Large-cabin business jets continue to slump in the pre-owned market while small and midsize jets have shown signs of resurgent sales, according to AircraftPost founder and president Dennis Rousseau. The improvement is hardly what anyone would call a “recovery,” but perhaps a glimmer of a correction to what has been a spiral of depreciating values, he said.
Rousseau puts specific numbers to the spiral. He said the pre-recession economic “life cycle” for a business jet was about 30 years, depreciating at an average of 3 percent year over year. “Now, it’s 11 to 27 percent year over year,” he said. And the average useful lifetime of a business jet as an asset has compressed to 23 years, from new to “scrap.”
Of course, that’s good news for buyers, and even for those with a good reason to upgrade. For example, Taylor Guitars recently swapped its Hawker 850XP (which it bought in the early 2000s, during that recession) for a Gulfstream G450. According to AircraftPost data, a 2008 G450 had an average selling price of $22.8 million in 2014. That nosedived to $12.7 million last year, a drop of 46 percent in two years. Taylor Guitars envisioned the need for a legitimate long-range jet for sales trips, as well as missions to seek out and regenerate the global supply of exotic tone woods for its instruments. For cofounders Kurt Listug and Bob Taylor, the market forces aligned perfectly, since the hit they took on the value of their Hawker was a pittance compared with what they saved on the Gulfstream.
In the midsize range, Rousseau sees a similar increase in interest in the Citation XLS+, for example. He said, “It has the range of more expensive jets, a reasonable cabin height and average prices have dropped into the $6 millions—about $6.9 million for a 2011 model.” Of 219 built, 16 percent of the XLS+ fleet was on the preowned market last year, compared with 12.9 percent in 2015, according to AircraftPost. The combination of practical performance and comfort and a drop in price have made the XLS+ a strong seller in recent months. Rousseau noted a similar pattern with Citation CJ3s and CJ4s.
Bright Spot in North America
Another reason for a rebound in small- and midsize-jet sales is the fast fade of so-called emerging markets such as Russia and China. The two held great promise a few years ago, but international sanctions against Russia and China’s government crackdown on corruption and its cultural tone shift to “austerity” mode have put the speed brakes on hopes for growth.
That means the market has shifted back to North America, where buyers are savvier about the benefits of small- and midsize-cabin jets. The general aviation infrastructure is also better able to accommodate a wider range of aircraft sizes and types. One reason for this is the fact that, in the U.S., for example, aviation grew from the grass roots up; early “barnstormers” evolved over decades into today’s airlines. In China and other emerging markets, the opposite is true. “Air travel” started with airlines, often government-sponsored. So expanding the general aviation infrastructure is a top-down process, and not an easy one to sell to average citizens, even those whose businesses could benefit from the flexibility of general aviation.
Another midsize jet that Rousseau notes is the G200, which saw average prices dip below $7 million. AircraftPost lists 28 G200s on the market, 11.4 percent of the active fleet. The average model year is 2005, with asking prices ranging from a low of $2.69 million to a high of $7.8 million. Average time to sell is posted at 342 days for a total absorption rate of 9.3 months; though Rousseau expects that time to shrink as lower prices pique buyers’ interest.
One industry supposition runs that lower asking prices for aircraft registered outside North America affect overall pricing, particularly when the aircraft come from developing countries with challenging aviation infrastructure.
Rousseau also sees little influence on pricing from the fact that many aircraft for sale are foreign registered. He cited the Falcon 900 EASy as an example. At press time there were 21 on the pre-owned market (11.9 percent of the fleet), 14 of which were registered outside the U.S. Average asking price is just shy of $20 million and they range from $11.5 million to $28 million. The average 900 EASy on the market is eight years old, according to AircraftPost, and probably still has its original interior. “An owner isn’t going to take less for his airplane just because it has an EI [Irish], F [French] or M [Isle of Man] tail number,” said Rousseau. He noted that, although it can take three months for the import process to run its course, “What’s the average time to switch to a new U.S. registry [from an existing U.S. registry]? Three months.”
As for any “Trump Bump” on the market, Rousseau doesn’t believe in it. He said that in his 40 years of tracking business jet pricing, it matters little who is sitting in the Oval Office at 1600 Pennsylvania Avenue.
