““CEOs go to their vacation homes just after companies report favorable news, and CEOs return to headquarters right before subsequent news is released. More good news is released when CEOs are back at work, and CEOs appear not to leave headquarters at all if a firm has adverse news to disclose. When CEOs are away from the office, stock prices behave quietly with sharply lower volatility. Volatility increases immediately when CEOs return to work.” —David Yermack, a New York University finance professor, whose recently released study shows a correlation between when CEOs take their private jets on vacation and movements in their companies’ stock price ”
Preowned Annual Report
The used jet market has had to contend with more than its fair share of obstacles over the past few years and 2012 didn’t offer any relief. They say that when the stock market moves up it climbs a wall of worry and that’s probably not much different from how jet buyers view the aircraft market. That said, there may be a bit less to worry about than there was last year at this time.
If you looked only at inventory levels throughout 2012, you’d think this wasn’t a very upbeat year for transactions. But transactions are actually occurring at a frequency not seen for a few years. The fact that overall inventory has held steady suggests that a stable flow of new jets is entering the market. In addition, some zombie aircraft listings continue to distort the picture regarding the number of aircraft for sale. Consider that more than 400 of the current offerings have been on the market since 2009 or before and that nearly 70 percent of those are models built in 1989 or earlier. Being in your twenties can be great–unless you’re an airplane. Whether this group is legitimately for sale or is unsellable, at least as whole aircraft, remains unclear. But it’s worth considering that this segment represents 17 percent of today’s worldwide inventory–a significant portion.
Action remains concentrated, as it has been for some time, on aircraft built after 1999–the models many lending institutions consider good investments. Today, in North America, roughly 7 percent of aircraft in this group are for sale, which means they’re in reasonably tight supply. In Europe, 16 percent of these aircraft are available–a decidedly softer market, which makes for fertile shopping grounds. In fact, among some model types, there are now at least as many aircraft for sale in Europe as in the U.S.–a probable result of the large number of jets that European buyers absorbed in the mid-2000s.
So 2012 seemed to spur many to get back into the market and it perhaps brought risk-averse buyers a step closer to the pricing floor they may have been waiting for before plunking down their euros and dollars. Current pricing seems to be breaking the law of supply and demand, but if 2012’s level of activity continues, we could see some models adhere to this most basic of economic theses in the year ahead.
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