“"Many years ago, our company founder, Al Conklin, sold a new twin-engine business aircraft to a very successful entrepreneur. He had established a bit of a rapport with the individual and, after the sale, asked him straight out, 'How can you justify the cost of this airplane?' His reply? 'What is the cost of a divorce?'"–David Wyndham, president, Conklin & de Decker”
Preowned: Shopping in a tight market
With demand high for late-model jets, bargain hunters may start looking more at older aircraft.
When you’re evaluating the state of the used-aircraft market, you need to look at more than the percentage of the worldwide fleet that’s currently for sale. You have to investigate availability in a variety of geographical areas and model-year ranges.
Consider that only 8.1 percent of the nearly 11,000 airplanes manufactured since the beginning of 2000 are now for sale. Meanwhile, the percentage of older aircraft on the market is about twice as high. A disparity also exists between the two areas of the world with the largest late-model business jet population. North America has a tight supply of airplanes manufactured since the beginning of 2000, with only 6.5 percent for sale, but Europe’s market still languishes with twice that figure available.
The spread between North America and Europe has remained fairly consistent over the last couple of years, but may be in for a change as the European Central Bank contemplates something similar to the Federal Reserve’s quantitative easing. While one may question the wisdom of these types of programs, it’s a fact that fewer aircraft are for sale today than before the U.S. initiated its current monetary policy.
The continued short supply of late-model jets should spur new-aircraft sales but may also cause preowned-jet buyers to look more at older airplanes. While popular 2000-and-newer aircraft like the Falcon 2000EXy and Challenger move at a rate of about one a month, pre-2000 models currently often sell at a one-per-quarter rate, despite seven-figure price drops in some cases.
We’re still witnessing the upbeat buyer activity that descended on the market in the fourth quarter of last year. In fact, inventory is now at its lowest point since the fall of 2008 and is noticeably below its 12-month moving average. This is likely one reason we are starting to see values stabilize across many model segments.
Bryan Comstock is president of Jeteffect, a jet sales and acquisitions firm headquartered in Long Beach, California.
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