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As we moved into the Summer of 2010- there had never been a market so fractured- with so many ups and downs. Or- does it just seem that way after a dismal 2009- when everything raced toward the bottom – together? There are numerous influences- positive and negative- and each one is a worthy headline.

Fletcher Aldredge   |   1st July 2010
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Fletcher Aldredge Fletcher Aldredge

Fletcher Aldredge is publisher of the Vref Aircraft Value Reference, the industry’s modern price...
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Pre-Owned Aircraft Sales Trends
Headline-worthy influences create many ups and downs in a fractured market.

As we moved into the Summer of 2010- there had never been a market so fractured- with so many ups and downs. Or- does it just seem that way after a dismal 2009- when everything raced toward the bottom – together? There are numerous influences- positive and negative- and each one is a worthy headline.

Let’s start with the most important - ‘Exports Revive GA’. For years- we have thought pitiful airline service was one of the best drivers of general aviation. Though the airlines continue to send disgruntled customers our way- it is the robust export market that has helped breathe life back into everything from Cessna 182s to Gulfstream G550s. As offshore economies recover and grow- the U.S. remains the best source for private aircraft.

‘Personal Wealth Staggering!’ It is true that the personal savings rate in the U.S.- Japan and elsewhere is not what it should be. However- for a certain upper percentile life has never been better. Aircraft dealers estimate that nearly 90% of today’s transactions are sans loan. This is just as true for a $500k Cirrus SR22 as it is for a $50m Global Express.

That Wealth headline at least partially offsets one of the big negatives in the current market: ‘Lending Standards Remain Tight’. Potential buyers- not in that upper percentile- continue to complain loudly about higher down-payments and other restrictions which keep them out of the market.

‘Huge Underclass Confounds Market!’ The large number of repossessed airplanes continues to make the back-end of the elephant seem pretty bad. Fortunately- today’s buyer is not going in blind – in fact- most are more knowledgeable than ever. A professionally marketed- well-maintained airplane can easily be worth 20-30% more than a derelict- or one that is perceived as such.

By the time a buyer makes an offer on a Cessna Cardinal RG or a Falcon 900- he or she has probably inspected a dozen of them- and flown four or five. Most of today’s buyers can tell the difference between a good value and a cheap airplane with a cover-up paint job.

After a decade of falling prices- eager buyers have moved in and prices are moving up. The Vref Light Single Index jumped 4.4% in the recent quarter. Complex Singles gained 2.6%- up three quarters in a row. In any other economy- we’d call that a trend. However- there is no way to tell how future buyers will adjust to a market that has clearly moved off the bottom.

A Neanderthal cockpit in an unbelievably well-engineered- well made airframe describes the typical 20 (or more)-year-old piston single. Thank you Walter Beech- Clyde Cessna and William Piper for designing and building airplanes that outlived you all- and will probably outlive most of us.

It’s true- many are in need of a digital makeover – to say the least. However- these old airplanes (if they were cars could easily get a historical plate) represent some of the best values in the industry. For the price of a dolled-up SUV ($60k)- you can buy a nice Beech Sierra- a Cessna 182- an older 210- or Mooney Ranger- a Piper Archer- an Arrow- or half a new LSA. Any of these will easily travel twice as fast as a Cadillac Escalade- and you might be able to avoid that center seat on ContiUni Airlines a little more often.

The rising tide did not float all boats- however. If an aircraft is too needy – poor paint- damage and ancient radios – it’d better be really cheap.

We’ve thought that before – back in 2007- 2008- and again in 2009. The upward movement is tiny- but noticeable. The average piston twin has steadily lost value in nearly every quarter since 2001- with only a slight bump from the housing bubble. Prices were hammered due to fuel and maintenance costs.

In the recent quarter- the Vref Piston Twin Index gained 1.6%- while the average Pressurized Twin moved up 1.5%. Most dealers still report the piston twin market as slow. However- Beech 55 Barons- late model Cessna 340s and 414s- older Piper Senecas- and Aztecs appear to have moved off the bottom. Again- the rough and run-out airplanes are a tough sell.

Another way to phrase it is ‘stability’. After settling to an all-time low- the Vref Turboprop Index has stayed there for one year. With steadily increasing activity- there is the expectation of higher prices. However- the horde of inventory must thin out before any real price increase is realized. King Air B200s- one of the benchmark turboprops- still has 12% of the fleet for sale. There has been little change in that percentage for several quarters.

Dealers report good activity. A few say they’ve never been busier. There is a certain urgency now to buy at the bottom. In some markets (Bombardier Global 5000s- late model CitationJets- Citation XLSs- and early Lear 45s) most of the low hanging fruit has been picked. The ‘must sells’ are much less common- and owners are sticking closer to asking price. Most of the jet market continues to be price sensitive.

The Vref Light Jet Index lost 1% in the recent quarter. Mid-Size Jets fell 4.7%- while older Large Jets dropped 7%. Activity is happening- but clearly at a price. In some markets (Beechjets- Challenger 601s- Falcon 50s- GIIIs and GIVs- Citation 650s- and Citation Xs)- a slashed asking price is still the best way to attract buyers.

The general consensus is; yes- we have. However- there are way too many airplanes for too few real buyers to sift through. Total inventory levels are only down about 2% from early last year. And- then there is still the lending issue. The perception on the street is that money remains too tight.

Finally- the issue that trumps all others is The Economy. When the Stock Market had its 1-000-point hiccup a few weeks ago- the aircraft resale market got acid reflux disease – thankfully just for a day. At this early stage of the recovery- consumer confidence is very easy to shake.

More information from
www.vrefonline.com or www.vrefpub.com

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