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However, it may be useful to go through the recent sales of all types of aircraft and see which models have recorded the most transactions thus far in 2014. We pulled the record of all retail sales from January 1 2014 - July 31 2014 from Amstat. There are some interesting conclusions to be made from this data. Most surprising is that the most transacted pre-owned aircraft trading are no longer in production. Of the top 20 sellers, only three are aircraft currently in production (the Citation Mustang, the Citation Sovereign and the Citation CJ3). Secondly, the most commonly transacted aircraft are smaller aircraft. Of the top 11 aircraft, five are turboprops, three light jets, two mid size aircraft and one large cabin jet. The top three aircraft are actually turboprops, with the King Air B200 (50 transactions), Pilatus PC12 (50 transactions) and Piper Meridian (49 transactions) taking the top three spots respectively. The 20+ year old Citation II is the top selling jet, coming in fourth with 43 transactions. The first entry for a large cabin, long range jet is the Challenger 604, coming in 8th place with 32 transactions. The market appears to appreciate the value of pre-owned aircraft. The slump in the pre-owned market has brought pricing down to historically low levels, and some amazingly capable and versatile aircraft can be purchased for levels that were unimaginable 6 years ago. The value proposition of pre-owned is now enormous, and I believe these figures show that the market realizes this and is acting upon it. For example, the two top selling mid-size jets, the Hawker 800XP and Lear 60, have long been out of production; their newest models are 8 – 10 years old. However, prices are now in the 2 - 4 million USD range, providing a fabulous business tool with similar functionality to a new one, at a fraction of the price. Since the recession we have seen the majority of banks avoid financing older and lower value aircraft. The typical rule of thumb for financial institutions is that the aircraft must be no older than 10 years and with a value over 5 million USD. Of the top 35 aircraft, only 6 meet these criteria. This infers that 1) cash is still the dominant financing source as banks are reluctant to finance the most commonly traded aircraft, and 2) there is an enormous market for financiers that is underserved at the moment. It’s highly likely as the market continues to improve in terms of demand banks will begin to serve this market and to finance these older aircraft. This also means there is a vast amount of room for growth in the older, lower value segment if and when they become popular options for lenders again. Geographic breakdown If one breaks down the geographic location of the buyers of the top 37 aircraft, the USA accounts for an overwhelming majority of buyers. These 37 models comprised a total of 966 transactions, and of those, 763 were to buyers whose entities are domiciled in the USA. This is a 78.9% market share of pre-owned transactions. This does vary from model to model, with some aircraft having a much greater international appeal than others. But on the whole it shows that the pre-owned market is being driven by demand from the USA. Remember that this is just for the top 37 aircraft, and not the market as a whole. The top 37 aircraft are predominantly older and smaller jets, a segment that is popular in markets with a long and mature understanding of maintaining and operating older aircraft, like the USA. The USA has the longest history with corporate aircraft and therefore this comfort with the older products makes sense. The emerging markets, responsible for an ever increasing proportion of new, large cabin aircraft sales do not have this comfort yet. As they gradually accustom to operating older aircraft, expect this number to start shifting. However, until then, as an owner of a non-USA registered aircraft, if you plan to resell the aircraft expect that it is highly likely that your transaction will involve an export/import.
Finally, much media attention is focused on the OEMs and the number of new deliveries each year. For the last four years, this was between 1100 - 1350 jets and turboprops per year. While this is important data (without new aircraft deliveries, there are no pre-owned aircraft!), it is worth noting that in the first seven months of 2014, the pre-owned markets have transacted a little over 1,800 jets and turboprops. In terms of size, the pre-owned market is about twice as large as the market for new aircraft. Each of these transactions has an equally large economic impact upon the industry as does a new sale. Each pre-owned transaction involves a large number of professionals, such as lawyers to assist with contracts, pilots receiving new training, MRO facilities completing a pre-purchase inspection, brokers advising buyers and sellers, tax advisors issuing opinions and financiers lending against aircraft. When reviewing the overall health of the industry, the pre-owned market must be included. A quick caveat: As with all statistics, it is important to look at the full picture. These numbers do not take into account the fleet size of each aircraft type, and instead just reflect the number of transactions. Given that the King Air B200 and Pilatus PC-12 are two of the most produced corporate aircraft in history, it stands to reason that they should have the highest number of transactions. This is a big reason why the ultra-long range aircraft (G550, Global Express, Falcon 7X) are not included in the top 40 – their fleets are much smaller than many of the light jets and turboprops. Those markets are quite active, with a fairly high percentage of turnover each year, owners should not despair that the absolute number of transactions is quite low. If you are the owner of an older model, out of production aircraft, take comfort in the fact that these markets still have surprising amounts of demand and activity. Older aircraft present tremendous value for buyers, and there is great demand for them - at a price of course. Pre-Owned Sales for January-July 2014.
Colibri Aircraft is a private aircraft brokerage and asset advisory company based in London. Colibri’s focus has been on the international arena, remarketing and purchasing aircraft for clients as well as advising lenders on asset value protection and repossessions. Having bought and sold aircraft for customers in Asia, South America, Europe, the Middle East and the USA, Colibri has a first-hand perspective on different cultures, their approach to private aviation and the knowledge to complete transactions across multiple jurisdictions.
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