Preowned: In with the New...
The large number of new aircraft entering service in the next few quarters heralds further downward pressure on preowned-airplane prices. The impressive lineup of debuting models includes the Cessna Citation Latitude; Embraer 450 and 500; Dassault Falcon 8X and 5X; Bombardier Challenger 650, Global 7000 and 8000; and Gulfstream G500 and G600. In addition, first-time jet makers will introduce the HondaJet, Pilatus PC-24 and Cirrus Vision SF50.
Though only the Challenger among the group above supplants an existing airframe, these entrants will nonetheless affect values as manufacturers replace flagships, today’s models become one generation older, and customers seek to unload current aircraft as they prepare for delivery of new ones.
The Falcon 7X, Gulfstream GIV and GV-SPs, Citation Sovereign, Global 6000 and Challenger 600 series are likely to take a hit, and that’s important to keep in mind whether you’re an owner or a buyer considering one of these airplanes. In today’s thin market, it’s difficult to gauge when and how severely prices of preowned aircraft will be affected, but the introduction of new models is being factored into values already, believes Rolland Vincent, president of business aircraft data-services company Rolland Vincent Associates.
However, “the effect on pricing is fairly gradual,” he says, as most buyers, concerned about squawks in early-production aircraft, prefer to wait to order “until after unit 100, for quality control.” That keeps new models from wildly proliferating and large numbers of replaced aircraft from being dumped on the market.
Meanwhile, declines in preowned values make selling the new jets more difficult for manufacturers because customers may be offered less than they’d anticipated for the airplane they’re replacing, says Vincent. That fact—combined with the need to keep order books at certain levels to maintain production lines—has led to “uncharacteristic” price discounting from some manufacturers.
“They want to do the deal,” notes Vincent. That, he adds, may make operators that have postponed refreshing their fleets “face the music and say, ‘We need a new airplane,’” as they conclude that preowned values won’t bounce back to historical levels soon, if ever.
Indeed, the current downward pricing pressure on models impacted by these new-generation jets could simply be part of the wider sales trend that has characterized the market since the 2008 crash: “If you wait, the price drops,” Vincent says.
James Wynbrandt (firstname.lastname@example.org)