Says Some Listing Planes Don't Really Plan To Sell Them

Despite endless reports of ever-increasing used business jet inventories, one forecast says we could soon see the bottom. Brian Foley Associates (BRiFO) expects a mid-year peak in the number of used jets for sale.

"That's not to say there'll be an immediate decrease, just that it won't get much higher," predicts president Brian Foley. "At the peak, inventory levels will meander for a few months before falling somewhat by year-end. Soon nearly 1 in 5 of the world's active business jet fleet will be up for sale."

Used prices will continue to drop after the inventory peak and then trough near year-end. "It takes awhile for prices to adjust to supply, just as they recently took time to drop as inventories quickly rose," Foley says. "The most desirable equipment will slowly begin selling through the second half."

One factor that's exacerbating the used market is that a number of used aircraft that are listed for sale, really aren't.

"Some owners with no real interest in selling list them for sale anyway, either in hopes of getting an offer too good to be true or as a contingency in case things get worse," Foley asserts. "Still others keep the plane for sale for political reasons. Either way they're doing themselves and the real sellers a disservice by keeping supply artificially high which results in further depressed prices."

Foley remains hopeful for next year. "The market will further stabilize when those who have to sell get out of the market. When the market turns, and it will, buyers will be taking advantage of the best pricing in years. At the same time, other sellers will simply take their jet off the market as their improving balance sheets no longer justify having to dispose of it."

Still, Foley's optimism remains decidedly measured. Manufacturers have serious pre-owned challenges before new sales can pick up again. Not only does the historically high used inventory have to decrease (particularly younger aircraft), but customers selling new delivery positions have to sell. Unsold new OEM inventory, known as whitetails, must also be cleared out.

Foley says that wait may be 'financially excruciating.' "It's not inconceivable that eventually the "Big 6" business jet OEMs become the "Big Sub-6," he warns.

FMI: www.brifo.com