Fletcher Aldredge reviews aircraft residual values, sampling some 10-year-old models and comparing how their values have depreciated on today’s used market compared to new.
This month, we take a look at airplane residual values. We are often asked, “Which airplane should I buy? Which one is going to appreciate in value…or lose the least?” We always respond, “Buy the one that best fits your mission…and the one you can afford to operate.”
It is interesting, nonetheless, to analyze which ten-year-old airplanes have retained their value the best. Some are as expected, and others a big surprise. To be clear, all airplanes in this study are 2006 models. The ‘Percentage of New’ is a comparison of the airplane’s original ‘New’ price in 2006 and today’s Used Retail price. It is not a forecast. At www.vrefonline.com you’ll find a study of Piston aircraft. Within these pages, we focus on Turboprop and Jet aircraft only.
Turboprops - Recent Quarter
By far the most stable segment, the average turboprop value was unchanged this quarter. Buyers tend to be very unforgiving. Needy airplanes with run-out engines or less than excellent paint and interior could be well below book.
The winners in the residual value contest (see Table A) are single engine turboprops. The Pilatus is not only the best turboprop for maintaining value, but with a ‘Percentage of New’ at 75%, it topped the entire study. Getting King Air performance while only paying for one engine has served the PC-12 well.
Performance doesn’t always guarantee performance. The very fast, futuristic-looking Piaggio landed at the bottom of the turboprop list. This should come as no surprise to those who follow that market.
Jets - Recent Quarter
The early weeks of 2015 are shaping up to be a continuation of the marketplace of 2014. That is not all bad. For several quarters now some light and mid-size jets have been mustering a minor turnaround. CitationJets appear to have bottomed while the XLS, Sovereign and Hawker 850XP have actually ticked up.
Prices for many large jets continue to erode. The Global 5000, XRS, Falcons and Gulfstreams all extend a multi-quarter downtrend. Why? Supply still exceeds demand in our shaky, scary world.
Cessna should be very proud to have three aircraft in the top five of our jet table (below). It’s difficult to tell whether this is a reflection on the tenacity of Cessna, or the fact that CitationJets fulfil a popular mission at a somewhat affordable price.
Reflecting on Table B, there are two surprises for us. The first is the so-called big iron (G550s/Globals/Falcons). After many quarters of a soft market and declining prices, all remain in the upper half. That’s admirable.
The second surprise, or disappointment, is Learjet: At one time, Learjet was perhaps the best-branded name in aviation. It was synonymous with airplane the way Maytag is with washing machine or Xerox is with copy machine. Yet there it is; the Lear 60, one fabulous machine, almost at the bottom of the residual value list.
The next time someone asks, “How much do airplanes depreciate every year?” the only correct answer is, “It depends.” Clearly it depends on the aircraft, the economy, and the perception buyers, sellers and financiers have of said aircraft. That’s a fancy way of saying, it depends on the marketplace.
With the potential to lose as little as 25% to as much as 75% of its value in a decade there is no formula that can accurately predict residual value.