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PRE-OWNED AIRCRAFT SALES TRENDS (3Q 2008) - Please refer to View Original Article

Fletcher Aldredge   |   1st October 2008
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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

However you look at it- money is no object!

Just about every conversation ends with something like- ‘The summer’s been slow- but when everyone gets off holiday- and the election is over- then this economy and this market should turn around.’ Those hopeful thoughts are usually prefaced with details of a deteriorating market.

In the case of some business turbine aircraft- like King Air B200s- Beechjets- CJ2s and Citation IIs- the number for sale has doubled in the past year. Gulfstream IVs have tripled in availability. CJ3s and Falcon 50EXs have quadrupled. If someone wants it- money is no object. If no one wants it- money is no object. Seemingly- it doesn’t matter how high the price is for some new or near-new- long range jets. If it’s ready to fly today – it’s sold. And- it doesn’t matter how low the price is for some high-time- older piston aircraft for sale – there are few takers.

The seesawing U.S. Stock Market is providing little direction. Scary news continues to dominate. A pervasive wait-and-see attitude is apparent throughout general aviation. However- we found two positive indicators. As we went to press- runaway oil prices had moderated. There was no way to tell if this was a trend reversal or a lull at that time. Secondly- the Federal government has expressed a willingness to bailout the home mortgage industry to the tune of hundreds of billions of dollars. That has to be a good thing. And remember- if the U.S. government doesn’t help- T. Boone Pickens surely will.

Piston Singles and Twin Engine Airplanes for Sale 
We can count the decent piston markets on two and a half fingers. But- before we do that- this bears repeating: If it’s low time and no-excuses with a new panel- there is demand. However- most piston airplanes remain stagnant- and most dealers report the market as slow to dead. It is amazing to us how many aircraft dealers are doing well- reporting activity similar to last year – maybe as many as one third. They appear to be staving off a recession by concentrating only on the better airplanes and providing a stepped-up level of customer service.

It is a great time to buy a piston-powered airplane – or just about any airplane. Prices for light singles have fallen seven of the last eight quarters. The Vref Light Single Index dropped another 1.3% last quarter. Cessna 152s and other ready-to-go trainers have been almost immune from recession talk- actually gaining value in the last year- however. That’s one of the decent markets.

Complex singles continue to trend down. Average prices in that market have fallen twenty-seven quarters in a row. But dealers report phone activity picked up toward the end of the summer- indicating that prices are beginning to look attractive to buyers. Some downsizing is apparent in almost every segment. Low-time Piper Malibu Mirages have actually become kind of scarce- and mid-to-late 1990s models brought some very strong prices last quarter due to their relative cost of operation.

The Malibu is a lot cheaper to operate than a pressurized twin - and that brings us to the last segment that has been ok – Cessna 414s. Though prices have trended down for years in piston twins (including 414s)- airplanes with total restorations continue to find buyers who are often refugees from turboprops and light business jets. Acquisition costs of these masterfully upgraded 414s and 421s can be as much as an older King Air- but fuel and overhaul costs seem much less daunting.

The Vref Light Twin Index was off 2.3%- while the Pressurized Twin Index fell 3.3% in the recent quarter.

With few exceptions- turboprops have been quiet. Inventory has surged and Beech King Air C90Bs business turboprops for sale are right at that magic 10% availability mark. Above 10% of the fleet for sale can mean a buyers’ market.

From 2004 to the first quarter of 2008 the average King Air B200 gained 44% in value – that’s huge. Now- there are more than a hundred B200s on the market; sales are slow – and average prices are trending down. If it has new everything- then it will sell quickly. Most buyers won’t wait on engines and new P&I though. King Air 300 airplanes for sale prices are stable; while 350s are plentiful and prices down.

Cessna Conquest Is have seen a slight correction due to SIDS expense- while Conquest II activity is improving with prices stable. Mitsubishis- Cheyennes and Twin Commanders have shown little activity- with prices slipping. The Vref Turboprop Index is down 1.2% for the recent quarter - the smallest decline of any segment.

Business Jets for Sale 
For much of 2008- the jet market has ranged from painfully slow to quite good - depending on the airplane. The same still applies- but most sales appear to be taking longer. This can be especially painful to those who- less than a year ago- enjoyed selling jets in just a few hours. Now those same airplanes can take a few months to move.

The light jet segment is off the most- dropping 5% in value during this recent quarter. Buyers: if you’ve been planning on starting a flight department- now is the time. According to JETNET- more than 12% of all Beechjets are for sale (and more are on the way to market). 20% of the Citation II business jets for sale and Falcon 10 fleets are on the market- and 27% of all Westwind IIs can be bought. That makes for a soft market- and prices for all of the above are down.

Are there bright spots? Yes. The CitationJet - relatively thrifty - is attracting some of those downsized buyers. All CJs are above the 10% level of availability- and actual selling prices have adjusted downward - but there is activity. Lear 31A prices are only slightly off due to lots of deals pending.

The mid size jets are only marginally better. Citation IIIs are abundant- with 18% available. Astra SPXs are approaching one in four being for sale- with 22% on the market. Hawker 800As have 14% for sale- and Lear 60s show up with 13% on the market. The Vref Mid Size Jet Index lost 2.2% in average value during the last quarter. A ProLine 21-equipped 800XP- however- shows tight supply with prices up slightly- whereas early 800XPs are soft. Just about every other airplane is selling for less now than it was six months ago.

The Big Iron has slowed down as inventory ratchets up too. Last quarter the Vref Large Jet Index lost 3.8% in value (see www.VrefOnline.com). There are still hot pockets like the Global 5000 and XRS markets. However- actual selling prices are off as much as $2 million dollars for some airplanes from peak prices of less than a year ago.

There are lots of Challenger 601-3As available while early 604s are softening. The early Falcon 2000 corporate aircraft for sale inventory has more than doubled this year with prices down; and the Falcon 50 and 50EX are very soft; Falcon 900Bs show little activity and 900EX prices are slipping in anticipation of more trade-ins. Finally- Gulfstream IVs are quiet with inventory well above 10%; IVSPs are not as flooded- but selling prices are off; and GVs and G550s actually have moderate availability for a change.

So What’s Ahead?
Most dealers we spoke with expect 2008 to end on a high note. Obviously- there are some very serious issues to work through before an economic turnaround is apparent. The Presidential election – and associated dalliances - should be the least of our worries. Fuel prices and personal bankruptcies are the critical issues. Home foreclosures in Iowa and Arkansas probably have little effect on the $60m jet market- but they are closely tied to general economic health – which is tied to the sale of Cessna 182s- King Airs and Westwinds.

More information from www.vrefpub.com

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