Market Focus: Gulfstream G650/ER
The pre-owned G650 market enters 2016 primed for a structural shift as 5 brand new 2015 aircraft hit the market in December alone. All within a handful of serial numbers, this new inventory will almost certainly result in the top end of the market struggling to hold the $70M mark.
Total G650 and G650ER on-market inventory now stands at 15 aircraft, which is about 10% of the in-service fleet. This is a record high and further evidence that the G650 is becoming a mature, pre-owned market and one that will establish a more normalized year-over-year pricing relationship. Until 2015, used G650’s essentially traded based on the “patience premium” to buyers unwilling to endure lengthy production lead times.
With 6 retail sales in the past 6 months juxtaposed against this flurry of new inventory, circumstances exist for substantial downward pricing pressure. This means early 2012 aircraft are likely to fall into the mid $50M’s. Aircraft with non-standard or highly customized interiors will be placed at an even greater disadvantage, as buyers have multiple standardized options to pick from.
Gulfstream has been able hold a firm line on G650 pricing and delivery positions since the inception of the program. We’ll be interested to see how 2016 develops in this regard. With plenty of (new/newish) used inventory to choose from and the prospect of falling pre-owned pricing, Savannah may find that buyers have found a little leverage for the first time.
It’s also interesting to speculate how Gulfstream’s contractual ban on trading delivery positions may in fact end up fostering a continued supply of zero time used aircraft for sale. With such long lead times, an OEM is bound to end up with some order holders whose circumstances change. And with no orderly way out, the only real option has been to take delivery and then try to sell the plane. So far, market pricing has incentivized this strategy all the way around. That could change.
Stay tuned to this blog …