Pre-Owned Update: Pre-owned market remains strong
Activity on the pre-owned front has remained strong through the second quarter, after hiccuping earlier in the year. Between December last year and January this year, inventory increased by 45 aircraft, but since January through mid-July inventory has climbed by 90 aircraft, a far lower average monthly increase. Many in the industry view the increase in available pre-owned models as a rebalancing of inventory after the surge of buying that has defined the last few years.
Manufacturer backlogs have likely played a role in keeping used inventory growth in check. As lead times extend, sellers of aircraft positions command premiums for soon-to-deliver aircraft. Positions on G550s, Sovereigns, CJ3s, Challenger 300s and others remain in high demand despite high fuel prices and higher interest rates.
While aircraft positions enjoy active trading, so too do late-model, low-time aircraft of all variants. Consider the sparse offerings across the board on some large-
category aircraft. To date, the combined production runs of the Airbus ACJ, BBJ, Global Express, GV and Falcon 900EX total 623 aircraft, yet only 14 are available on
the used market today.
The time on market is impressive, with two of the five–the Global and BBJ–averaging fewer than 100 days and the Falcon 900EX fewer than 50 days. In the last six months, the GV and Global Express have traded at an average rate of one per month. In the same period, two BBJs and one Airbus have been sold, while no Falcon 900EXs have been sold.
At press time, 1,738 business jets are for sale, about 12.5 percent of the 13,722 in operation worldwide. In contrast, as a subgroup, aircraft in operation that were manufactured within the last 10 years offer up slightly less than 6 percent of their collective fleet to the pre-owned market. The number of large-category aircraft less than 10 years old and available on the pre-owned market is just 2 percent.
The heat in the late-model, large-aircraft category has radiated to older large-category aircraft. Though no longer in production, three aircraft remain in high demand, albeit at availability levels higher than last year. The Falcon 900B supply is at 7.5-percent availability, as is the GIV-SP, and the Challenger 604 supply is holding at 5 percent of its fleet.
While these large aircraft continue to be in favor among buyers, they do not have a monopoly, as every category has at least one standout model. In the super-midsize category it’s the G200, which in January last year peaked at 20 aircraft for sale when about 100 were in service. A year ago inventory fell to about 10, where it has remained amid a production run that is approaching 150 aircraft. The number of choices has been reduced from 20 percent of the fleet in January 2005 to about 7 percent today. Pricing runs from $13 million for a single-digit serial number to the high-$19 million range for a triple digit.
Twelve of the 258 Citation Xs delivered are for sale currently, equating to fewer than 5 percent available. Prices run from the high $10 million area for a 1996 model into
the $17 million area for a 2003, the latest on the market at present.
Seven of 229 Falcon 2000s–or 3 percent of the fleet–are up for grabs. As low as that figure is, it is higher than the average set during the last two years, but less than the five-year average of 10. Pricing on a single-digit serial number, a 1995 model, is situated at $17.5 million and runs up to $22 million for a 2004 model with a serial number in the 200s.
The Citation Sovereign, the newcomer to this group, has had spotty appearances on the used market, with $15 million pricing the norm and with position prices beginning in the upper-$16 million range and above. Roughly 80 have been delivered.
At 13 available, the current supply of Citation Excels is roughly even with a year ago. Prices are in the low-$8 million to mid-$9 million range. The successor Excel XLS presents three deliverable aircraft and three delivery positions. All are priced in the low- to high-$11 million range. The smaller CJ3 is available in delivery position form only, with three slated for this year and one next year. All are priced at more than $6 million.
While the sales activity in the summer period is often slow, the last few summers have bucked the trend, giving credence to forecasts that have called for the market
to stay active through next year. That this year’s action is behind last year’s brisk pace is probably beneficial to the overall market, as pricing, while high in many cases, has become stable, providing buyers and sellers more insight into aircraft values and making for a more efficient market.