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Summer 2009

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By now, practically everyone knows that the business aircraft market has been hit hard by the current recession and anti-aircraft sentiment in Washington. We have seen prices drop between 40 to 60% on business jets and up to 30% on turbo props as compared to the spring 2008.

Hardest hit seems to be the mid- and large-jet categories. Early Hawker 800XP’s are down more than 50% in value, trading in the high $3MM’s. Citation Excel’s have also dropped drastically.

The big story is probably the large jets that were so hot last year -- early GIV’s and Falcon 900’s are below $10MM, and GV’s are in the mid-to-low $20 million range.

The reason for this dramatic value drop is simple economics, supply and demand. We are at record levels of aircraft for sale. Even formally stable markets, such are the CJ2 have bloated inventory levels.

The big question I get is: Are we at the bottom yet? I can only answer with “I think we are, but...” And that’s my best answer. The inventory levels are stabilizing; we are seeing more interest and real buyers, rather than “bottom feeders” looking to steal aircraft. On the flip side, even these buyers expect to get a great deal on whatever aircraft they are buying.

With the current inventory levels, I do not expect to see prices recovering any time soon. An optimistically best case scenario would be if prices start moving up in two years. They could easily stay at these levels for 3-4 years.

The next question seems to be, “Why buy now?” That is easy to answer. Right now you can buy great aircraft cheap. Next year it will be good aircraft cheap. And when you can no longer buy the good aircraft cheap, then the prices will start to escalate. That great one-owner Falcon 50EX selling for $7.5 today will be a good three-owner aircraft next year.

Needless to say, the current price levels are a result of the economic turmoil we have experienced in the last nine months.

The secondary factor to this “Buyer’s Market” is the fact that aviation finance companies are reluctant to lend on aircraft. They are still trying to understand the value of their portfolios before lending more funds. Also, the availability of funds for these finance companies has also been an issue., For many years, they could access Wall Street for funds either through the commercial paper or bond markets. That source had dried up and is just starting to flow again.

IS YOUR AIRCRAFT SUITED FOR INTERNATIONAL SALE?
by Jeremy R.C. Cox

The U.S. dollar is gradually returning to its normal traded value, and therefore, U.S. registered used aircraft are also again becoming attractive to foreign buyers. The current used-market is burgeoning with unsold inventory; thus, a new strategy is in order for a new seller if he is going to find success in a transaction. An area worth exploring is the possible sale of the aircraft off-shore; but before you start looking into customs regulations, first you need to understand the differences between the airworthiness requirements of the Federal Aviation Administration (FAA) here in the U.S. versus those in other countries.

Aviation was born here in the U.S.A.; however, the French were the first to regulate aviation with their Fédération Aéronautique Internationale, starting less than two years after the Wright brothers made history here in 1903. The U.S. governing body overseeing civil aviation was founded in 1926 and later became the FAA in 1958.

Globally today, civil aviation on the seven continents and within their associated resident countries are governed by three major regulating systems which are: the European system, the American system and the British system. These systems widely differ from each other as follows: The European system is both political and bureaucratic, with its main functions being to promote safety and to derive revenue from civil flight operations. The American system is mainly political, with its main functions being to promote safety and to reduce cost that exists from civil flight operations. Lastly, the British system is mainly bureaucratic. The Australians, Canadians and Indians follow the British system. The South Americans, Chinese, Japanese, Indonesians, etc., all appear to like and follow our system, while the rest of the World is either following or now adopting the European system. The British system is on the decline and our FAA system is struggling to make its voice heard as the better, cost-effective system against what is coming out of Strasbourg and the Netherlands today. This is a losing battle. So what does this mean to you?

The bottom-line is simple, if you are currently ‘spec-ing out’ your new aircraft future delivery, make sure that you buy the European options now instead of having to retrofit them later. If you already own your aircraft, then you should gradually upgrade it to meet the European system. This rationale shall make your selling position in the future far stronger than if you equip to only comply with the American system regulations (the FAA will never restrict you to having more safety equipment than you are required to have). So, what are the European options that you should be upgrading to?

I would use JAR-OPS-1 as your road-map. This document states that all of the following equipment is required to conduct commercial operations within the European Union Member Countries:

• Dual Landing Lights
• ACAS II (Airborne Collision Avoidance Sem) aka TCAS II w/ Change 7
• Dual Altimeters in both inches and Mbs
• TAWS (Terrain Awareness System)
• Cosmic Radiation Detector (above FL490)
• Radar (Weather Detection)
• Cockpit Voice Recorder
• Crew Protective Breathing Equip (PBE)
• 406 MHz ELT
• Crash Axe or Crowbar
• FDR (25 hr Flight Data Recorder/ 17 Parameters/42 Parameters > 27,000 Kgs)
• Dual 8.33 KHz Spaced Radios
• Dual FM Immune Navigation Systems
• Dual/Independent Long Range Navs
• Audio Panel within reach of the crew

JETBROKERS WORKING FOR YOU

If you have put your aircraft on the market without a broker, or are considering selling your aircraft, now is the time to consider listing with JetBrokers. The most important function of a broker is to find the right market for your airplane quickly so you can get the highest price while it’s still fresh on the market. This requires a thorough knowledge of what the market is doing right now, knowledge impossible to acquire with the sale of one aircraft. We are in the resale market every day, and have worked with buyers and sellers of aircraft for an aggregate of almost a century.

Most sellers without a broker fail to price the aircraft optimally, within a price range designed to get the aircraft sold at the best price possible, given the owner’s time frame and the market conditions. In this market, it is not unrealistic to receive between ten and twenty calls per week from various buyers for your aircraft. How do you know, without comparisons that include all of the maintenance and market variables, what your aircraft is worth? And is this the best use of your time, or the best way to deal with what is, after all, a very expensive piece of capital equipment?

JETBROKERS EUROPE

We are very proud to announce that JetBrokers Europe has been re-established and expanded this late summer of 2009. With an office already open in London, JetBrokers Europe has also opened an office in Geneva, Switzerland, where the staff in both of these offices have been trained to serve the ever-growing Russian and European Business Aircraft and Helicopter marketplaces by offering professional brokerage services in several different languages other than English. These include French, German, Spanish and Russian.

JETBROKERS GROWING AGAIN

JetBrokers, Inc. has added another experienced salesperson to the organization. We welcome Richard K. Nickerson as VP-Sales. Rick has vast experience in the business aviation arena and has spent many years selling aircraft. His background includes new helicopters sales for Bell and Augusta, as well as many years with Cessna.

Rick can be reached directly at 1-636-449-2838 or in the St. Louis Office at 1-800-532-6900.

DIRECT OPERATING COST

The DOC (Direct Operating Cost) used in the comparison charts includes fuel ($4.30 per gallon), engine reserves (either MSP or overhaul agency estimates), and maintenance costs using information gathered from operators. All inspection estimates are based upon the aircraft operating 400 hours per year and averaging 1.5 hour legs.

JET AIRCRAFT COMPARISON SUMMARY

TURBO PROPS COMPARISON SUMMARY