Used jet aircraft prices have fallen 50 percent in the last seven months, according to Mesinger. And buyers, even at those prices, are few and far between. Lack of financing is a big piece of that equation. Few people can write a check for 2, 5, or 15 million dollars. "Financing is all but gone," Mesinger says, "and the effect of that on our market is catastrophic. Mix with that sheer business being down, and the intangible of confidence being down, and the 'negative optics' right now of owning and operating a business jet, and it's like a perfect storm."
Used jet sales are still in better shape than new ones, however. Even last September, Mesinger says, jet manufacturers thought they had enough of a backlog to ride out whatever economic storms might come. "Nobody dreamed their entire backlog would be in peril," he says. "But prices have fallen so far that people are realizing they can lose their deposit and buy a used airplane on the open market, get their plane right now, and still get it cheaper than waiting for their new plane." And the only calls Mesinger is getting are from individuals, not corporations. "Corporations just aren't calling right now," he says.
Is there any good news for jets? Well, sort of. First, Mesinger thinks that prices are nearly as low as they will go. "When something has lost 50 percent of its value, there's not another 50 percent to go," he explains. "And unlike a stock, an airplane is a piece of equipment that performs a mission. Even in a down market, it remains a piece of equipment that performs a mission, so it always retains some value."
Furthermore, in both pistons and jets, activity will probably pick up once buyers and sellers stop sitting on the sidelines waiting for a better deal. "Getting sellers' expectations to match market reality is the biggest piece of my work right now," Mesinger says. "It's like a high school dance. When the market starts to go down, buyers begin to pull back, waiting for a better deal, and sellers pull back, not wanting to let go at a lower price. So transactions come to a grinding halt. Nobody wants to be the first ones out on the floor. But soon one or two meet in the middle, and others follow."
And if the credit markets loosen up a little, activity may pick up quite a bit. "In our new 'normal,' " Mesinger says, "you could get into a business jet for $1.5 million that would have been $4 or 5 million a year and a half ago. People are now also willing to buy older aircraft, as opposed to buying something new."
So while the news isn't great, there are clearly some silver streaks, if not full linings, in the storm clouds. For one thing, there are some real bargains to be had, for anyone getting into the market. And the other silver streak to remember is … we've been through worse before, and this, too, shall pass.
"Recessions aren't much fun, but they are a normal part of the business cycle," Thomas says. "This is as severe a recession as the worst ones I remember, but now at least stuff will still sell. I remember, during the Arab oil embargo in the early 1970s, for a month or two, all activity ceased. Then there was 1979, with the even/odd day gas rationing, when all activity ceased again. But, as it always does, [the industry] recovered. Business has to go on, and you can't always do it on the airlines."
In the meantime, Thomas says, airplane owners shouldn't panic. "Just do what makes sense for you at the moment," he says. If you want a better airplane, there are deals right now. If you have to sell, Thomas says, "be a serious seller." Which translates to: be ready to sell for a significantly lower price than you would have last year.
If that sounds like a bitter pill to swallow, Thomas reminds his clients that the reason most people buy airplanes "isn't to make money." They buy them for a specific purpose, or what Thomas calls "soul satisfaction." And especially in today's market, he says with a smile, "an airplane is cheaper than therapy."
What Airplanes Are Still "Hot" … or At Least "Warm"?
It's a buyer's market, in every class of aircraft. But there are still some models that are holding their value better than others. Economy is a big factor in an airplane's desirability at the moment. So twin-engine pistons are currently "very soft," according to Steve Champness, national advertising sales executive for Trade-A-Plane. "You can get a [Beech] Baron for a song right now," he says. "There's a lot of suspicion about what's going to happen to fuel prices. So people are going from twins to high-performance singles, like the Cirrus, Cessna 400 or even Bonanzas."
Single-engine pistons built in the late 1990s and early 2000s that don't have glass cockpits are also struggling. "The problem those aircraft have is that, since they don't have the new technology, they're competing against older aircraft of that same model that perform the same but cost a whole lot less," explains John Frank, executive director of the Cessna Pilots Association.
The toughest sells, according to used aircraft broker Barron Thomas, are aircraft built in the 1950s and early 1960s that don't fit into the true classic/antique category, but are old enough to be running into significant airframe and age issues.
The bestsellers, by contrast, are "aircraft that are one to five years old, of any make," Thomas says. "If they have glass, they have a slight advantage, but those aircraft are a very good value. The other category that's holding its value a little better and selling faster is the real popular Cessnas from the mid-1970s -- the 172s, 182, 210s and 206s." But, Thomas adds, "there's a very loyal following for every kind of airplane. [Cessna] Cardinals have a big following. So do mid-late model Mooneys, and even Grummans."
That trend is enhanced by the fact that buyers today have more information than ever at their fingertips. So, if anything, they tend to be even more specific about what they want. "They do their own research and decide what they want," Thomas says. "So a guy who calls wanting a Mooney only wants a Mooney, and a Bonanza guy only wants a Bonanza."
On the jet side, smaller is better, according to Jay Mesinger, CEO of J. Mesinger Corporate Aircraft Sales. "What's moving better are the small to midsize jets," he says. "[Cessna] CJ1s, 2s and 3s, and Hawker 800s, that kind of aircraft. The market for the larger Gulfstreams, Challengers and Falcons has all but gone away right now." Part of the reason for that is fuel economy, and the "negative optics" of operating a large business jet at the moment. But another piece of the equation is that the drastic plunge in jet aircraft prices is making some of the "entry-level" jets an option for people who, a year ago, couldn't have contemplated buying a personal or business jet.