From the Editor: Slim pickings in the used market

This means that the scarcer number of airplanes for sale can drive up prices, that these aircraft sell faster, and that customers are driven to consider buying new airplanes as price gaps narrow. Or should I say, “asking prices.” Manufacturers are apparently still feeling the residual effects of the 2008-2009 recession and are under pressure—as always—to keep assembly lines moving and avoid backlogs. Even if it means taking as much as a few million dollars off full-retail list prices. So, there’s a competitive dynamic at work whereby smaller inventories of newer preowned airplanes can drive down new-airplane prices. And it’s at work now.

JetNet says inventory dropped from 11 percent of the jet fleet and 7.7 percent of the turboprop fleet in 2016 to 9.9 and 7.2 percent, respectively, in 2017. Translate those percentages into units, and the fleet numbers become more tangible.

In July 2016, JetNet said that 23 TBM 850s were for sale. By January 2017, that number dropped to 16, or just 4.8 percent of the TBM 850 fleet. For Pilatus’ PC–12NGs, the numbers were 32 and 30 airplanes for the same time frames, for a drop to four percent of that fleet. Citation CJ3s? They were especially popular in the used market, dropping from 25 to 14 airplanes by January 2017, representing a mere 3.4 percent of the CJ3 fleet. Gulfstream’s G450? July 2016, 35 on the market; January 2017, 21 airplanes, or 5.9 percent of the fleet. A seller’s market indeed.

The for-sale numbers may be even lower by now. “Last year there were 35 good used Phenom 100s on the market,” said Matt Hagans, president of Eagle Creek Aviation Services, an Embraer, Cessna, and Twin Commander sales and service center with locations in Indianapolis and Naples, Florida. “Now there’s just three, and only nine Citation XLSs.” That represents just 1 percent and 3 percent of those respective airplanes’ total fleet sizes. Hagans says he spends much of his time trying to hunt down scarce airplanes for his prospective buyers.

With all the recent stock market gyrations and economic uncertainties, how can this buying activity be explained? Part of it is because a buildup of the choicest, recent-model, low-time turbines had been snapped up by last autumn. But another interesting factor may well be the newly enacted changes to the tax codes. Previously, buyers could depreciate their purchases over a five- or seven-year period. Now, 100 percent can be deducted in the first year of ownership. That goes for both new and used aircraft purchases.

Anyone with even a smattering of education in macroeconomics has heard of the aphorism “a rising tide lifts all boats.” That saying has been largely attributed to President John F. Kennedy, who used the phrase to counter criticism of an Arkansas dam project as a pork-barrel initiative. In terms of today’s turbine market, the tide may be rising, for both new and used turbines. Thinking of buying? Maybe now’s the time—before any more price inflation kicks in, the used inventory shrinks even more, and new airplanes may be the only alternatives.AOPA

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