October, fly it to Grandma’s house for a Holiday feast, then sell it expeditiously — all the while being assured of a decent profit. The very few dealers who are still gutsy enough to inventory airplanes will tell you that owning an airplane and assuming you’ll make a profit can be a scary proposition.
While we may not be in a traditional recovery, it is clear there are bright spots as well as actual upward pressure on some airplanes.
Piston Engine Aircraft
This segment has shown consistent stability since 2010. We understand that one person’s stability is another’s stagnation. However, while we’ve all been craving for a return to a 2007-like marketplace, a few piston singles have crept up in value. Did you know, for example, in the past couple of years mid-1990s vintage A36 Bonanzas have gained more than 5% in value? During the same time period, the average mid-1980s Cessna 182 is up 6%, and the Turbo 210 moved up 8%.
One thing more apparent with each passing quarter is the vast difference between the clean, updated airplane and its neglected sister-ship. One will have a beautiful Garmin G600 panel and a remanufactured engine while the other seems overdue for an appearance on the Antiques Roadshow.
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Turboprop prices may have hit bottom years ago. We still see pockets of ups and downs, but these seem to be based on aircraft condition or short-term demand, such as government contracts. In a ‘long-range jet world’ some are surprised that decades-old Cessna Conquests, Piper Cheyennes and Twin Commanders continue to enjoy a viable market.
We see a healthy market for corporate turboprops well into the future. Not everyone needs to go 6,000 miles at Mach 0.9. In fact, General Electric Aviation’s Dowty Propellers are paving the way for a new generation of turboprops by exploring the effects among the propeller, nacelle and wing. As we all know, the propeller never really left General Aviation.
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The jet market continues in contrary ways. We are always careful to point out that overall inventory is down and activity is up. Then why are so many jet prices continuing to fall? The answer most often given is, “Demand is still not strong enough to support a price floor…for some airplanes.”
Obviously, it’s not fair to paint the entire segment with one broad brush. Aircraft with a highly modified avionics suite can bring top dollar. A Gulfstream G550 (and other jets) updated with CPDLC and ADS-B Out, that is U.S. registered and based, yet is ready to fly anywhere, can be worth much more than an adjacent serial number with no engine program and no upgrades.
The jet market was quite a mix this quarter. We are not only flabbergasted by the drubbing large jets continue to take, but delighted that a few, smaller jets actually moved up in value – a little. And, a few more are reported to have some upward pressure.
|Aircraft Type||Vref Fast Facts|
|Later model Premier I||Prices up a lot|
|Challenger 300||Off again|
|Challenger 604||Finally stable after a sell-off. Slight upward pressure|
|Global XRS||Good deals – steals – continue to happen|
|Most CitationJets||Flat or relatively stable|
|Citation Excel||Tight, with a slight uptick in later models|
|Citation Encore||Prices up for early models|
|Citation Sovereign||Improved market. Some upward potential in early models|
|Falcon 50/50EX||Down again|
|Falcon 900B/900EX||Off moderately|
|Gulfstream GIV-SP||More downward pressure from a soft G300/G400 market|
|Gulfstream GV||Down significantly as activity returns|
|Gulfstream G450/G550||Continue a slow downtrend|
|Gulfstream G650||The only aircraft trading at a premium|
|Hawker 850XP||Prices up again|
|Learjet 45||Relatively stable|
|Learjet 60/60XR||Long downtrend continues|
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2015: A Smarter Marketplace
Another plus for aviation, the number of qualified buyers has increased significantly. In the past six years, according to OxFam, and reported in CNN’s Money the number of billionaires worldwide has doubled. And, it’s no secret that corporate profits have surged.
It should come as no surprise to anyone that we at Vref are bullish on the future of General Aviation, both near-term and long-term. From our vantage point, we have witnessed a successful evolution in aircraft sales. Activity is good and continues to improve, primarily because sellers and brokers continue to get smarter.
Not that long ago, many sellers assumed because the last jet sold a year ago for $12m, the next one should be worth $12m. Buyers rarely seem to have that delusion these days. Now, most brokers are very quick to ascertain a current, real world value. If the airplane hasn’t sold for that $12m asking price after six months, it might not. This realization, more than anything, has pulled our industry back from the brink and into its modern-day recovery mode.
Furthermore, it tells us our global industry can - and will - thrive, no matter what the geopolitical minefield that we call the Global Economy throws our way.