Pre-Owned Business Jets Year in Review

Pre-owned business jets showed an increase in the number of sales for 2010 over 2009 and 2008.  Taking a random sampling of medium and long range aircraft, the number of transactions was up an average 30% over 2008, although selling prices dropped an average of 56%.  One reason for the increase in transactions could be the result of prices going from ridiculously high levels to a level that makes sense again.  Affordability is a very attractive metric right now when considering shipments of new business jets in the first 9 months of 2010 were down 20% from 2009, 616 to 491 respectively (source: GAMA).

A number of factors can be tied to these results.  Market values are down an average 24% from 2008, resulting in greater value for the dollar which in turn creates a value proposition with some aircraft that is very attractive.  Also average time on the market has increased from 139 days in 2008 to 248 days in 2009 and 344 year-to-date, which also contributes to falling Market Price.

From an economic perspective, despite the downturn and continued sluggishness, major business publications report merger and acquisition activity up 28% over last year.  The majority of these deals (92%) are companies buying companies vs. private equity involvement (the former leading to a more stable business fundamental).

The business jet market is in a slow-moving recovery with selling prices hovering at the low end.  The vast majority of those who purchased pre-owned aircraft 3 years ago owe more than their aircraft are worth.  However, we need to be careful and not look at 2007 / 2008 as the normal market to return to, because prices were not normal, they were inflated.  On an optimistic note, being at the low end of pricing can be positive in that it can be viewed as one of the signs to a recovery.

Aircraft with the right mix of cabin comfort, range, technology and price point are showing signs of stabilizing. But older aircraft that are near economic obsolescence continue to lag, not only with potential buyers, but lenders as well. With the later generation aircraft selling 25% below a normalized market, residuals may seem to be on the low side today.  However, should prices return to normalized levels, residual values will also rise, putting those doing deals today in a favorable position.  For a discussion on transaction data and residual values, contact AircraftPost.com.

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