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: September 2015
by Bryan A. Comstock - September 18, 2015
On Wall Street there’s a saying that goes, “Sell in May and go away,” which alludes to the market’s typical seasonal slowdown that begins in the summer and carries into early fall. It speaks more to the low volume of stocks bought and sold, presumably as traders take summer vacations. While it’s more a clever quip than sound investment advice, the same type of behavior seems to descend upon the used jet markets, as owners light up turbines and launch on omnidirectional paths to fun-in-the-sun destinations. September almost always brings a back-to-work attitude when it comes to aircraft buying and selling, and this year is poised to stay true to form.
Despite the anticipated cyclical lull, current inventory, surprisingly, sits below both the year-ago level and the 12-month moving average and never saw much of the typical summer build. This past December saw a multiyear low of 2,217 aircraft for sale, and that number has gained about 50 as we enter what is typically the most active sales period of the year. The summer slowdown can actually be beneficial to a broker whose inventory is often left uncomfortably low after a busy spring. The summer respite affords the opportunity to rebuild listings to be ready when buyers return to the market in greater numbers during the last four months of the year.
While inventory has been whittled down, prices continue to adjust, in most cases downward, but recently in a more linear fashion than the drastic drops in the recent past. Aircraft age, price, popularity and location are some of the catalysts that can directly affect the time an aircraft spends on the market. Consider that over the past six months a Citation XLS spent 494 days on the market, while its successor model XLS+ spent just 113 days. The popular super-mid Challenger 300 has averaged about 260 days on the market during that same time span and the Gulfstream G550 only 229 days. Models that are in favor at any given time can spend even less time. Consider the Falcon 2000EX EASy: with few to choose from (just seven at present), the time on market is only 173 days.
CHINESE MARKET SLOWING
Jetnet shows 28 aircraft for sale in China, or about 10 percent of the aircraft registered there. That’s not an inordinate amount by any means, but the fact that 10 of the 28 were placed on the market within the last three months might be more telling. Several months ago an industry counterpart who used to be quite active in China shared with me that China overbought, and since that time signals have emerged to lend credence to his statement. Other anecdotes have circulated about ready-to-deliver aircraft earmarked for China that are instead calling the manufacturer’s floor home for now. Some appear to be deals, while others seem to be priced above market. Perhaps the recently devalued yuan will allow willing sellers to part with their aircraft, but for now we’ll keep a watch on new market entrants as well as the day counter for aircraft already listed.
Exporting from China may require jumping some hurdles. With an attractively priced, readily available supply of used aircraft elsewhere in the world, prices will have to be compelling enough to attract buyers. While the 10 that recently hit the market have been out there for only a short period of time, another 12 have been on the market for more than 400 days and some of those significantly longer than that, including two that have exceeded 1,000 days on market. With a handful of exceptions, most of the offerings in China are large-cabin aircraft, including ACJs, BBJs, Lineage 1000 and Legacy 650s, G550s, Globals and Falcon 900LX and 7X and the like. As you might expect, most of the 28 for sale are 2010 model year or newer.
A Europe-based industry counterpart explained how challenging it is to sell anything in Europe unless it had an “N” registration. This is clearly where owners of “B” registered aircraft are likely to find their challenges. For serious sellers, the workaround might be to reposition the aircraft to a location allowing easier access to buyers.
Buyers returned to the market in full force last year. That activity has tapered slightly during the first two quarters of this year, but the breather seemed widely anticipated. While figures are not yet available for the current quarter, by many accounts it was more active than one would expect. As we head to the final and historically most active quarter, we could see inventory dip below last year’s multiyear low.