““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 ”
How '08 might unfold
In the first quarter of 2006, phones weren't ringing for used-jet sellers. Last year, the situation was the opposite, as activity out of the gate was head-spinning and never slowed. It's anybody's guess how '08 will unfold, but one thing seems clear: no longer does the market's health depend solely on the U.S.
Last year, in fact, it felt somewhat as if America had become the Wal-Mart of the world, as aircraft buyers around the globe took advantage of a spiraling dollar to update their fleets. This was anything but a story of old aircraft exiting the U.S. to finish out their days in some sleepy country, like an old mare being put out to pasture.
The large-cabin segment of the market has garnered the most attention of late and will likely do so going forward. New-aircraft backlogs extending beyond 2010 have left many clamoring for viable aircraft from the used fleet, a trend that has depleted inventory and boosted prices for many models. Still, buyers have not been put off and have come to accept that if they want aircraft, they will pay through the nose. While few expect a radical downturn, it's likely that the large-cabin market segment will be somewhat resilient if one should occur.
Light jets might take the biggest knock in such a downturn, but at the moment this segment, too, is booming. The conventional wisdom is that individuals and small companies own many of these aircraft, and that both groups may react to a threatened recession by divesting themselves of their airplanes more quickly and in greater numbers than some major multinational companies might. Large-cabin values and interest also seemed to be buoyed of late by increasing demand for charter lift-despite Southwest Airlines' recent television ad claim that flying with that carrier is like owning your own jet.
What's Hot, What's Not
Here's a look at a few models that have recently become relatively expensive--or bargain-priced:
Gulfstream IV-SP. Buyers last year bid up prices of this model beyond what had been a $30 million ceiling. While values are holding at high levels, only six of 287 GIV-SPs reside on the used market, so there probably aren't any great buys here and there may be downside risk. Seemingly ever-extending G450 backlogs coupled with buyers' insatiable appetites for large-cabin, long-range aircraft have brought stability to this model, but few believe prices will exceed current levels.
Citation CJ2 and CJ3. These models built a huge and well-deserved following in 2007 and sellers were rewarded with higher prices. Now, after a significant drop in CJ choices and with prices for nearly new CJ3s topping $8 million, some think the Bravo and Encore might, in many respects, offer more performance at a better price.
Astra SPX. Inventory of this model has nearly doubled in less than six months and if you have an eye on value, this may be a place to look. With nearly 20 percent of the fleet for sale, the SPX is in the midst of a price adjustment. Downward pricing pressure from the G100, essentially the Gulfstream nameplating of the IAI Astra SPX, may have something to do with this. The G100 pricing appears to have prompted some mid-$8 million-priced SPXs to vacate that territory and move to the upper-$7-million range. Nearly all of the 11 SPXs on the market are in the $7 million range.