The Gulfstream G550 and G450 markets are both very active markets. The pre-owned markets are being directly affected by Gulfstream’s pricing of new aircraft. Right now Gulfstream has between four and five quarters of backlog in the G550 and G450 markets. This is much lower than the two years they typically have. Historically when the backlog shrank to these levels Gulfstream would become very dynamic and lower pricing to increase the backlog. Currently, however, Gulfstream is holding new pricing stable and this is fueling high activity in the pre-owned market.
At Guardian Jet we like to separate the market into categories:
- Near New – Less than 3 years old and 1,000 hours
- Slightly Used – Less than 5 years old and 3,000 hours
- Used – Older than 5 years or more than 3,000 hours
The G550 market is one of the strongest resale markets in aircraft. With 439 aircraft in the fleet and 21 for sale, there is 5% of the G550 market for sale. At Guardian Jet we view a typical market as having 10% of the aircraft for sale. The G550 with 5% for sale is a seller’s market, though the percentage for sale is rising. In the third quarter of 2013, there were only 11 G550’s for sale, almost doubling in the past 6 months.
In the 1st quarter of 2014, 4 G550’s were sold. This is, as expected, down from the 7 sold in the 3rd and 4th quarters of 2013. In comparison, however, the 1st quarter of 2013 had only 1 G550 transaction. With 4 aircraft with deals pending, we expect the G550 market to continue to be a very active market through 2014.
The G450 market has also had a very active start to 2014, with 5 sales in the 1st quarter. The 1st quarter activity has shrunk the number of sale down to 16 aircraft, equating to 6% of the fleet. Over the past 4 quarters the G450 market has averaged just fewer than 5 transactions per quarter. In comparison the previous 4 quarters before that averaged fewer than 3 transactions per quarter.
The G450 market saw its value drop $4-5M from the 2nd quarter 2012 to the 2nd quarter 2013. Since then the market has stabilized and is depreciated around $1M in the last 4 quarters.
The near new G550 market consists of only two aircraft available for sale. A 2011 G550 for sale has 400 hours on the aircraft is asking $51M and a 2013 aircraft with 320 hours is asking $54.2M, very close to new aircraft pricing. Typically, when near new aircraft are put on the market they demand close to new aircraft pricing because they are available without a wait for the manufacturer backlog. Currently, however, the short Gulfstream backlog may shrink the desire to pay new aircraft pricing for a used airplane. To give you a baseline, a 2009 model with 550 hours sold at the end of last year for $40M.
The G450 near new market is only one aircraft, a 2012 with 350 hours, asking $32.5M. This ask price reflects the short backlog Gulfstream has slightly more accurately. Gulfstream is currently quoting around $36M-$37M for a new G450. The aircraft is owned and operated out of Bermuda and is JAR/OPS1 capable. This can be a benefit down the road when it is time for resale of the aircraft, but can also provide additional costs importing the aircraft into the United States and getting the aircraft certified by the FAA.
Two of the four most recent G450s to sell were both near new. Both 2011 aircraft with 700-800 hours, they sold for $29.25M and $27.5M.
The slightly used G550 market consists of five aircraft, three of which are under contract and working towards a deal. There has been high turnover in both the slightly used and near new markets driven mostly by low hour totals. On the market currently, 5 of the 21 aircraft for sale have less than 1,000 hours. Compare this to the last 6 months of sales, where 4 out of the 9 sold with less than 1,000 hours on them.
The G450 has one aircraft currently on the market in the slightly used range. A 2009 model year aircraft with 1,400 hours asking $27.25M. Again this demonstrates a desire for lower time aircraft. 8 of the previous 10 sales in the G450 market have had less than 2,000 hours. Only 5 of the 16 currently listed for sale have less than 2,000 hours.
The majority of the G550 market falls into the used category. There is definitely value to be found in this market. On the low end of the G550 market aircraft can be bought below $30M. This represents great value when you consider a new G450 in the mid to upper 30’s.
There is also a large quantity of aircraft coming off warranty with 2,500-4,000 hours. These aircraft, with engine programs, are listed in the $37-$39M range.
Like the G550, the majority of the market falls into the used category. The low end of the market has fallen below $20M. While hours remain a premium in the G450 market aircraft with around 2,000 hours in the 2007-2008 vintage can be had in the $22M-$25M range.
Continuing on through 2014 both aircraft markets appear to be maintaining their high activity and relatively stable pricing. If Gulfstream begins to significantly discount new aircraft pricing look for the used market activity to slow down as buyers turn to new aircraft instead of low time used models.