Time to put on your walking shoes

It is inevitable when I meet a pilot who learns I am an aircraft broker that the next question is: “How is the market?” That is quickly followed with a hip pocket analysis that it must be tough, that no one is buying and that Chicken Little must be my only prospect.

The real nature of the aircraft market of the past few years goes well beyond the apparent driver: The economy.

No, the aircraft market is not too bad. The bloodbath occurred during the first six months or so of the post-2007 economic collapse. Owners that had to sell dumped their aircraft and, in doing so, took big losses. After that, the sellers dug in and prices stabilized.

While the economy depressed prices, certainly, the real push down has come from more natural market forces.

The roots of today’s “buyer’s market” begin in the late 1980s when the manufacturers stopped producing new airplanes. Product liability insurance costs were out of control and Cessna, Piper and Beech responded by quitting or curtailing production. Until Congressional relief on tort reform in the mid ’90s, the lack of new aircraft meant supply-and-demand forces pushed used aircraft prices up — every year.

Owners of the era became used to the idea that they could buy an aircraft and within a few years, sell it for more that they paid. By the end of the ’90s, a Cessna 182 that was bought for $40,000 in the mid ’80s — one that was already 10 years old — could fetch about $100,000 on the used market when it was now 20 years old.

The owners had a mindset of entitlement in this regard. They thought their aircraft, a device for converting money into noise, was an investment.

When the “new” Cessnas were re-tooled and production was re-started in the late ’90s, followed shortly thereafter by the advent of Cirrus and others, the die was cast for a disruption in value for the older airframes. Cirrus had fantastic success in the 2000s, building and selling more than 6,000 aircraft in Duluth and pushing them through a brass-ball sales organization to a new generation of pilots. The new flyers and those being introduced to general aviation as a business tool were repulsed by old steam gauge panels. New technology, glass panels and modern creature comforts were the pull towards where the money gravitated.

The old airframes, still in the hands of the old guard owners, began to systematically unravel. In the whole, they simply have become so long-in-the-tooth that they seem more like a run-out used car than the pride of the patch.

Fast forward to the present. Not the end of the world, but the end of the road for the values of the old ’60s, ’70s and ’80s airframes. There is an abundant supply of more modern, low-time airframes that have now depreciated into the $100,000 to $250,000 price range. The Cirrus bubble aircraft — those built between 2003 and 2007 — are numerous and values have pushed down into the realm of the old guard planes that occupied that price range in the past. The Bonanzas and 210s and Lances that demanded prices in the high 100s or more now sag below $100K on some models.

You can buy a fast, modern 180 kt Cirrus for under $150,000. The old guard turn their noses up at the design and construction. Who cares. The Young Turks have shown that this is what the real market wants: Fixed gear, glass panels, speed and sexiness.

Without a fresh population of pilots coming up the ranks who demand a worn out, beat up, frayed, dinged, dirty, smelly Cherokee 140 or Cessna Skyhawk, the economics of correcting the long list of discrepancies that come with these airplanes is becoming Draconian. How can a new paint job, new engine and new avionics fit into an airframe that in itself isn’t even worth $30,000? Ain’t gonna hap’n, Cap’n.

For every pristine, lovingly cared for relic of the past, where a devoted owner pats, pets and polishes his prehistoric bird, there are 10 stuck away behind closed doors or inelegantly tied to the ramp, rotting away without even routine maintenance. There are more and more derelicts all the time.

What this means for market prognosticators is that the low-end guys are going to be able to buy an airplane for a little while longer. Then those birds will be gone. And the supply of later models will not be plentiful, so prices for them will first stabilize and then go up. And voila, it will be a seller’s market.

For those in the know, it is already happening. The very scarcity of some late model types are pushing those values up or, at least, slowing the depreciation.

Of course, this take on the issue largely focuses on the single-engine market. There are variances across the board within singles, of course – certain makes and models do better, others worse. The twins are down in the dumpster and are not coming out of it. Jets operate under a different model, although the really older jets are subject to a new paradigm, too, but one driven by lenders lack of interest.

Bottom line here, for those wanna-be buyers who think they are in control of the market at this point, my advice is to go buy another pair of walking shoes.

Todd Huvard, president of AircraftMerchants, a North Carolina-based aircraft brokerage, is a commercial pilot with multi-engine, instrument and seaplane ratings and is typed in Cessna 500 and Falcon 20 jets. He was founding editor and publisher of The Southern Aviator.

 

 

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