The Market for Existing Airplanes

Existing GA airplanes are not "used" or "preowned." They have been appreciating since the mid-1970s.

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I don't like the term "used" or "preowned" applied to airplanes. Those are standards of the automotive industry, and airplanes and cars have next to nothing in common.

The best way to describe an airplane that isn't brand new is "existing." That's the term typically applied to buildings. They are either new or existing. You don't buy a used house, for example. You buy a new house or an existing house. And airplanes have almost everything in common with buildings and real estate but very little similarity to cars and other vehicles.

This may appear to be an exercise in semantics or parsing words, as some of our famous leaders have done in the recent past. But to understand the value of airplanes it is essential that we stamp out our comparisons to automobiles and view airplanes as durable objects possessing very long life potential.

Over the past 10 to 15 years, the value of existing airplanes soared and has only recently retracted some. That has not been true for the entire century of powered flight but is a relatively recent phenomenon. I would date the onset of the appreciation, or at least very slow depreciation, of general aviation airplanes at about the mid 1970s.

About 20 years ago, the Beech Bonanza A36 signaled the change that was ahead for existing airplanes when it became the first popular airplane to be worth more when it was a dozen or so years old than when it was new. Those price comparisons didn't include adjustments for inflation, so the value of the existing Bonanza wasn't actually the same as its new price, but the dollar numbers were the same, and that was new and startling.

Then, in the 1990s, many, in fact most, existing popular high-performance singles saw their values increase to a dollar number substantially greater than when they were new. It happened in other categories of airplanes, such as some models of business jets and the occasional light piston twin, but the run-up in prices was most pronounced in piston singles. Overall economic inflation did some of the work, but the decade of the 1990s was actually a low inflation period compared to the previous two decades, yet the value of existing singles soared in the 1990s.

Two major factors explain the high value of existing singles: First is the rapid inflation of new airplane prices. Second is the maturity of the technology.

For many reasons, including the high cost of product liability insurance and dwindling production volume, the price of new singles pulled ahead of general inflation. Because airplanes have always been expensive, price increases of several percent or more per year compounded into substantial dollar volume price increases. For example, according to Vref, a leading value reference of existing airplanes, a Bonanza A36 had an average new price of $330,000 in 1990. By the year 2000 the price for an A36 was up to $530,000. And if you step back 10 more years the A36 new price in 1980 was around $139,000.

When the price of new airplanes goes up, it pulls up the value of existing airplanes. If you think of a new airplane as an alternative, or a replacement, for an existing airplane, an increase in the price of the new airplane makes the existing one more valuable. That's why a 1980 A36 Bonanza is worth about $180,000 today.

The second big reason for the high value of existing airplanes is the maturity of technology in the piston airplane and turboprop category. A new piston or turboprop airplane will have essentially the same performance and utility as existing airplanes. This is not for lack of trying by airplane designers and manufacturers; it is simply the realities of aerodynamics and structures. The efficiency of airfoils, airframes, engines and propellers can be improved only slightly because our understanding of how they work was very complete 40 or 50 years ago. The best minds in the world backed by the unlimited wartime budgets of the biggest governments refined propeller airplanes during World War II and the years leading up to it, so there are only small increments left to improve our understanding of aerodynamics in the propeller speed and altitude range. All-new single-engine airplanes, such as the Cirrus and Lancair, for example, offer some alternatives with high power and fixed landing gear, but they by no means make an existing Bonanza or Saratoga obsolete the way the Boeing 707 did to the Douglas DC-7.

You may think the inability to make major technological advances is a bad thing, and that it signals doom for our favorite activity. But, actually, the situation is reversed. The maturity of propeller airplane technology preserves the value of our investment and reduces the cost of flying over what it would be if technology were able to advance at a rapid pace and leave existing airplanes hopelessly behind.

Here's where my real estate analogy really applies. Let's say that building materials and techniques were advancing at a high rate on the order of recent electronics advances and thus rendering buildings a few years old unattractive. What would that do to the value of your house? Bad news. But the fact that buildings still have a foundation on the bottom, roof on the top and walls in between and that the materials used to create those essentials change little over many years means that your house is your best investment. The building increases in value because it endures, not because it becomes obsolete.

And to continue the housing analogy, the parts of a house that wear, or the technology that changes, is replaceable and portable. For example, you don't tear down the house because it needs a new roof, or new plumbing, or new windows. You replace those items. And when the kitchen cabinets and appliances show their 1960s roots, you don't level the house, you redo the kitchen. Same for the bathroom, where there have been improvements in plumbing and fixtures.

The same applies to an airplane. Like a building, everything that wears is replaced. Engines come and go, interior refurbishment is equivalent to redecorating your home, and the plumbing and wires all get constant attention. And the new technology-primarily avionics-is entirely portable and can be installed in just about any existing airplane. You can also upgrade the engines for more power in many cases, or buy an improved and more efficient propeller. But you don't junk the airplane any more than you level your house because repairs are needed.

At the risk of beating the airplane as real estate analogy to death, I compare the general aviation business to an area of the country such as the Northeast that is highly developed. There is little or no room for large-scale housing developments here near New York City, for example, but new construction does take place when a new house or building is wedged into a lot previously thought undesirable, or when an existing building is torn down and replaced with a new one.

What finishes off a building is economics. Either it has been allowed through neglect to deteriorate to the point that the cost of repairs exceeds the value of the building after the work, or the land has grown in value out of proportion to the existing building.

It's about the same with existing airplanes. Neglect can finish off an airplane in just a few years because the cost of restoring it to airworthy condition can exceed the value of a similar airplane already in good shape. And like the house that is no longer grand enough to match the value of its lot, an airplane can be too low in value to justify the tiedown rent, insurance and other fixed costs, so it gets shuffled off to end its days rotting at some out-of-the-way airport with weeds growing up around its wheels.

So, please, stop calling existing airplanes used airplanes, any more than you call your house a used house. Existing airplanes are the foundation for all flying activity, and the couple thousand new airplanes added to the neighborhood each year support the value of the airplanes already there, and the other way around.

Only in New York How's this for an IFR clearance? "Fly the Westchester One departure to intercept the Carmel 275 degree radial to the 039 degree radial of Sparta and then direct to Morristown Airport."

No airways, no intersections, just radials to intercept. And the Westchester One departure is merely a pre-assigned turn after takeoff.

I had the radials dialed in on my Garmin 530 and 430 to get a preview of what this clearance looked like on the moving map. It didn't make much sense, other than it got me out to the northwest away from the New York area traffic. But it was a clearance I could fly, so I took off expecting radar vectors anyway.

As it turned out, I didn't fly the radial of anything. As I turned around to the northwest on the departure procedure, New York Approach gave me a vector to intercept the localizer to Runway 23 at Morristown and track it inbound. A weird clearance actually turned out to be the easiest possible IFR flight through the crowded New York airspace.

Over 80 Club My insurance agent, Larry Rachlin, has been in the aircraft insurance business for decades working with pilots of all sorts of airplanes. He called me the other day to suggest that we need to write more about older pilots because he was seeing a strong increase in what he is calling the "over 80 club."

Most pilots believe that at some age they will become uninsurable in an airplane even though they meet the certification and training standards of younger pilots. But Larry assures me that isn't true. He has written policies for a number of pilots well into their 80s and sees the trend increasing. That makes sense to me because people are staying healthy longer, and the pilot population is aging. Why not fly into your 80s?

According to Larry, the key to insurance availability as you age is a long-term relationship with a major insurance company such as USAIG or Global. He says insurers are reluctant to cover pilots who are past 70 or so unless they have had years of experience with that individual. If you have been insured by a major company and you are at or approaching the social security age, don't change companies. Larry says that if you stick with a major insurer and agent, they'll stay with you as the years go by.

Nexrad, Lightning and Tornados Pilots are constantly asking which thunderstorm detection and avoidance device I want the most. Is it a Stormscope to find lightning, an airborne weather radar to see precipitation or one of the new cockpit weather devices that shows Nexrad pictures in flight? A recent trip to Wichita demonstrated why I want them all and can't really choose a favorite for all situations.

Thunderstorms were forecast for most of the 1,300 nm from New York to Wichita, but they were only scattered over the eastern third of the country. The Nexrad picture received by the Garmin GDL 49 satellite receiver showed the activity was south of my route to the fuel stop in Indianapolis. No need for the Stormscope or airborne radar on that leg.

When I looked at WSI's detailed radar picture at the Signature FBO at Indy, I thought I was home free. There were only a few scattered radar returns over western Indiana, and nothing over Illinois, Missouri and Kansas. Maybe the forecast storms wouldn't show up after all.

But I began to wonder when the wind at 6,000 feet was blowing 55 knots from the southwest. That much wind in June in that part of the country is never a good sign. Sure enough, the Nexrad picture on the Garmin showed an east-west line of storms developing over central Missouri covering the width of the state. A sigmet describing the line, and noting that it was severe, soon followed. The Stormscope confirmed lightning activity in the Nexrad returns.

In this situation the airborne Nexrad picture was the perfect avoidance solution. I could see on the Garmin presentation that a deviation to the Missouri-Iowa border, instead of cutting across Missouri on the direct route to Wichita, would miss the weather. The big picture on the Nexrad kept me out of the cells, and when it came time to turn toward Wichita, the airborne radar was perfect for going around the few cells that remained at the west end of the line.

Approaching Wichita, the Nexrad picture showed just a couple of tiny isolated returns, and only of Level One and Two. However, my Stormscope was going crazy. All of a sudden several pilots flying east of Wichita started asking for urgent deviations around weather. I wasn't far away but couldn't see the problem on the Nexrad picture or my airborne radar, but the Stormscope indicated that cells were building quickly.

Finally, a couple of small radar targets appeared on my airborne radar, very compact, showing heavy precipitation in the general direction of the Stormscope-detected lightning activity. I gave these little cells a wide berth, landed at Wichita without incident and went directly to the hotel on the airport. When I turned on the local TV news, there were reports of a tornado on the ground near El Dorado, a small town just east of Wichita and in the area where the Stormscope spotted the rapid development of very strong thunderstorm cells.

In one trip Mother Nature treated me to a look at the best features of all three weather avoidance systems in my airplane. Which one would you want to have? Or more important, which one would you leave out?