After a typical first-quarter breather during which inventory often rises, buyers appear poised to step up the buying in the second quarter. True to form, inventory did tick up last quarter, but it held below its 12-month moving average of 2,300, which itself is within striking distance of a multiyear low, courtesy of a busy year last year. Add to that a fair number of aircraft on the market but under contract and we’re likely to see choices move lower in the current quarter.
As is becoming the norm, when you see 30 aircraft for sale in any one market, that tells only part of the story. Take the Challenger 300, which stands at just about 30 for sale. With approximately 350 manufactured, the current choices don’t make the market top heavy by any means, and when you start to impose certain parameters, choices get downright scarce. Case in point: if you’re considering purchasing a 300 with U.S. pedigree, your choices just dropped by two thirds.
This is a trend that crosses all model types from the small-category Premier I, of which 12 of the 125 in operation are for sale; only four are U.S. based. It gets worse (if you’re a buyer): one is a share sale and another is listed as “sale pending.”
Most have noticed a spike in the number of G550s for sale over the past year to levels never before visited. The first thing to consider is that there are now nearly 500 in operation, so the 35 currently for sale represent just slightly fewer than 8 percent of the total number produced. Few models can claim the distinction of having 500 aircraft in operation, and I don’t know any others that are in current production.
Five of the total are under contract. Of the 30 remaining, about half are in the U.S., eight are in Europe, a handful in Asia and a few in South America. Dissecting this further shows Asia with the lowest percent available based on in-continent fleet, the U.S. at 5.5 percent, Europe 12 percent and South America at 21 percent, where three of only 14 are for sale.
Further giving buyers agita is the more than 10-year production run enjoyed by the G550 and Challenger 300. Buyers looking at the market generally are not going to be considering all model years but will target a model year range, often based on budget, again limiting the number of choices.
DOWNWARD PRESSURE ON PRICING
Prices have not yet aligned with regionally low supplies in some market segments. Price increases have been AWOL for years, prompting questions about why, particularly for models that are perennial favorites. One colleague in the industry offered some observations, which range from there being too many aircraft for the number of buyers to the great number of fractional aircraft that transition into the wholly owned fleet after completing their group ownership roles.
Price compression starts at the top and exerts pressure on the next downstream model and so on. For that reason you see prices on aircraft that would have been implausible just a few years ago. A Global Express priced below $10 million and a GV in hot pursuit, priced just above $10 million. Challenger 300s are available for even less. While each of these examples represents the low price for the model type, all appear to offer potential value for the right buyer. The GIV/SP can be found priced as low as the $5 million mark for an early copy and reaching to just under $11 million for the latest available. The Falcon 2000 posts similar numbers. However, twice as many Falcon 2000s as GIV-SPs sold over the past six months.
The Learjet 60 continues to come back into favor among buyers. Eighteen months ago offerings exceeded 50; today there are 32. The last time that model presented so few choices was the fall of 2007. That was a long road to recovery, but the current number of choices places the venerable aircraft at a 10-percent supply based on the just over 300 in operation. Another trending model is Embraer’s Phenom 300. While it’s not unusual to see a current-production model increase its used offerings, the 300 is doing the opposite. A year ago there were 17 for sale, and that has since inched down to 11 or just fewer than 5 percent of the roughly 250 in service.
A recent conversation about the GIV market prompted the realization that the earliest models have turned 30. That led me to look at some even older models, and what I learned is that this market currently offers more than 50 different model years of all types of aircraft. This wide range of product can distort the perception of a soft market. Of the 2,287 aircraft for sale worldwide, 1,330 were manufactured before 2000 and 957 have been built since then.