Older business jet values continue to fall, says IBA

Gulfstream G650 flying

Prices for newer, flagship models such as the Gulfstream G650 increase, as older models suffer from heavy deprecation.

Gulfstream G650 flying.

The International Bureau of Aviation (IBA) announced at EBACE that it will re-examine its financial numbers for the global business jet fleet, as new evidence supports an increase in values for new models, but discounts for older versions.

Jonathan McDonald, an ISTAT certified appraiser and senior aviation analyst at IBA, said: “Due to relatively tight production numbers and, therefore constrained supply, aircraft such as Boeing BBJ2, BBJ3 and Embraer Lineage 1000 appear to be holding well in terms of market value.

“We are less bullish on the smaller Boeing BBJ, where much of the fleet is now over ten-years-old and therefore inherently quite heavily depreciated.”

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Looking at the Gulfstream fleet, IBA notes that higher specifications and limited supply of newer models, such as the Gulfstream G650, means that ultra-high-net-worth individuals are willing prepared to pay a premium for a young, used aircraft or for an earlier delivery slot.

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“Typically IBA’s model would compute a ‘new-ish’ G650 at around $65 million, but in reality if we had to appraise one we know, we would probably be looking at around $68 million given the strong demand for the model,” said McDonald.

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In contrast, IBA would value a more mature G450 at around $17.5 million, which equates to an annual drop of around $2.5 million – or an average of 6-7 per cent per year – based on the aircraft’s original list price of around $36 million.

Other high brand business jets, such as the Gulfstream G550, Bombardier Global or Boeing Business Jet have faced similar declines in value, with McDonald noting that a 2001-delivered Global Express originally valued at $43 million would now do well to attract a value of more than $17 million.

“If you were to park a 1996-delivered G-IVSP alongside a recently delivered G450, many wouldn’t be able to tell the difference between the two,” added McDonald. “Yet one is probably still worth around $36 million, the other perhaps $6.5 million. When you consider that the G-IVSP probably cost $28 million new, that aircraft is now worth barely a quarter of its new price.”

In light of the changing market, McDonald says: “IBA does not expect to see the same levels of business jet value buoyancy that were evident in 1997 and 2007. Times have changed and we suspect most industry observers within the corporate sector will agree.”