Pre-owned business aircraft weight-category market trends
This month we provide an update on the pre-owned business aircraft industry market trends before scrutinizing the numbers by weight classifications (MTOW). After more than two years of decline- our expectations had been that 2011 would be another year of correction with high hopes for sustained growth starting in 2012 and beyond.
As you may recall- 2010 showed improvements in pre-owned sale transactions compared to both 2009 and 2008 - however- these gains were the result of overall lower pre-owned aircraft prices to move the large for-sale inventory. The health of this pre-owned market sets the stage for new aircraft orders and we are all anxiously awaiting further signs of improvements.
JETNET reported that the first six months of the 2011 pre-owned market showed early-stage recovery signs. In July this trend continued as JETNET reported double-digit growth (11.2%) in pre-owned business jet retail sale transactions during the first seven months of 2011. Average asking prices in June and July improved by $1.2 million and $2.7 million- respectively compared to 2010.
Two consecutive months of increases in the average asking prices for business jets is a clear sign that the bottom has been reached for average asking price- and that a turn-around is occurring.
Pre-Owned Full Sale Transactions
The 12 Month Moving Total Trend for both the ‘Pre-Owned Business Jets and Business Turboprop Aircraft Retail Sale Transactions’ are illustrated in Chart A covering a period spanning January 2004 through July 2011.
As of July 2011 the Business Jet retail transactions are 8.6% below the peak (set in February 2008) while Business Turboprop transactions are down 23.4% from their peak (also set in February 2008). These both represent rebounds from their 2009 low-ebbs- and are good indicators that the correction process is in motion.
The ‘For Sale’ Inventory
The ‘For Sale’ inventory of Business Jets dropped below the 2-500 mark for only the second time and second month in a row since November 2008. The percentage dropped below 14% to 13.7% in July 2011.
Meanwhile- the Business Turboprop percentage ‘For Sale’ ended at 10.1% of the fleet in July 2011 (teetering on the edge of a seller’s market). This is a positive sign as the inventory ‘For Sale’ is dropping - albeit slowly.
Average Asking Prices for Business Jets for the YTD January to July from 2006 to 2011 show a staggering decline of 26.4% from 2009 at $6.1 million to $4.49 million in July 2011 (Chart B). Business Turboprop average Asking Prices have shown a similar decline starting in July 2007 at $1.504 million and dropping by $207-000 (or 16%) to $1.297 million over a three year period.
‘For Sale’ Fleet Age (Business Jets)
Table A shows the Business Jet fleet age-split for aircraft in operation and ‘For Sale’ in July 2011 compared with July 2006. The aircraft age is split between aircraft that are less than 20 years old- and 21 years and older.
While the total percentage for sale in July 2011 is at 13.7% compared to July 2006 at 12.6%- there has been nearly a doubling of aircraft ‘For Sale’ today that are 20 years or less in age - 1-239- or 10.1% ‘For Sale’ compared to 664 or 7.6% ‘For Sale’ in July 2006.
In reviewing the percentage of aircraft for sale that are 21 years or older the percentages are nearly the same (21.1% in July 2011 versus 20.8% in July 2006). The 21 and older age-group percentages ‘For Sale’ are very high and account for one out of every five on the market.
‘For Sale’ Business Jets (MTOW Category)
Chart C shows the ‘Average 12-month’ view of Business Jet inventory ‘For Sale’ by MTOW from 2006 to 2011. The Light category (10-001-20-000lbs MTOW) accounted for 43% of the total ‘For Sale’ followed by the Medium (20-001-35-000 lbs) at 29%- and then Heavy (35-001 lbs+) at 24% in 2011.
The total ‘For Sale’ inventory showed a large increase of 58% - or over 1-000 aircraft - in 2009 compared to 2008. The Heavy category showed the largest percentage change from 18% to 24% in inventory with the Light category accounting for 52% in 2006 - dropping to 43% in 2011 percentage share.
Pre-Owned Business Jet Full Sale Transactions – By Weight Class
Chart D shows the average 12 month view of business jet ‘Full Sale Transactions’ by MTOW category from 2006 to 2011. There was a large decrease of 39% or 649 fewer sale transactions from 1-669 in 2008 to 1-020 in 2009. There has- of course- been a steady improvement in the full sale transactions since the 2009 low period.
The Light jet category accounted for 50% of the ‘Full Sale Transactions’ in 2006 but dropped to 39% by 2011. The Medium and Large categories each increased by 3% in their percentage share over the same five year period.
Average Asking Prices (By Weight Category)
Chart E depicts a 12-month view of ‘Average Asking Prices’ by weight category from the 12 months ending July 2006 through the 12 months ending July 2011. There was a large decrease in the average asking prices for both the Heavy and Medium categories during 2010 and 2011.
The Light category has shown a steady decline in average asking prices that started one year earlier (in 2009) than the Heavy and Medium category jets. There has not been any further decline in the 2011 average asking prices ending July 2011- suggesting that some stability in average asking prices may have begun.
Pre-owned retail transactions are picking up nicely and business jets are nearly at the 2007 peak levels. For Sale inventories are slowly drifting down as the monthly average asking prices continue to show some signs of stabilizing for the first time in more than two years.
Throughout much of this downturn the Heavy jet category showed much greater increase in the ‘For Sale’ inventory coupled with a large decrease in the average asking prices compared to the other categories. However- there has been a positive increase in the ‘Full Sale Transactions’ in the Heavy and Medium categories since the 2009 recorded lows.
We need to keep in mind that in this report we focus only on pre-owned aircraft. New aircraft deliveries by weight category can certainly paint a different picture.
Ultimately- we believe the closing months of 2011 should continue along the path of correction- and we look forward to more positive news in Las Vegas at the 64th Annual NBAA Meeting & Convention. See you there!