The worldwide supply of used aircraft is revisiting a level not seen in more than five years, despite a growing business jet population that saw nearly 4,000 enter service during that period. The U.S. claimed nearly half of those new aircraft deliveries, followed by Europe and Asia, South America and Africa and Australia. One might speculate that if a buyer is purchasing a business jet in a down economy there must be an excellent reason for the investment, and perhaps this is why only 200 of those delivered during this period have made their way onto the used market. It should also be noted that of this group, two thirds are 2008 models and likely are just being replaced by their current owners.
So today, when you look at the fewer than 2,500 used aircraft for sale, you have to scrutinize the herd closely. Location and age are two big factors, yet location is less of a factor for large-cabin aircraft, especially those in short supply. Age continues to be the figurative death knell for aircraft, perhaps one reason why nearly 1,000 older aircraft make up the current supply on the used market, some of them seemingly bruised by lenders’ reluctance to offer financing or by support programs that have been discontinued. The mods that used to breathe new life into aging aircraft are still viable, but these days some mods can cost such a large percentage of the aircraft’s worth that their value is questionable. When an owner disposes of his aging aircraft, the buyer could well be a parts company, since in some cases the parts can be worth more than the whole. I’m not talking about JetStars and Sabre 80s here; at least one GIV and one Falcon 2000 became organ donors in the last year or so. Suffice it to say that 40 is not the new 30 when it comes to aircraft.
European Market Flourishes
As Europe outstripped U.S. deliveries for the first time in the mid-2000s, we now see a higher percentage of used aircraft for sale there. In Europe, JetNet shows 15.5 percent of all aircraft in operation for sale. That number drops to 12.5 percent if only aircraft produced between 2003 and 2013 are considered. In comparison, the U.S. has 11.7 percent of all aircraft in operation for sale and 6.1 percent of the 10-year-old pool for sale. No disrespect to the growing jet populations of other continents, but Europe is the story du jour. For example, 11 of the 24 CJ2s for sale are located in Europe, six in North America, four in South America, two in Asia and one in Australia. Other Citations such as the XLS and CJ3 exhibit a similar supply for sale. The takeaway: when you see that 25 aircraft are for sale in a given market, you might have to pack your Burberry scarf in your Louis Vuitton bag and plan on haggis for breakfast if you want to begin covering all your international bases.
Despite clear signs of market stabilization, some buyers can still talk themselves out of buying. Consider two of the most stable markets at the moment: the Challenger 300 and Gulfstream G550. Someone mentioned he was steering clear of the 300 because he had heard that a bunch of aircraft were about to be dumped on the market. My only guess is that he envisioned the Flexjet 300s surfacing all at once following the announced sale of the company. That’s not going to happen for at least a couple of reasons, yet the perceived possibility spooked this particular buyer out of pursuing the aircraft.
Some people believe the supply of G550s is going to balloon as deliveries of the flagship G650 spool up, but there is no early indication that this is happening. In fact, the supply has remained the tightest of any business jet today, and if it continues on its present path the G550 may be one of the first to appear in the Aircraft Bluebook Digest, or Vref, with an up arrow, versus the downward-pointing one that has plagued owners for the past several years. Early indications are always tough to use as a barometer for the whole year to come, as they seem to ride the fourth-quarter wave of heightened buying activity. However, should 2014 continue on the path of the previous year, with the actively traded models seeing prices stabilize, a few of the most highly sought-after models could experience a price increase.
