NAFA member, James Hagerty, President and CEO of Hagerty Jet Group shares the latest Quarterly Market Update for Gulfstream Aircraft for the first quarter of 2019.
Mixed Market Signals in Pre-owned Gulfstream Markets
In our previous Gulfstream Pre-owned Aircraft Market Report, Hagerty Jet Group predicted a choppy 2019 for business jet transactions. Entering into Q2, we continue to sense mixed market signals with steady transaction volume, but with increasing supply and notably decreasing ask prices.
Transaction volume in Q1 2019 was stronger than we anticipated. Most pre-owned Gulfstream markets we track had stronger transaction volume in the past quarter than the prior 12 months. Most notably, there were 16 G550 sales in Q1 2019. That’s almost double the average of the previous three years.
We tracked a spike in Off Market aircraft transactions that were not publicly advertised or unknown by market participants. For example, 6 of the 16 G550 transactions for the quarter were considered Off Market deals. We consider this as an indication that many buyers are frustrated by the lack of good inventory and sought direct opportunities with unlisted aircraft.
Although average values remain flat across most makes and models, we expect prices to soften in Q2. In the G550 market alone, there were 14 price reductions in the quarter with an average decrease of -9%. This signals that Sellers are lowering price expectations to compete for buyers who are otherwise considering Off Market alternatives. Although the G550 market had a bump in values of nearly 10% last year, we believe demand will wane with fewer transactions in Q2 than Q1 and at lower prices.
General sentiment from our peers in the broker community signals a decrease in overall demand as global economic uncertainty continues to loom. Fears of a 2020 recession, the unknown impact of Brexit and US/China trade relations are several common talking points in the industry. The Trump-Bump from a year ago seems to have faded and normalized. Now it’s back to business as usual.
We are watching closely the new G500 market emerge. The first Pre-Owned G500 came to market in late March with a $49.99M ask price. This is a newly delivered airplane with ferry time only. The ask price is arguably slightly higher than a new plane with a 2020 delivery. We’re interested to see the premiums, if any, a buyer will pay to mark the first“pre-owned” G500 transaction. Please continue to subscribe to receive future editions of our quarterly market report.