Private Aviation: A Buyer’s Market?

According to Reigel, when the 2008 recession first hit, airplane manufacturers mistakenly expected buyers in ex-U.S. markets not to waver on taking delivery of existing orders when the U.S. economy faltered. However, deliveries were cancelled, sending stocks of some major jet manufacturers into a free fall.

At the same time, a wave of fresh “for-sale” listings from the recent buyers of new planes flooded the market, meaning the top of that market got stuck with aircraft they couldn’t sell. The situation was further compounded around 2012 when the Gulfstream 650 emerged as the premier plane for the wealthy elite and multinational banks in top end of the market, while Embraer’s Phenom 300, which is sold in large part to fractional providers, simultaneously enjoyed success at the bottom of market.

“Many manufacturers believed that sales of these two aircrafts were leading indicators of a full-blown recovery,” recalls Riegel, “but those were false indicators.” Today’s resale market includes thousands of owners who strategically continued to pay overhead costs for years, waiting to be able sell their planes without taking a 50 percent loss. It also encompasses those who purchased new planes recently and want to unload their previous ones. “Most Gulfstream 650 owners, for example, owned other large planes before they upgraded, but now they can’t get rid of those old planes at any price,” he explains. “So today you have wealthy buyers shopping around for a $50 million plane, and these are the types of buyers who ordinarily wouldn’t consider a used aircraft at any price. Because of this glut of used aircraft, beautifully refurbished aircraft with less than 30,000 miles are selling for $15 million,” he says.

These are not planes with arcane systems, Riegel adds. “They incorporate almost all the best systems, the computation fluid dynamics and many of the same high-end features and amenities you would still find on many of today’s brand new planes,” he says. “There are many staggering deals for great aircraft available at one-half to one-third of a comparable new aircraft in the
upper-end and the super mid-size categories of the market. Buyers go in thinking they’ll purchase a Phenom 300, and in process learn I can get them into a better plane with faster speed, greater range and higher capacity costing 25 percent of the price of that new Phenom 300, and that decision takes them a few seconds.”

The bottom line? A saturated pipeline is spitting out planes at unbelievable prices, says Riegel. “Those variables make for a buyer’s market the likes of which I’ve never seen.”