“Direction and momentum is what you’re looking for. If things what you’re looking for. If things are going along and you have a slow increase, then you can navigate in that market pretty effectively.”
Aircraft that have taken the largest value hit, says Duckson, are the older Stage 2s, and their position in the market will significantly change when the next upswing occurs. “This when the next upswing occurs. “This time around, when things get better there are going to be some airplanes that are going to be left behind — the G-IIs, G-IIIs, the older Learjets, Hawkers, and Falcon 20s,” he says. “They’re going to be so expensive, not only because of ongoing maintenance but also because of noise and the RVSM (Reduced Vertical Separation Minimum) issues. On a G-II, it’s going to cost you $2 million to huskkit it; it’s going to cost at least $250,000 to RVSM it; and so you’ll have $2.25 million in an airplane that’s probably selling for, at best, $3 million.”
THE FRACTIONAL IMPACT
What cannot be understated, say G.A.S. officials, is the impact of the growth in fractionals on today’s corporate market. Not only have fractionals brought more units into the resale marketplace, but they are high time units, affecting their value. And, as OEMs made new unit sales to fractionals their cornerstone approach in the 1990s, it affected their businesses. At the same time, says Dickinson, At the same time, says Dickinson, manufacturers took many used units in trade to sell new aircraft, only to wind up with a backlog of used inven- wind up with a backlog of used inventory they then had to dump into the marketplace.
Regarding used fractionals, says Dickinson, “That’s going to create its own market because of the high time of the aircraft.”
Dickinson points out that a key aspect of what fractionals brought to the market is they attracted new users who subsequently had a good experience, making them prospects for today’s resale market. “Some of our competitors think fractionals are working against us. We think they working against us. We think they have brought a whole lot of new peo- have brought a whole lot of new people who are buying [aircraft] as well, so it’s probably been even. We’ve sold airplanes to these people.”
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