What Is 1Q 2008 Telling Us? A closer look at the pre-owned sales numbers. The first quarter 2008 results continue to look positive for new aircraft for sale but for Pre- Owned business jet aircraft ‘For Sale’- the percentage For Sale- and the Full Sale Transactions there are mixed results compared to the same period for 2007. As you will read later in this aviation article- though- we witnessed similar patterns during the first quarter of 2007. However- this news comes as something of a ...
What Is 1Q 2008 Telling Us?
A closer look at the pre-owned sales numbers.
The first quarter 2008 results continue to look positive for new aircraft for sale but for Pre- Owned business jet aircraft ‘For Sale’- the percentage For Sale- and the Full Sale Transactions there are mixed results compared to the same period for 2007. As you will read later in this aviation article- though- we witnessed similar patterns during the first quarter of 2007.
However- this news comes as something of a surprise after seeing such strong results from new aircraft sales through the first quarter of 2008. We remain a little cautious about the remainder of 2008 with regards to the pre-owned aircraft for sale market segment- especially for the U.S.- as we continue to read about certain sectors of this economy being soft.
One issue on most American minds is the increasing crude oil prices that are over $100 per barrel. In April 2008 Jet-A fuel prices as reported by a Conklin and de Decker survey of 30 major U.S. general aviation airports was at $6.46 per gallon compared to March 2008 at $6.13 per gallon- an increase of 5.4% in just one month.
As we reported in the April 2008 digital edition of World Aircraft Sales Magazine- there is a market shift going on with more of the backlog of orders coming from Non-U.S. markets and it is becoming quite pronounced!
Just how much of this is due to the factors of the US economy and higher fuel prices- or the international pent up demand is unknown but most likely is a combination of these factors. Bombardier recently reported that 67% of its business jet for sale orders came from outside the U.S. last year. Chart A (top right - see PDF) is a good example of this market shift as reported recently by Textron- the parent of Cessna Aircraft Company.
Table A (see PDF) shows that the number of Pre-Owned business aircraft ‘For Sale’ decreased by -7.1% in the First Quarter of 2008 compared to the same period in 2007 according to JETNET Star Reports. The total percentage of aircraft ‘For Sale’ fell to just under the 11% mark compared to 12.6% last year at this same time.
The Pre-Owned corporate aircraft for sale numbers of Full Sale Transactions in First Quarter 2008 versus First Quarter 2007 resulted in a decline of- 4.2%. Also shown in the Table A are monthly transaction comparisons for the respective periods from January through April. The past two months have shown over 20% decline in pre-owned aircraft sales transactions. We believe this warrants a closer look to find out what is behind the change - particularly after reviewing the new aircraft for sale results for the quarter.
In May- GAMA reported the first quarter 2008 results for New business jet shipments- and noted 297 units compared to 211 for the same period last year. This was a 40.8% increase. An interesting side note is that 67 of the 297 shipments last quarter were new VLJs as shown in Table B (top left - see PDF) and if we remove them in the quarterly comparisons- the increase falls to 11.1% from 40.8%.
In Table C1 through C3 (left - see PDF) we have compared the Citation- Hawker- and Gulfstream aircraft by ‘Make’. We are showing these three Makes- because that is where the majority of the reported decline came from in comparing the quarterly numbers of 2008 vs. 2007.
As Table C1 shows- there were 126 more Citation aircraft ‘For Sale’ as of April 2008 and a quarterly a decline of -12.6% - or 39 fewer Full Sale Transactions against the same time period in 2007. The decline in 2008 started in March and has continued into April.
Table C2 shows that there have been fewer Hawker business jet aircraft for sale since January 2008 compared to the first quarter of 2007. The Full Sale Transactions have also declined from January to April compared to the previous year- except for February 2008 when they recorded the exact same number.
After the first four months of 2008- Hawker pre-owned corporate aircraft sale transactions are down by -25% compared to the same period in 2007.
Gulfstream ‘For Sale’ numbers depicted in Table C3 have been on the rise since February 2008 compared to the same period in 2007. Currently the Full Sale Transactions for Gulfstream Pre-Owned aircraft for sale have shown a decline since January 2008- and after the first four months of 2008 are -17.1% below last year.
As shown in Tables D1 and D2- (opposite - see PDF) the only aircraft ‘Make’ to show an increase in the last three months in the Pre-Owned market was Bombardier - specifically its Challenger and Learjet corporate aircraft models.
From the above analysis of Cessna and Hawker Aircraft by ‘Make’- we examined 25 Cessna and 30 Hawker ‘Models’ to determine were the decline in Full Sales Transactions came from. Two Pre-Owned aircraft models from both Cessna and Hawker shown in Table E (below - see PDF) indicate the largest difference in the March 2008 over March 2007 comparison.
The March comparison in Table E (compiled by JETNET)- along with the two consecutive months of declining Pre-Owned Full Sale Transactions gives us a few areas for concern for the market. However- the decline trend includes many models with 1990’s technology or older- so considering the fuel efficiencies and high-tech amenities of newer business jet models today- this trend may continue to affect Pre-Owned aircraft sales.
Our summary includes the sharp reality that March 2008 Pre-Owned Full Sale Transactions started to decline compared to last year and that the trend continued for a second month.
The overall Pre-Owned For-Sale numbers are up significantly by 247 aircraft as of April 2008 even though the percentage of total aircraft in operation that are For Sale has dropped to 10.89% for the quarter from 12.6% as reported in Table A. The Full Sale Transactions are down -9.0% after the first four months of 2008 compared to 2007. This decline- which started during the month of March in the first quarter- unfortunately- has continued into April 2008. We will continue to track and report these market changes in future on-line aviation articles.
For more information:
• Michael Chase is president of Chase & Associates- and can be contacted at 1628 Snowmass Place- Lewisville- TX 75077; Tel: 214-226-9882; Web: www.mdchase.aero.
• Marj DeLong is president of MarketLift- Inc. and can be contacted at P.O. Box 595036 Dallas- TX 75359; Mob: 214-862-8992- Web: www.market-lift.com.
• JETNET can be contacted at 101 First Street- Utica- NY 13501; Tel: 800-400-2298; Web: www.jetnet.com or www.avdatainc.com