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 Business Aircraft Sales, Prices Continue Upswing

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PostSubject: Business Aircraft Sales, Prices Continue Upswing   Wed Mar 07, 2012 9:25 pm

The business aviation market is showing early signs that the momentum at the end of last year is carrying into 2012 with key indicators improving in January, according to initial analyst reports. Used aircraft sales continued to strengthen, and prices jumped dramatically in January for the first time in months, according to Jetnet’s latest report.

Business aircraft flights, meanwhile, reached their highest levels of activity in nearly a year, according to FAA and Morgan Stanley data.

This dovetails with anecdotes from some of the original equipment manufacturers (OEMs) reporting increases in interest and activity in January, which traditionally is a slower month for aircraft sales.

The percentage of the fleet for sale is down across all categories and fell below 10% for turboprops in particular, “clearly moving it into a seller’s market,” Jetnet says. Business jets for sale were down almost a full percentage point to 13.7% in January, and turboprops were down by more than a percentage point to 9.3%. Both turbine and piston helicopters for sale also declined to 6.4% and 6%, respectively.

Average asking prices, meanwhile, were up dramatically in all categories except piston helicopters in January. Prices jumped 51.6% for turboprops and 58% for turbine helicopters, Jetnet says. They also improved for business jets, while piston helicopter prices slid modestly.

The overall increase in prices is welcome news for the OEMs, some of which had to offer deep discounts to move unsold inventory. It’s not the first increase in prices since the downturn. There were temporary upticks early last year, and analysts caution that one month does not make a trend.

But industry expert Brian Foley, owner of consultancy Brian Foley Associations, notes that prices in January 2011 “will have been near the low-water mark for turboprop pricing and that 2012 could potentially see pricing approaching levels not seen in three years.”

A number of factors could play into the price increases, particularly for the turboprop changes–including the mix of turboprops sold. Fuel prices might be sparking some interest, but Foley cautions that fuel prices can be a double-edged sword for turboprops. “On one hand, since turboprops are more fuel-efficient than jets, it helps to drive their value proposition,” he says. “However, within the category, buyers at the low end of the turboprop product spectrum are more sensitive to overall operating costs than buyers at the high end, which could end up bifurcating the market much as we’ve seen with business jets.”

Beyond used aircraft inventory, other market indicators showed positive signs in January. Business aircraft flights improved 1.27% in January, reaching the highest level since June, analyst Morgan Stanley says. Traffic was up for Gulfstream and Bombardier models, although down 0.4% for Cessna aircraft.

The OEM chiefs also have been encouraged by the beginning of 2012. Scott Donnelly, chairman and CEO of Cessna Aircraft parent Textron, says sales have gotten off to a better start this year than they have in past years.

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