Bryan Comstock is a published industry expert. He has earned the respect of buyers, sellers and industry
insiders through his years of writing for FLYING Buyers' Guide, Aviation
International News and Business Jet Traveler.
Below is Bryan's latest article written for and published by Aviation International News.
Pre-owned Update: March 2015
by Bryan A. Comstock - March 1, 2015, 7:44 AM
The used market typically takes a breather in the beginning of the year relative to the often frenetic pace often set during the last quarter of the year, and early 2015 appears to be no different. Although used inventory is showing its usual bump, it currently sits below the 12-month moving average, which happens also to be a multi-year low. Low interest rates and cheaper fuel could be added drivers for the market, despite chatter that both are at a bottom.
With Europe embarking on a stimulus reminiscent of the U.S.’s Troubled Asset Relief Program, or TARP, its market might be at a turning point. Currently 13 percent of its collective fleet is for sale. If you exclude aircraft manufactured before 2000, that number drops just slightly, to 12.5 percent. (Europe’s fleet is younger than the U.S. fleet.) The U.S. currently shows 10.6 percent of its total fleet for sale, but when you look at models manufactured in 2000 and later, the percentage available drops to 6.4 percent, or about half the European tally. Despite the differences, what both regions have in common is inventory numbers that have continued to ratchet lower in recent years. Any European economic turnaround could see this closure rate tighten further in the months ahead as prices have been attractively reset and economic boost will likely rekindle sales. With U.S. inventory levels healthy enough to satisfy buyer demand at home, buyers rarely venture far afield, unless prices make it highly compelling to do so.
INVENTORY HIGHS AND LOWS
While inventory overall has diminished, choices among some model types have broadened. Generally, however, it seems that the markets affected in this way are the ones that were overheated last year, and now they are returning to a more normal supply. For example, last summer the Challenger 604 market dipped to 21 aircraft for sale worldwide (less than 6 percent of the more than 360 in operation). It has since ticked up to 31, slightly fewer than the number for sale last year at this time. Three quarters of the 604s for sale reside in North America or Europe. Ten have changed hands over the last six months, according to data service AircraftPost, which cites $6.6 million as the average sale price.
Then there are markets sitting at multi-year lows–the Falcon 2000EX EASy comes to mind. Only four of these are for sale, all of them based in Europe. The aircraft is not particularly active on the market because the fleet size is relatively small, but the fact remains that only 3.8 percent are available for sale or one third of the offerings of a few years ago. The GIV-SP has had its share of ups and downs, perched at 33 at the beginning of last year before dipping as low as 19 nine months ago. Twenty-three are currently for sale, or 7.5 percent of the number in operation. The recent uptick in inventory seems related more to buyer abstinence than to the dumping of an inordinate number of aircraft onto the market. Only four GIV-SPs have sold in the past six months, down from 11 in the previous six-month period. Despite lower inventory, this aircraft has felt prolonged pressure from descending G450 and GV prices. There’s great bang for the buck here: everything that has sold in the past 12 months has moved for less than $10 million.
The super-mid supply is treading water, with all near their respective 12-month moving averages. The smallest production run in this segment (excluding the Hawker 4000) is the Falcon 2000. That aircraft offers the fewest at 21, while the others are carrying numbers in the low 30s. The tightest supply, perhaps not surprisingly, is the ever popular Challenger 300. While it has the largest production run in this grouping at just over 450, it has the lowest percentage available at seven. Pricing at the low end first dropped below $10 million more than a year ago and since then trading below that level has become more common. Not to give the 4000 short shrift: 70 were produced, eight of which are currently for sale, most of them outside the U.S. Posted asking prices run from the mid-$5 million range up to $9.5 million, but average sale prices over the past six months have hovered around the $5 million area. The Falcon 50EX trades in this price range and has one of the smaller production runs in the grouping at 100. Eleven of those are for sale at present.
As 2015 begins to unfold we will be watchful for any developing trends, particularly Europe’s attempts to revive the economic union. For now, the market is acting the way one might expect with a nearly even flow of buyer buyers and sellers. If prices do soften in certain segments, the pullback will more likely occur at a measured pace in line with normal depreciation.