2004 Volume 2

MARKET LEADER™

Synopsis
Aircraft with no 'issues,' have hit bottom - and bounced. No longer can low-time, no-damage, squawk-free airplanes be found at fire sale prices. Between 2001 and 2003, each sale price tended to be below the last. Now, there is genuine upward pressure, especially on the good airplanes. Buyers, don't tarry.

Reports from the marketplace continue to be diverse. While everyone is enjoying the increased activity, many are concerned about the 'what ifs.' What if stronger prices bring more airplanes onto the market, creating another glut? What if there is another terror attack? To some degree, the first concern is already happening. Many sellers who gave up on the market a year ago, are back in. The difference - now there is a market. Airplanes are selling and amazingly, many of the customers are dealers.

No doubt about it, most segments of the market continue to be price driven. Years of distress sales and the worst market in memory will not go away overnight. Buyers still approach each aircraft smaller than a G-IV with the idea of getting a deal. While there remain plenty of airplanes to choose from, good economic news has produced a growing supply of buyers.

Piston Singles
The strongest parts of the market are the very top end (long range jets) and the light singles. At least one dealer reported that he is able to sell the better Cessna 172s before he actually gets them home. Demand for well-maintained Warriors, Cherokee 180s and just about any other fixed gear, unpressurized, normally aspirated single is good. This demand is gradually spreading to the complex singles. Prices for upgraded, early Mooney 201s and Piper Arrows edged up this quarter.

Piston Twins
There is activity - more than we've seen in a long time, but it's got to be priced right, or loaded, or both. We compared current availability levels on several twins to November of 2003, and there is little change. According to Jetnet, 12% of the 58 Barons are for sale in May of 2004, and 12.1% were available in November, 2003. The 58P market has cleaned up slightly, going from 15% to 13.9%. This has not changed prices. The Cessna 421B market is also flat -14% for sale in November of last year and 14% now. 421Cs are also about the same, 19% in November, and six months later it's 18.6%. In the light twin market, there is some upward pressure on values. It seems that all things considered - fuel burn, insurance and purchase price - airplanes like Senecas and Twin Comanches were best buys - and prices moved up.

Turboprops
King Airs are leading the recovery in this segment. Prices are clearly up for C90As and Bs. The number available dropped from 10% in November 2003 to 9% in May of this year. The B200 is probably the most remarkable propeller-driven market. Prices have jumped more than $200,000 on some models during the last two quarters. B200 availability has not changed much, hovering just above 7%. This progress has moved the later model straight 200s off the bottom. Actually, it has turned the entire turboprop market around. There has been little or no change in the inventory levels (10%) of Cessna Conquest IIs during the past six months, yet there is some upward pressure on prices. The Cheyenne II market has cleaned up slightly, going from 14% for sale in November to 12% now. This has stabilized values. There are more Twin Commander 690Bs available now (13.8%) than six months ago (12%), but prices are moving north anyway.

Jets
Trickle down economics works very well in the jet market. It all started with the big iron, Gulfstream IVSPs, Falcon 900EXs and Challenger 604s. These markets dried up significantly. Numbers for sale went way down (below 5%), and prices - way up. Many jets saw big price increases this quarter. Falcon 50s and GIVs jumped $400k to $700k depending on year model. Falcon 900Bs and GIVSPs gained between $1M and $2M. It is important to note that the jet market is very dynamic. For example, the GIV market stats may show a slight increase in availability. However, about a third of those airplanes are in prebuy - they've been sold. The word 'hot' was frequently used when discussing the GIV, IVSP and GV markets. We haven't heard that in years. To complicate matters, prices have been strong enough to attract new sellers, people who had formerly given up on the market. Will this dampen the recovery? It's too early to tell. If the economy continues to produce good news and there is no other extreme event within U. S. borders, the general aviation recovery is expected to continue. It has already spread to the light jets - CJs are up for the second quarter in a row. Only the older turbojets have been bypassed. As always, it is very important to adjust for condition, times and history. Fresh overhauls, RVSM, and new paint & interior make an entirely different airplane than one with deferred everything.

*Percentage of fleet for sale is per Jetnet. See www.Jetnet.com

There was a time when having a DME was almost a necessity. Some of us would have been lost without it, literally. Then came RNAV and Loran, and probably others that once had great value in any airplane - not anymore. The advent of GPS has been like a wonder drug for general aviation. Now, just about every new single engine airplane can be bought with a glass cockpit, TCAS, Ground Prox, weather uplink and situational awareness which any student pilot can master. DMEs, RNAVs, Lorans, ADFs and other outdated radios are not add-ons, especially on complex singles and larger.

Thank You for choosing Vref, The Accurate One - The Only One You Need!

Have a Happy Holiday Season!

©2004 by Vref Publishing, Inc. All Rights Reserved.

Past Articles:

• Vref 2003 Volume 3
• Vref 2003 Volume 4
• Vref 2004 Volume 2
• Vref 2004 Volume 3
• Vref 2004 Volume 4

For more information about how we can satisfy your aircraft needs, please contact: sales@aircraftinvestmentgroup.com