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Luxury Aviation: A Slowdown on the Horizon?

Aircrafts: Traditionally, the United States' buyers have made up 50 to 70-percent of luxury aircraft sales; whether for new aircraft or previously owned. In the last four months there has been much discussion as to whether the US is going into a recession or is currently in a recession. This discussion leads to the next question: Are corporate aircraft sales going to decline along with the declining US economy? Historically, the answer to this question would be without hesitation, YES. Today the answer to this question would be probably NOT LIKELY.

The reason the answer would be not likely is because in the last 18 months, US buyers have made up 20 to 30-percent of the market and international buyers make up 70 to 80-percent of the buyers for long range luxury aircraft. US buyers no longer are the majority buyer, they are the minority.

As luxury aircraft are priced in US dollars, with the continued weakening US dollar, international buyers are able to pay the asking price as their foreign currency affords them a 35 to 45-percent discount without having to negotiate.

Rising Demand, Rising Prices
As manufacturers of long range aircraft (Gulfstream 550, Global Express/XRS, Falcon 7X, Boeing Business Jets) have seen their order books increase and delivery times stretch into 2012 and beyond, buyers have pushed prices of late model, nearly new aircraft that are currently in service and available for immediate delivery over 20-percent of the cost of a new plane. Usually buyers looking to acquire these types of aircraft want the here and now. Sure, buyers are placing orders for deliveries in the year 2012 and beyond, but in the meantime, they want a plane today -- here and now. The want it now's are the ones who are willing to pay the premium pricing for having something that they can take delivery of now and not in 2012 or beyond.

Since long range aircraft has been commanding 20-percent-plus increases for the here and now availability, older models (Challenger 604, GIV, GIVSP, Falcon 2000EX, Falcon 900EX) have also seen an increase in pricing as well. As more owners come to realize that their older, higher time aircraft have increased in value, they have begun to place them on the market for sale. Prices for these planes have also seen a 20-percent-plus increase in pricing in the last 18 months and we may see these prices come down slightly with the slow down in the US economy, as these are older higher time planes and become less attractive with age.

Future of Luxury Aircraft?
With the increased global economy and increasing global demand for long range aircraft, the market will continue to be strong regardless of a slowdown in the US economy.

The one question that needs to be asked is: Will pricing for nearly new Global XRS, Gulfstream 550, Falcon 7X or Boeing Business Jets continue to increase or level off?

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