In order to get a taste of the current climate in the business jet resale industry, one has to only take a look at the headlines of our major publications for January 2009. “Backlogs shrinking at the major OEMs” “As distressed Detroit drops its jets, bizav ponders the fallout” (Aviation International News – January 2009). “Used Business Jet Inventories rise sharply.” (Business & Commercial Aviation – January 2009).”
Demand for corporate jet aircraft began to taper off in early 2008, but demand from overseas buyers kept transactions flowing through the end of the second quarter. The global market then entered the traditional slowdown we usually see during the summer months. Only this time, the “summer slowdown” continued right on past Christmas. Meanwhile, as demand continued to stagnate, supply was steadily climbing in reaction to sliding economic conditions in the U.S. and around the world. By the fourth quarter, prices on pre-owned aircraft and brand new aircraft delivery positions started falling rapidly to try and entice potential buyers.
Some of the hardest hit markets were on large & ultra-long range aircraft, which had been demanding a significant premium for aircraft ready to be put in operation immediately. From October, 2008 to today, most of these markets lost 30-40% in value and prices continue to slide for the time being. The number of jet aircraft for sale today is 68% greater than it was only one year ago. Contributing to these dismal figures are the continued struggles of corporate profits around the world and some bad press for business aviation in the U.S.
However, for the first three weeks of business in 2009, the jet market has seen a significant increase in activity. It seems the large drop in prices has spurred some buyers who had been on the fence to make offers. Values have already fallen by a greater percentage over the last six months than they fell for the three year period in 2001-2003. Though I do feel the market has some more downside risk left, baring some Black Swan Event like 9/11, and assuming our new President can inject some confidence into the American consumers, I have hopes that prices might begin to stabilize in the not too distant future.
Toby J. Smith
JBA Aviation, Inc.