When Embraer sold NetJets a new fleet of Phenom light jets, it took 25 of these Citation Ultras in exchange.
When Embraer sold NetJets a new fleet of Phenom light jets, it took 25 of these Citation Ultras in exchange.

The impact of fleet sales

If a large fractional or charter company sells its fleet of a business aircraft model that you also own, the impact on the value of your airplane might not be as significant as you’d think.

A year ago, we reported on the potential effect on residual values when fractional and charter companies sell aging model lines from their fleets. We found that while declines can be dramatic, ­markets’ reactions weren’t well ­documented. Now, with residual values remaining a large concern and a wave of new models slated to displace older ones in these fleets, we’ve attempted to get a clearer picture of this corner of the preowned market.

Preowned: Fractional Fallout

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Preowned: Fractional Fallout

When a jet-share provider sells off a model, could a glutted market reduce the value of your wholly owned aircraft?

The major fractional and charter operators that own their fleets, including NetJets, Flexjet, and XOJet, fly a total of 44 business jet models and five turboprop models, according to aviation data supplier JetNet, but the combined numbers and replenishment rates mitigate their power to move markets. The jets and turboprops represent 8.1 percent and 3.7 percent, respectively, of the number of these models in operation, and the fleet aircraft appear to trade less frequently than others; from 2005 through 2015, more than 21,000 preowned aircraft sold on the retail market. A mere 542 of these transactions, or less than 3 percent, involved fleet aircraft.

To be sure, dumping a fleet en masse can unsettle market values for aircraft of the same type. For instance, in 2012 pricing fluctuated when NetJets offloaded 25 Citation Ultras to Embraer in a trade for some Phenoms, and again in 2014 when 25 Gulfstream G200s went to Bombardier in exchange for some Challenger 300s.

In the three months following Bombardier’s dumping of the G200s on the market, JetNet showed prices falling from around  $12.5–$13 million to under $10 million as buyers apparently did not differentiate between heavily utilized fleet aircraft and ones from individual owners with much lower hours.

Just over two years later, say aircraft brokers, buyer myopia has largely self-corrected. As of late 2016, the asking price for a professionally represented, privately owned and operated G200 is just over $6 million, while former fleet G200s are priced at under $4.75 million. Generally, the preowned market now prices fleet aircraft at about a 35 percent discount to “mainstream” aircraft, according to valuation service Aircraftpost.com.

Meanwhile, manufacturers are now less likely to take airplanes in trade, given the sluggish aftermarket sales environment, and the disposal of fleet aircraft has become more disciplined. Both changes are bolstering the residual values of these models, even the fleet veterans.

In fact, some marketers make a virtue of former fleet aircraft’s operational history, pointing to the rigorous maintenance and cabin re­­freshments that these airplanes typically undergo, and the guarantees that often come with purchase. NetJets, for example, recently established an independent brokerage, QS Partners, aimed at assisting fractional owners who want to move to whole-aircraft ownership, or vice versa. The brokerage also acts as the exclusive agent for NetJets Certified Pre-owned Aircraft.

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