As 2018 gets going, there is cautious optimism in the business-aircraft transaction world. Full-year 2017 deliveries, up just more than 1 percent at the three-quarter pole, according to GAMA's official numbers, are expected to be flat to up slightly when the final figures are tallied. The optimism stretches to the used market, where pockets of positive news and some encouraging data points have many looking to brighter days ahead.
Last year "was a success for the pre-owned business jet industry," declared Hagerty Jet Group in its 2017 fourth-quarter market update. "There was an uptick in transactions, inventory declined and prices in many of the Gulfstream markets are stabilizing."
Figures shared by Hagerty underscore its view. Hagerty tracks several key metrics, including the highest and lowest numbers of aircraft on the market during a given quarter within the last 24 months. Among the eight Gulfstream models tracked in its update, five—including all three in-production models, the G650, G550 and G280—had their most recent quarterly lows sometime during 2017. Two, the GV and G150 (which saw its production come to an end with S/N 326, delivered in June), were at 24-month highs as 2017 came to an end, while the high-water marks for the other six models took place during 2017's first quarter.
Another positive: the low number of in-production Gulfstreams on the market—inventory levels for the the G650, G550 and G280 were at 4 percent or less as of late December. "The lack of late-model aircraft for sale should help Gulfstream sell new positions," Hagerty suggested.
That's one possibility. Another is that the firming of the used market, particularly in-production aircraft, could attract more sellers—a pattern that could extend as market fundamentals continue to strengthen.
"We believe that as soon as we get any uptick in demand, there are additional used aircraft, often younger aircraft, that hit the market," wrote Canaccord Genuity analyst Ken Herbert. "We believe the strength in traffic should continue, and the fundamentals will eventually drive significant increases in this market, but we are still cautious heading into 2018 and see the potential for a greater pick-up in 2019."
Preowned-aircraft market gurus compile a lot of data, but none of it directly measures intent to sell. The closet indicators are arguably the figures that track the total number of aircraft on the market, how long they're there, and how many of them are removed from the preowned inventory before being sold.
AircraftPost, which compiles transaction data of about 55 business-jet models that make up the market's core—think Embraer Phenom 300s through Gulfstream G650s—tracks these numbers. Recent macro figures that focus on in-production aircraft, which typically move faster than their out-of-production counterparts, suggest that Canaccord's view is spot-on.
In each of the last three calendar years, the percentage of current-generation aircraft on the market that were removed from the preowned inventory has risen, AircraftPost figures show. The figure, just 5.7 percent in 2014, approached 15 percent in 2017, AircraftPost's preliminary full-year figures showed. Not surprisingly, the average number of days on the market rose along a similar trajectory, from 158 days in 2015 to 304 days last year.
Among in-production models with in-service fleets of at least 100 aircraft, making them most likely to have active preowned feedstock, the only models that saw days-on-market declines were the Dassault Falcon 7X and 900EX/LX. The G450 and G550 were flat.
A deeper look into the numbers unveils signs of a slow turnaround. The percentage of current-production aircraft on the market that sold rose to 47 percent in 2017, climbing more than 13 points over year-earlier numbers and recording the first year-over-year increase since 2014. In addition, the percentage of the total in-production fleet that changed hands edged above 6 percent last year, up from 4.2 percent in 2016.
The percentage of in-production aircraft on the market reached 13 percent in 2017. Among the 22 models AircraftPost tracks that were in production in 2017, six showed year-over-year inventory declines.
While many of these data points suggest the preowned market is firming, the great unknown is whether this will pull more inventory out of the shadows. In 2016, 41 of the 469 aircraft offered for sale and tracked by AircraftPost were removed—just under 9 percent. The jump to nearly 15 percent last year was the largest-year-over-year jump in at least five years, suggesting that there are many owners of current-generation aircraft eager to sell.