There has been conversation and many questions over the last few years relating to residual values, value retention, value as a percentage of cost new, values coming back, et al. For years, our industry used a 3 to 4 percent annualized depreciation schedule to gauge future values for business jets. Due to the fact our business was in its infancy, we did not possess formidable history to determine the validity of the schedule. When we buy-in to the fundamental assumption that aircraft are depreciating assets with a 30-year life cycle, most business jets will reflect an average midlife (15 years) value retention of 50 percent, when compared to the original cost new.
Vol. 26, No. 2 | June 6, 2012 | Go to Charts
by Carl Janssens, ASA | Aircraft Bluebook — Price Digest
Optimists see the silver lining behind the cloud while the pessimist only sees the cloud. Optimism continues to be the silver lining in the pre-owned aircraft market. However, reality of the dark cloud dictates an awareness and calculated approach.
Such are the conditions in the current ever-evolving pre-owned market. For the most part, the glory days of aircraft values being treated as premium investment opportunities are now nothing more than a faded memory. Knowledgeable buyers and sellers are keenly aware of this. Change of ownership continues at a slow to steady pace while values for the most part show continued depreciation. The exceptions are late model long range executive business jets.
Hawker Beechcraft Corp. in Wichita, Kan., is selling 10 King Air twin-engine turboprop general aviation aircraft to the Chinese aviation company Avion Pacific Ltd. in Shenzhen, China, for about $50 million. Avion Pacific will use the King Air 350i and King Air C90GTx aircraft for VIP travel, pilot training, aerial mapping and weather modification. Deliveries are to begin this winter.
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Finally, the pre-owned aircraft market moved in a positive direction in the first quarter of 2010. Late-model, large-cabin, long-range aircraft were selling at or better than values published in the Aircraft Bluebook.
External factors such as increased sales, a slight decline of available inventory and world market competition could all be considered causes for the improvement. Although this early indication of a slow recovery is in progress, it is too early to celebrate. Any positive sign going forward is far better than where the used aircraft market has been.
With the exception of the late-model, large-cabin class, most of the other business aircraft are not yet recovering in value. The good news is that values are showing more stability. Market activity is on the rise leaving a more optimistic perception that values are not exposed to the risks experienced in the last twenty months.
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