“"Not everything can fly. We will not install a swimming pool or a fireplace. That is not possible."”
What the year might bring
Because the used-aircraft market enjoyed a robust fourth quarter in 2010, you might expect the current year to witness at least a slow and steady uptick in transactions. That could well be what happens, but keep in mind that fourth-quarter activity is often upbeat-2008 being a key exception-and that this market's future depends heavily on what happens with the overall economy.
Speaking of that economy, PIMCO bond guru and jet owner Bill Gross recently employed an aviation analogy to describe its present condition. "We are running at a half-size-paper-airplane type of economy," he said, "as opposed to one with stable wings and full thrusting jet engines."
The preowned jet market this year will largely depend on whether that situation improves. If it does, we should see an increase in transactions.
Many point to the glut of aircraft for sale-nearly 2,800 at present-as a sign of a weak market, but each year that statistic becomes less and less of a barometer of the business's health. To get an accurate picture of the market, you have to keep in mind that only a bit more than 400 of the 2,800 aircraft mentioned above are U.S.-based and were manufactured since 2000. To better comprehend the inventory total, you also have to consider the number of aging aircraft; the burgeoning jet population globally; and the fact that aircraft position sales have tapered off.
Stabilizing prices for many models have given buyers greater confidence to execute trades and if nothing changes significantly in the year ahead, the market will likely continue to slowly improve. If, however, predictions of a greater-than-10-percent gain for the S&P 500 prove accurate, we could see accelerated buying activity as well as price appreciation for some models.