Large Cabin Business Jet Values Fall 4.4% in Q4 2016
Second edition of Intercontinental Aircraft Group's thejetwatch Large Cabin Value Index (LCVI) Report.
The LCVI is a non-weighted index designed to track the average change in market values for large cabin business jets. Tracking began on July 1, 2016 at a value of 230,000. It stood at 205,558 as of December 31st.
This represents a 10.6% average loss in value for the second half of 2016, or 21.6% per annum.
If this rate was to continue, large cabin business jets would lose half of their value every 3 years.
Underlying values are derived through a proprietary algorithm, developed for theJetWatch by Intercontinental Aircraft Group LLC, in consultation with outside experts in data management and statistics. The algorithm analyses real-time data, in combination with historically established patterns and correlations, to estimate current market values. theJetWatch is tracking over 73,000 data points for almost 1,500 aircraft.
For the full version of the Q4 LCVI Report, please go to http://iagjets.com/
The following is a summary by group, as classified by theJetWatch (with Q4 change):
Ultra Long Range, Contemporary (-3.9%)
G650/G550, Global 6000/XRS, F7X
Liquidity in this group is heavily weighted towards the G550, which saw no less than 27 published price reductions during the 4th Quarter, contributing to its 7.7% loss in value as calculated by the LCVI. This is likely to further impact Global 6000 and Falcon 7X values in the near-term. Those models suffered a calculated loss in value of just .6% and 3.4% respectively, following more pronounced declines in Q3. Liquidity is particularly low for the Falcon 7X, with 32 months of available inventory.
Finally, a note on the G650 market: The pricing gap vs. the G550 appears unsustainably large.
Long Range, Contemporary (-1.9%)
G450, Falcon 900EX EASy/LX, Global 5000
This class held value relatively well during Q4 following a 7% decline in Q3. The G450 market, in particular, produced 9 sales during the period. Unfortunately, that was counter-balanced with 8 new listings, leaving overall inventory flat. The Global 5000 also had a fairly strong Q4 with 4 sales following its 7%+ price decline in Q3.
Similar to the Falcon 7X, the Falcon 900EX EASy/LX also suffers from low liquidity - just 4 sales in the past 6 months against 20 active listings. That's 30 months of inventory and a red flag for near-term prices.
Long Range and Above, Out of Production (-5.0%)
GV, GIV-SP, Global Express, F900C, F900EX
A consistent theme of 2016 has been the strong demand seen in the GV market, which has now also spilled over to the Global Express. These aircraft offer incredible capability at current price levels - which are roughly half of the average basis for a G550 or XRS/6000. Price stability in these markets has been offset by continued weakness in the GIV-SP and Falcon 900C/EX, resulting in a 5.0% drop for the class as a whole.
Large, Contemporary (-3.3%)
CL605/CL650, F2000EX EASy/LX/LXS)
The Challenger 605 performed substantially better than the Falcon 2000EX EASy/LX/LXS in Q4, losing 2.3% in value vs. 6.4% for the Falcon. Despite relatively similar fleet sizes, the CL605 is trading at about a 2 to 1 clip.
Why? Possibly because Falcon sellers are priced at a 36% average premium to the CL605 for the same vintage.
Large, Out of Production (-7.5%)
CL604, F2000, F2000EX
Some continued weakness in this group, driven primarily by a second straight 10%+ quarterly decline in Falcon 2000 values. However, as of late, that market has picked up the pace - there were 7 sales in Q4 vs. 4 new listings - indicating the market found a price point it likes.
The CL604 fared better, losing a relatively modest 3.7% in Q4. However, a word of caution. While inventory appears down slightly over the past 6 months, that's more due to aircraft being withdrawn from the market than actually selling. In fact, there have been 7 more new listings than sales over the period.
Here's the interesting thing about this group: these planes sell. In fact, of all six groupings, the Geriatrics group has the highest liquidity ... by far.
In all, 28 aircraft have sold over the past 6 months against 48 currently on the market. That's 10.45 months of available inventory. The next best group has over 16 months ...
About the theJetWatch LCVI
The LCVI is formed by summing the average market values for each model-year of a specific aircraft type. A divisor was applied to weight each model equally as of July 1, 2016, at an index value of 10,000. Twenty-three different types were included, which resulted in an opening index value of 230,000.
Certain models have been excluded, such as non-purpose built business jets; models which were not in production as of 1990; and some sub-variants such as the Gulfstream 300/350 and 500; Falcon 2000DX, S and 900DX; etc.
About Intercontinental Aircraft Group LLC (IAG) and theJetWatch
IAG is a full service business jet transactional agency founded in 2012 by Jeff Habib and Cass Anderson, with locations in Manhattan, Silicon Valley and Seattle. IAG primarily assists clients with the acquisition and disposition of business jets.
theJetWatch is the data warehouse and consulting branch of IAG. Primarily focused on producing real-time market values for IAG's clients, theJetWatch also publishes a monthly newsletter covering business jet markets, economics, and ownership strategies.
Intercontinental Aircraft Group LLC