Cox Market Index Report (Dec. 2016)

I believe that there are four – key market influencers that are showing up in the trend data of my report. These are:

  1. The U.S. Presidential Election is Over, and Business Aviation opinion is highly optimistic regarding the winner (President Elect Donald Trump)
  2. New Business Aircraft Production/Delivery has been Reduced
  3. The aircraft that have sold in 2016 have all been ‘right-priced’, or at least ‘right-sold’, depending on which side of the deal you might be
  4. Several Markets continue on an up-swing (Dow Jones Industrial Average, U.S. Dollar Exchange Rate versus the Great British Pound, and West Texas Intermediate Crude)

Much of the improvement in the Cox Market Index is found in the “Number of Days-On-Market.” There is continual improvement in the indices created from the composite list of aircraft used in my reports, i.e. the number of days continue to reduce – which means that business jets, and turboprops are generally selling faster (less-time) than they were previously.

It is fascinating to me to see ‘Percentage-For-Sale’ numbers in single digits, like for instance the King Air 350i (3%), Pilatus PC12 (4.73%), and the Gulfstream GV (4.81%.)  Yes, there are still over-supplied markets like the Falcon 50EX (20%), the Citation Bravo (16.16%), and the Learjet 60 (15.31%).

The percentage for sale figures derived from my chosen composite list of aircraft, do not show the entire picture of the marketplace, because when one looks at current production aircraft markets for the same data, a different picture emerges, as follows: Embraer Lineage (25%), Falcon 900LX (19.61%), Lear 40XR (16.13%), and Citation Sovereign+ (12.31%), it appears that there is an inversion that occurs for certain aircraft that are near new, versus aircraft that are more than 10 years old.

This inversion leads me to draw the following conclusions:

  • There are still too many aircraft being built, compared to the number of actual buyers
  • So many new aircraft were sold because of bonus depreciation, that have now reached, or surpassed their length of depreciation (5, or 7 years), and are now flooding the market on the high-end (young aircraft)
  • This same batch of aircraft produced after the Global Financial Crisis, and sold at large discounts back then, are now all coming out of, or have dropped off from the warranty programs that were included in the new sale
  • It is cheaper to purchase a new aircraft today, than it was 5-to-6 years ago…The OEM’s will fight to provide you with a truly massive discount (I’ve heard of 25%), just to make a sale today
  • Many of the older aircraft that are advertised, or off-market (scourge), are still in the hands of mis-guided/disillusioned owners who have yet to right-price their aircraft, to enable it to sell
  • Many of the markets specific to older, but range/cabin capable aircraft, for instance the GIVSP, and GV, have been well, and truly cherry-picked, hence the extremely low percentage for sale numbers seen in some of these markets right-now/today
  • The banks are reaping the crops that they have continually sowed for the past 20 years…which has been their refusal to finance aircraft older than 10 years of age
  • Again the outlawing of older aircraft by safety rating companies that audit charter companies, has had a significant effect on the market

I could go on, but it will only sound like a rant!

Obviously the paradigm has changed in our industry. My evidence for you, in proving this, is how I classify the worldwide fleet of business jets by placing them into ‘three’ definite divisions/strata, as follows:

Top Division/Strata

The new, and nearly new aircraft which is a technologically adept/capable aircraft that breeze through the ‘now’, and Future Air Navigation (FANs) mandated airspace requirements, and that they are eligible for financing due to being less than 10 years old, are under warranty, etc. etc.

Versus…

The Middle Division/Strata (Majority)

The plus 10 year old fleet, that require the aftermarket to enable them to pass FANs, and other mandates, and have difficulty in getting funded by a bank. However the smarter buyers are still finding deals in this segment (the largest segment of the market.)

Versus…

The Bottom Division/Strata

Really old. Really Ugly. Not Stage III Compliant. Not a hope in hell of ever being financed, etc.

So…

Where are we all heading in this? Nobody really knows, except for the time-bandits amongst us…if only it were real (time travel.)

Here are the numbers depicted in my report graphs:

market-index-graph-12-14-16

days-on-market-12-14-16

commodities-12-14-16

number-of-aircraft-12-14-16

percentage-4-sale-12-14-16

low-asking-price-12-14-16

composite-aircraft-list

If we don’t speak before then, please allow me to wish you a very Happy Christmas.

 

 

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