Clock Is Running Out for Older Aircraft

Photo:  Embraer at Gavaio Peixoto test facility

Monday, Embraer reported delivering 100 Phenom 100 light jets in 2010, making it the best selling business turbofan aircraft last year. This occurred during one of the worst sales slumps in light jet history. There were scant sales of other makes of lights jets last year, with plenty of white tails perched on the ramp in Wichita.

About the same time, I got an email from W. Barry Smith at Business Air International in Dallas, inviting me to view a web video by Oliver Stone, the firm's executive director. The video points out that values of newer technology aircraft have rebounded in the resale market, especially for large cabin aircraft. Prices of older models are stagnating.

Tuesday, I called Stone and caught up with him on his cell phone in Istanbul as he waiting to change planes. I asked if there were a connection between Embraer's impressive 2010 sales results in relation to those of other light jet manufacturers and what's going on in the resale market. He said there's a direct connection.

"You get what you pay for. Newer technology aircraft, such as Phenom 100, are putting downward pressure on older lights jets, such as CJ1 / CJ1+. If an aircraft was designed and built after 2000, it's worth a lot more than those that are older," Stone said.

He noted that 17 to 20 percent of the Citation fleet that was built before 2000 is on the resale market. "And I think owners are not putting their aircraft on the market because prices are depressed. Few of them want to ride it down and sell those aircraft for what they're worth."

In contrast, only eight to 12 percent of new Citations are on the resale market. Less than seven percent of the Phenom 100 fleet is on the resale market, according to Amstat. That implies there could be additional downward pressure on Citation resale prices.

Look for resale prices of other models to follow suit. As new technology aircraft from Bombardier, Embraer and Gulfstream, among other manufacturers, arrive on the market, prices for older models could plummet even farther.