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Aviation History
1989
1989 - 1120.PDF
Omni Jet analysts predict higher corporate aircraft prices ^•"•^;^;i*»*» • '•'* iiiiii ^II^I^^^M^^^^irK^^:?^ si / I* BggaBBB supply of used mid-size business jets. BAe's 125-800 leads the class Prices of new and secondhand corporate and business-jet air craft will rise during 1989, according to analysts at Omni Jet Trading Floor. The Maryland-based organis ation cites several factors which have led to its conclusions: • The strong world economy —exports of US aircraft and engines are boosted by the devalued Dollar. The European economy is on "the rebound", and many Stage 3 aircraft are being bought • Aircraft utilisation—Omni reports record utilisation levels which are expected to continue. • Interest and tax rates— interest rates could edge up, says Omni Jet. The US budget deficit might prompt a tax increase of some sort, but no immediate change is foreseen. • Fuel prices—"still relatively low and stable". Omni Jet expects this to result in brisk trading of older, non-turbofan aircraft. • Aircraft prices—all manu facturers of corporate and busi ness jets are raising prices. This will make used aircraft more valuable. • Buyer identity—many air craft bought in 1989 were purchased by first-time buyers, says Omni Jet. • Deregulation—reduced ser vices to hub airports have neces sitated many companies buying aircraft to maintain successful management of business. Strong 1988 sales All manufacturers had strong domestic sales and exports last year, according to Omni Jet, which points out that new- aircraft sales comprised a rela tively small percentage of market transactions. Emphasising the higher values being achieved for secondhand aircraft as new prices rise, Omni Jet cites the Dassault Falcon 50: "A brand- new Falcon 50 costs $6 million more than one manufactured in 1980, yet performance is virtu ally identical", a situation true of many other types. Omni Jet suggests that this has resulted in value increases of as much as 20 per cent in the past 12 months. Omni Jet analyst John Wayne points out that recent Gulf- stream IV customers have taken An acute shortage is developing in the early delivery positions follow ing some cancellations. More than 130 GIVs have been ordered, with completions averaging about $3 million apiece. Several GUIs have come on to the used market from operators re-equipping with the later type. Gulfstream itself is active in secondhand sales, not wanting to see other dealers take hand some commissions from dispo sals or trade-ins. According to Wayne, up to a dozen Gils could be available, a number of dealers having bought specu latively. Gils vary in price from $3-5 million to more than twice that figure. A late developer in the large corporate-jet stakes is the Canadair Challenger. Origin ally perceived as a victim of poor reliability, the Challenger 600 is now commanding as much as $6-5 million a copy. Resale values have been helped by the provision of long-range tanks. Since supply is limited, Wayne expects prices to con tinue rising. Early Challenger 601-1A models are now fetch ing GUI prices and the first -3As have reached the market. Wayne says that the Chal lenger's large cabin, long range, and the fact that it meets Stage 3 noise requirements go a long way to meeting most corporate needs, with the manufacturer's so-called Smart maintenance programme covering airframe and engines overcoming reliability reservations. There is high demand for the third member of the corporate- jet "big three", the Dassault Falcon 900, with used examples fetching prices close to those of new machines. Indeed, Wayne argues that the only benefit of buying a secondhand 900 is the prospect of early delivery. The Falcon 20/Garrett TFE731 engine retrofit pro gramme has excited the market, according to Omni Jet. There are only one or two F.20Fs available, and Wayne reports many being bought for retrofit. Steady trading in Falcon 10s is reported, as original owners dispose of the aircraft. Wayne detects a reluctance to keep aircraft approaching ten years old. The type's continued popu larity on the used market may be attributed to its slightly higher speed than competing aircraft. "If you can find a used [BAe 125-800], buy it," is Wayne's advice. The type has taken 40 per cent of the market since introduction in 1984, and the price of a newly completed -800 is put at $8 million. The earlier -700 is now seen as particularly attractive at about the half price, while the earliest models can be had for as little as $500,000. "The interest savings alone pay for the extra fuel burned many times over." Garrett TFE731-engined Lockheed JetStar lis represent a long-range, Stage 3 alternative to more-expensive types, but trading has been slowing. The engines are available, but JetStar lis are scarce, reports Omni Jet. At prices between $4-25 million and $6 million, Citation Ills are plentiful on the second hand market. Wayne is hard put to say just why there should be "more than ever", reporting also a large number of Lear 55s. Citation II sales are active; Wayne judges that late-model, low-hours aircraft have reached their top price, but prices for earlier aircraft continue to rise. Values of Mitsubishi Diamond lAs are rising, with the type seen as an alternative to the Citation II. The aircraft is faster, but offers shorter range. Omni Jet says it is still too early to gauge the appeal of second hand Beechjets (derived from the Diamond 2). There has been heavy recent trading in the Israel Aircraft Industries Westwind. Omni Jet reports a stable Learjet market, and Wayne considers the Sabre- liner 65 to be undervalued. Pushing prices up Limited availability of many types on the secondhand market, inflation, low produc tion rates of new aircraft, and little improvement in perform ance of new aircraft over used machines will continue to push prices up, according to Wayne. Increased new prices are likely to pull up the residual values of used models, even those with turbojet engines. Omni Jet sees "an acute shortage" developing in the mid-size business aircraft market. Few good aircraft are available with the cabin size and low noise sought by many buyers, especially those trading up from smaller, entry-level aircraft. 22 FLIGHT INTERNATIONAL, 22 April 1989
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