Some of you may have noticed that my blog entries have been spaced a little further apart in recent weeks. That should tell you that I have either run out of things to say or activity has picked up enough where I haven’t had much fee time to devote to this forum. I think most of my grade school teachers would agree that the former is not one of my bigger problems. All the recent activity has been a welcome oasis in the desert that aircraft sales has been since last fall.
With a few retail transactions finally closing in various markets, we are now starting to get a better feel for realistic values. Until now, we have really just been guessing what some aircraft are worth because there have been no retail sales to use as a benchmark. I thought I might spend a few weeks updating everyone on some particular markets I have been actively engaged in. I will start with the Citation Excel / XLS markets, as I just completed an acquisition project in this market earlier this week
When we first started looking at these two markets in early May, there were 44 Citation Excels for sale representing almost 12% of the fleet, and 35 Citation XLS’s for sale representing almost 11% of that fleet. Early model Excels were being offered in the low $4’s and the later models in the mid to upper $5’s. As with just about all markets, there were also several aircraft that had asking prices $3-$4M higher than current market conditions could support.
At the same time (early May) early model Citation XLS aircraft were being offered in the low to mid $7’s and brand new XLS aircraft & delivery positions were asking $9 – $10M +. After discussing the differences between the Excel & XLS aircraft with my client, as well as observing the continuing downward pressure on prices, it was decided that the best option was to see if there were any XLS sellers that would bend to market pressure and sell their aircraft at a steep discount.
It would probably not surprise many of you that we found a few sellers that were willing to discount their aircraft further in order to sell it. What I found surprising was just how many of those 35 Citation XLS aircraft were not truly for sale and how many ended up removing their aircraft from the market when a real buyer started making actual offers. It seems a majority of these aircraft were put on the market last year and had not received any offers in 2009. With no offers to consider, many owners did not know just how far prices had actually fallen and had unrealistic expectations. Once a real offer came in, their agent would attempt to educate them, but the sticker shock was just too great in many cases.
In order to avoid this problem, we try to keep our listing clients up to date on comparable availability and sales on a regular basis. Rather than wait until a real offer is received to tell you the bad news (or good news depending on the market), we would rather you have that information well in advance so you can be prepared to react appropriately when an offer is presented. Real buyers are a rare commodity these days and if you aren’t armed with the most current market data you risk loosing him with an unrealistic counter, only to be talking much lower numbers when the next buyer comes knocking.
In the end, we did find a very good XLS that the Seller was ready to get rid of. In those 6 weeks of digging, I would estimate that the XLS market came down another 10-15%. Many Sellers who were not willing to meet market conditions ended up removing their aircraft from the market during that time, so inventory levels have now come down from 11% to about 9% of the fleet. I would say that market now starts in the low $6’s and tops out around the upper $8’s for a zero time airplane or near term delivery position.
The Excel market has fallen even further, with the introduction of several high time Netjets airplanes to that market. Those airplanes have been offered at extremely low numbers which has put renewed pressure on the early model, higher time aircraft. I would say prices on newer, lower time Excels top out in the mid to high $4’s, primarily because of the availability of early model XLS’s.
There had only been a few Citation Excel transactions over the first half of the year and when we started looking in early May, there had not been one retail transaction on an XLS in 2009. Since then, there have been a handful of transactions in each market.
That about sums it up. We have received several offers to purchase over the last two weeks and we currently have several aircraft under contract. I’m not sure which market I will write about next week – any requests out there?
Toby J. Smith
JBA Aviation, Inc.