Asian Sky Quarterly Q1 2016

AIRCRAFT SPOTLIGHT
GULFSTREAM G550
Since its introduction in 2003, the Gulfstream G550 has become
the benchmark for ultra-long range aircraft, with over 514 aircraft
delivered to date. This is due to its reliability, product support,
performance, technology and cabin comfort.
GULFSTREAM 550 FLEET (2016 Q1)
Fleet Size 514
For Sale 37 (7.2%)
Sold last 12 months 35
The G550 can carry eight passengers and a crew of four up to 6,750
N.M. at Mach 0.80 connecting major city pairs like Tokyo and West
Palm Beach in 12.5 hours or Beijing to Boston or New York in less
than 13 hours.
There are 37 G550’s on the market with five deals pending,
which reduces the supply to 32 aircraft for sale. This represents
approximately 7.2% of the entire fleet built between 2003 and today.
The industry average for large cabin jets is closer to 10.2% which
demonstrates the G550’s popularity in the pre-owned market.
The large business jets market supply has increased steadily
throughout the last 2 years and is now 54% higher today than in Q1
2014. The G550 pre-owned inventory value (see page 40) has not
experienced the same increase over this period. In fact, it is slightly
down from a peak experienced as far back as October 2014. This
trend has also seen the G550 move to a balanced offer/demand
position in ASG’s Market Positioning Index (see page 32).
Since the beginning of 2016, 2 G550s for sale have been withdrawn
from the market, 5 have been introduced to the market, 6 have
gone under purchase contract and 2 have had a sale transaction
completed. Consequently, the Offer vs Demand Ratio remains
below 100%, meaning a good demand persists for G550s in the
market (see page 32). The average G550 time for sale on the
market is currently at 231 days, also below the average days on
market for the 26 models analysed (see page 32).
Ask prices currently range from 17.95M USD for a 2004 vintage
G550 not enrolled on engine programs to 48M USD for a 2014
model with 700 flight hours, enrolled on Rolls Royce Corporate Care.
In 2015, there were 35 G550 transactions, accounting for 7.0% of
the fleet. G550 trading activity increased by 52% in 2015 over 2014.
ASKING PRICE RANGE (2016 Q1)
High asking price $48,500,000
Average asking price $30,581,333
Low asking price $17,950,000
In 2016, we have seen 6 G550s go under purchase contract and/or
closed a sale transaction, on pace to tie 2015’s robust Q1 numbers.
Sale prices in 2015 have ranged from 48M USD for a 2013 vintage
G550 with 122 flight hours, enrolled on Rolls Royce Corporate Care
to 21M USD for a 2003 vintage aircraft with over 3500 flight hours
and no Engine Program. In 2016, sale prices have ranged between
20.5M and 42M USD. It is likely that the first G550s to sell under
20M USD will happen in 2016.
Current market activity is a result of opportunistic buyers taking
advantage of diminishing values. ASG expects to see increased
G550 pre-owned market saturation as sellers look to get ahead
of the depreciation curve and recoup maximum value from their
aircraft. At the same time, we expect a sustained trading activity
as a new segment of buyers who would otherwise look to smaller
or older aircraft such as the Global, Falcon 900LX or Falcon 7X,
consider purchasing a pre-owned G550 instead.
In the past 60 days, there have been 11 advertised price reductions,
accounting for an average drop of 5% in asking prices. This
percentage drop is in line with the quarterly change in aircraft
values taken from an aggregate of Q1 G550 Bluebook and VREF
values (5.29% decline in value over Q4 2015). While the increased
depreciation is a reason for alarm, sustained and increased trading
activity indicates that buyers are still looking to respond once
aircraft are priced in line with the new business aviation market
conditions.
36 | ASIAN SKY QUARTERLY — FIRST QUARTER 2016