Summer Report: Market Roller Coaster or Stability…

By Dennis Rousseau, founder and president of AircraftPost.com. This article was originally published in the Aircraft Bluebook Marketline Summer 2015 edition.

 

During the last few years, AircraftPost has addressed many dynamics affecting the business jet market and specifically aircraft values. Our markets have changed dramatically since 2008. As we’re in our 7th year of ‘recovery’ the same recurring question is asked, “Is the business jet market improving?”

When we see a backlog in new aircraft deliveries with waiting times exceeding 2 years, pre-owned sales tend to increase as was the case in 2000 with the dot com hyperbole or the run-up to the financial debacle in 2008. However, we do not have these type events to stimulate new or used aircraft sales. On the global economic side, the same countries that were boosting sales of business jets (China, Russia, select countries in the EU and South America) are undergoing harsh austerity measures. This is returning North America to being the dominant player in new aircraft sales, which in and of itself is not a bad thing, it simply leaves the US market carrying the weight when our economic growth is batting ‘0’.

Good News

Our industry recently experienced an influx of good news and technological advancement with the announcement of the Falcon 5X, the Gulfstream G500/600, the Cessna Latitude, certification of the Embraer Legacy 450 and the Honda Jet, first flight of the Pilatus PC 24 business jet as well as the Falcon 8X.

Good News / Bad News

The backlog for new aircraft deliveries is declining. Bombardier is reducing production of the Global 5000 / 6000 and have ceased production of the Lear 60XR. Out of production aircraft inventories continue to rise, exceeding 10% of the available fleet. For most pre-owned aircraft the number of transactions year-over-year are down and prices across the board continue to deteriorate. The GV experienced a 22% drop in price from 2013 to 2014 and a further 16% in 2015, which in turn may have sparked an uptick in the number of transactions. A similar scenario played out with the Challenger 605 and Global Express XRS where year over year pricing declined and transactions increased. In all cases the price declines well exceed the effects of age-based depreciation.

Market Stability

Overall our markets are moving in pockets. What seems to be driving sales is value or better stated, “How much aircraft can I buy for the dollar?” The GV may be the dominant market player today but if history repeats itself, another aircraft will soon takes its place.

The following chart summarizes select business jet model sales from January through May for each reporting year.

Summer 2015-2

 

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