The secondhand values of large-cabin jets are falling faster than those of smaller counterparts, as high-end business aircraft take the biggest hit from a collapse in demand from emerging economies.
That is the finding of experts at Flightglobal’s Ascend consultancy, who have assessed what used jets were selling for in the first quarter, compared with the same period last year.
While overall values fell 9.4% across the business aviation market, the largest types suffered far greater declines, with the price-tag of a Gulfstream G550 falling an average of 16% (or up to 23% for the oldest vintages), and the G450 faring just as badly. Bombardier Globals have fallen by between 9% and 16% with the Global 5000 coming off worst. The Falcon 7X had taken a 9% hit by January, with up to another 6% likely to have been shaved off values by the end of the quarter.
While all three airframers have attempted to address the problem by cutting production – Dassault Falcon deliveries fell by nearly a fifth over the period – inventory levels and weak demand in what has been the most bullish of markets in recent years are having an effect.
A longer term look at the marketplace indicates this is no passing blip. Current market values (CMVs) for 10-year-old large-cabin types have fallen steadily since 2012. The CMV of a 10-year-old Global Express classic has plunged from $27.5 million to $18 million. A Global 5000 of the same age has fallen 24% in two years. Similar falls are seen for early-build, 10-year-old G550s, worth $30 million in 2013 and trading today for around $22 million.
The large-cabin segment, of course, is still a relatively new phenomenon. Until the mid-2000s, it was dominated by the Gulfstream GV and Bombardier Global Express, until the arrival of the G550. The Falcon 7X ended the duopoly just before the global financial crisis and today Gulfstream – which added the G650 in recent years – represents just under half the global fleet.
Since 2008, production has continued to rise, at a faster pace. If the production trend from 1997 to 2008 had continued, 61 aircraft would have been added to the fleet each year. Instead, production has averaged 161 additional units per year since then, says Ascend senior analyst Daniel Hall.
“This was supported by emerging markets coming along, but perhaps now the damage is being felt with the secondary market and installed fleet size,” he adds. “Roughly speaking, it is the 2006 to 2009 vintages where we currently have greatest secondary market weakness. This is reflected in their high volumes for sale. If secondary market demand for a roughly 10-year-old large-cabin, long range aircraft cannot absorb inventory from an overall fleet size of 400 to 800 aircraft today, how will it absorb double this total fleet size in future years?”
According to Ascend, there are around 160 large-cabin, long range aircraft advertised for sale, 9% of the 1,800-strong fleet of all types of business jets the consultancy uses as its sample. Interestingly, G550 inventory has actually reduced to around 33 aircraft, 6% of the fleet. “It is possible that many sellers gave up and removed their aircraft from the market. Dassault’s Falcon 7X has nearly 30 for sale, at 11% of the fleet – that will be one to watch this year.”
So do these figures suggest a short-term depression due to multiple factors converging, or a permanent shift and new reality. “If emerging markets pick up, oil returns and currency stabilises, we’ll likely see healthier new demand,” says Hall. “However, we have never seen such a build-up of installed large-cabin, long range fleet, and maybe now we have proved there is too much.”
Flightglobal will be hosting a webinar in June in which Ascend consultants will go into the figures in more detail. The date is yet to be announced. Check flightglobal.com for details on how to register.
Source: Flight Daily News
