Thu, Jun 12, 2003
Sales Up, Prices Holding...
The Industry Trends committee of the National Aircraft Resale
Association is seeing the ingredients for a recovery in pre-owned
aircraft sales, based on factors ranging from the stabilization of
aircraft values to opportunities created by the expiration of
Fractional contracts. Aircraft dealers and brokers are also
reporting anecdotal evidence of an increase in sales activity.
"Inventory levels are high, resulting in almost
unprecedented choice. Interest rates are at historically low
levels, and prices have stopped declining. The combination of these
factors represents a classic buyer's market," said Tony
Friend, Chairman of NARA's Industry Trends committee.
"Economic uncertainty is the wild card, particularly in the
corporate market, since corporate aircraft sales typically
correlate with corporate profits," Friend noted. "However, many
aircraft dealers are seeing knowledgeable buyers moving back into
the market because of the opportunity to get a very good deal in
the current circumstances."
Pressures being placed on older aircraft are adding to the
potential activity increase. Some financiers and insurers are
becoming reluctant to support older aircraft. In addition, the high
cost of compliance with requirements for modern electronics and
quieter operation, coupled with the price tag for regular major
maintenance, is causing owners of older aircraft to consider
upgrading and modernizing their fleet.
Existing Fractional owners who are coming to the
end of an existing contractual relationship are another source of
potential buyers. Rather than renew their Fractional contracts,
some are looking at extending the benefits of corporate air travel
through whole-aircraft ownership.
Other evidence of a likely turnaround includes:
- An increase in turboprop sales reported by market research
firms in late 2002 and early 2003.
- Price stabilization that has halted the precipitous drops of
the past few years. According to ASO figures, for example, the
average asking price for pre-owned Gulfstream IVs fell 3% between
2000 and 2001, then plummeted 17% from 2001 to 2002, but slipped
only 1% in the last year. This signals to buyers that prices have
hit bottom and that pre-owned aircraft are once again a good
- First-time buyers entering the market, such as one corporate
buyer who recently purchased a Beechjet 400 from Central Flying
Service in Little Rock (AR), to save time in traveling to company
locations in multiple states. Another first-time prospect is
currently evaluating proposals from the same dealership because he
believes he can reduce a grueling 74-day-a-year travel schedule by
one-third through private ownership.
"Our phone activity has picked up dramatically in the last
several weeks, and we're also seeing leads from Internet ads
increase from three or four a week to several dozen. We're seeing
action both in light jets and turboprops," said Phil Gustafson,
Director of Sales for Central Flying Service. "I definitely think
we've seen the bottom of the market, and in fact that the recovery
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