VREF Market Update June 2018

The first Quarter is behind us, and it is less then a month to EBACE. It’s hard to believe that the first half of the year is just about behind us. Just like the temperatures starting rise, aviation is also getting hot or should we say warmer? Activity levels are up, which means there are more active buyers and inventory levels in many categories are trending down. It’s the best news many of us have heard in a long time. While the Corporate Jet markets seem to be booming due to the new tax laws in the USA, there are also increasing back logs, and aircraft are selling with less market exposure, in many cases aircraft are not even making it to market prior to the resale. It appears the world or at least the aviation marketplace is less volatile or at least not as knee jerk as say the stock market, or North Korea’s stance on nuclear weapons. The economy is shaking off the jittery news that would have sent it into a tailspin a decade ago. There is no longer a negative stigma with buying or operating and aircraft and as we will see in the index below there are some rising stars in all of the segments we report. We are also less then 2 weeks away form the long awaited release of Vref 2.0. The new platform will be modern and offer a ton of new services, there is one in particular that I want to highlight, Vref Verified.

 

Vref Verified was created to provide the aviation community with a solution to the complex nature of valuing aircraft if the aircraft is either out of your experience and knowledge base or if it is just too complex to truly be done accurately. There are quite a few examples of why an aviation professional might require assistance with accurately creating a Vref valuation. One such example would be the ever-challenging world of aircraft trainers such as Skyhawk or 172’s. Many of these aircraft are trading for substantially higher prices then what we report at Vref, and we are aware of that. The problem is due to the fact that many are not aware of the proper add-on’s or the associated values with a totally remanufactured aircraft. In order for someone to accurately create the valuation they would need to rely on copious amounts of research or an expert in that segment. Now with Vref Verified for the fee of $100 our subscribers will get the assurance of knowing someone with the proper knowledge reviewed and verified the information for accuracy. This can then be presented to the client with confidence. The Vref Verified product is a reviewed and stamped valuation but it is not an appraisal and would not qualify as one. The more complicated the market, or aircraft the more buyers, lenders and sellers will start demanding for vetted valuations.

 

As the summer months continue to go by we will, be phasing more and more data into the platform. We will be communicating these updates to you directly. I know everyone has a busy summer planned, but don’t forget to report your closings.

Piston Singles – – This segment has bottomed and shown signs of increased demand, and inventory continues to drop. Many complex singles were showing a sign of hitting the bottom in the last quarter of 2017 with anend of the year activity level outpacing expectations. A few owners are getting realistic, or perhaps buyers are sensing the bottom surely must be near. As activity improved toward year-end, the aircraft with upgrades demanded substantially higher prices especially as inventory continues to drop.

There is a steady market inside and outside the U.S. for ready to go trainers, specifically Cessna 152s, 172s and Skyhawks, Piper Warriors and Arrowsand pricing while flat will start to see the benefit of the higher market demands. Cessna 172s, 206s, Cirrus SR22’s all benefited from stronger demand, and bottomed out values. Even newer pre-owned values (7 years or newer) have started to flatten which indicates that economics is at work.

Piston Twins – – This segment is finally showing signs of improvement but it still has room to go. A new uptrend in fuel prices is not helping, along with the move ups into older turbo-props for some buyers. Many of the aging twins are starting to stabilize, while the older aircraft without modifications or upgrades continue to fetch “old dog” prices. Still the G58 is the aircraft of choice for those people moving up from their single engine aircraft, and with 2020 looming we believe those aircraft already compliant will be more attractive then those aircraft not 2020 ready. Through it all, twin buyers are there if the price is right. There is a mission that only a pressurized twin can fill – small growing companies who want twin-engine safety on short legs with two or three passengers. More importantly, a RAM overhaul on a GTSIO-520 is only 70k compared to 300k on a PT6 and withoil back above $65 a barrel this is a trend that will continue. The Piper Seminole and Seneca should be gaining strength due to a worldwide training demand.

 

 

Turboprops – – The end of 2017 was busier then expected, low time King Airs, with recent paint and interior, don’t stay around long as long as they are priced in the sweet pot of the market. The King Air C90s are showing some signs of life, with prices started to creep up for the first time in many years. The 350 market and older 100’s remain flat, while the 200’s continue the charge into the positive territory. It’s a breath of fresh air for many in the slightly used pre-own King Air market as scarcity is starting to play a vital role in higher valuations. Pilatus 47 series are stable, and the NG’s are getting harder to find as the market has shiftedto a sellers market with less then 5% availability both domestic and abroad.Even the Piaggio Avanti’s are starting to bottom out after many years of trying to find a footing.

Jets – – Shifting market demands and continued strength in North America are creating difficulties in availability for many sub segments of the business jet community. Medium size airframes with 8 passenger or higher floor plans, priced under $5M USD, are showing higher than previous quarters demand. With no new production aircraft competing, we see Citation XLS’s, Lear 45’s, Lear 60’s, 800XP’s and Sovereign’s starting to creep up in price. Industry leaders in the super midsize class continue to be dominated by the Falcon 2000, and Challenger 300 series of aircraft. Even older aircraft that are 2020 compliant with fresh paint, interior and avionics are starting to show they too have desirability in the market. Downward pressure continues to build in the older, larger airframes. Classic Global Express’s in need of large airframe inspections, engine restoration and cabin management upgrades can find themselves nothing more then a part out. Older GIV’s and GV’s along with Falcon 900’s are continuing to drop in price as buyers face unknown operational budgetary issues.

Helicopter – – 2018 set up to be first positive year for new deliveries since the massive decline started in 2013 as oil prices have recovered. Vref notes the strong correlation between oil prices and the delivery rates of new equipment. All segments of the market continue to drop except the Super Medium fleet. North America, Europe and Asia continue market dominance as emerging market recovery continues to be slow. General Utility aircraft, and Corporate VIP are now roughly 60% of the total worldwide fleet. Airbus and Bell delivered the most units for 2017. The H125 continues to benefit from tight inventory, with less then 5% of the total fleet available. 407s are also hovering around the 5% availability suggesting that 2018 might finally see some flattening of values. Light Twin segment remains mostly flat. Mediums are also still looking for a footing with S76s and Bell 412s and AW139s seeing longer days on market and slow closings. Super Medium orders and a high level of optimism as offshore energy, oil and gas continues its comeback. The Heavies are still in a downward trend with almost 10% of the total fleet for sale, S92s continue to drag down this segment with weaker asking prices. Future growth will be seen in the 505X market with significant Chinese interest, as well as Eastern Europe and parts of South America as EMS activities in those regions play catch up to the USA and Europe.

Drones/UAVs – – Vref will soon be reporting on UAVs so stay tuned for coverage on the most popular commercial aerials and insight on the applications for agriculture, law enforcement, SAR, delivery, cargo, and many more.

Vref is dedicated to proving the most up to date, accurate data possible to the aviation community. AS we continue to add features, and functionality to the platform it is critical now more then ever to make sure you our client knows how much we value your opinions. If there is something you need help with please let me know, and if you have ideas to issues we want to hear from you too.

 

 

 

By |2018-10-05T15:33:25+00:00October 5th, 2018|Uncategorized|