The G650 was announced in 2008 and customer deliveries started 4th Quarter 2012. The aircraft had an initial cost new of $59.5M subject to CPI which brought the total to ~$65M. As of September 2016 s/n 6205 entered service bringing the total in-service to 206. Published list price for a new G650 / 650ER today is $66.8M and $68.8M, respectively.
As is the case with ‘clean sheet’ aircraft, the excitement to own is overwhelming in the early stages of entry into service (EIS), however this typically wanes as more aircraft are delivered and pre-owned inventory builds. In the case of the G650 buyer enthusiasm was particularly high as the aircraft was in a league of its own relative to range, cabin size, performance, etc.
Year-end 2012 there were 7 aircraft in service and 1 ‘pre-owned’ G650 came to the market with an ask price of $71M, subsequently selling for the same. By year end 2013 there were a total of 50 aircraft in service and 2 came on the ‘pre-owned’ market. One of the aircraft, a 2012 year model, had an ask of Make Offer and sold for $71.5M, capturing a $7M premium over the cost new.
In 2014 the ‘pre-owned’ inventory increased to 10 available aircraft. As a percentage of the fleet the G650 was now aligning with availability in corresponding markets at 10%. As history has shown, when supply increases the market tendency is for ask / sell prices to drop in kind, however in the case of the G650 ask prices remained well above their cost new, ranging from 72 – $75M. Selling prices followed a similar pattern ranging from 71.5 – $74M for the 7 aircraft that sold. Viewing the results from another perspective, 10% of the fleet came on the market and 7% of the fleet sold, which is indicative of a very active, strong market. Average days on market (DOM) for the 7 aircraft sold was 140, compared to the 1 aircraft sold in 2013 at 139 days
2015 was the year that better aligned the G650 with the overall pre-owned business jet market. A total of 25 aircraft came on the market, representing 15.7% of the fleet. As a result, the ask price range dropped to a range from $65M to $73.9M. Selling prices followed suit ranging from $62M to $73M. Of the 9 aircraft that sold DOM averaged 132, which is in line with the tally for 2013 (139) and 2014 (140).
YTD 2016 30 G650s came on the market, representing 14.6% of the fleet and the average DOM increased from 110 in 2015 to 290. The ask price range for the 28 available aircraft ranged from 64.9M to $69.9M. As previously mentioned, when supply increases ask prices [and sell prices] decline. As sellers see more competition they get anxious and follow the market down. A 2016 650-ER came on the market May 2016 at $66M ask and closed one month later for $65M, which set a precedent for pricing in that it’s a near new aircraft, competing with a list price new of $68.8M and a wait time of ~18 months. As well, a 2015 had 0 DOM, full warranty, delivery time only and sold for $62M. Two similar aircraft sold around the same time frame for $60.5M each, which exemplifies the effects of market saturation. Further, a major market event transpired around mid-year when a 2014 vintage aircraft sold for $57M, followed shortly thereafter by a 2013 EIS aircraft selling at $50.3M. To-date, of the 15 aircraft on the market 5 show ask prices in the low to mid $50M range. If history follows course (percent delta between ask price and sell price), these aircraft could potentially see sale prices in the high 40s.
Market Effect on Long-Range Aircraft. Business jet values and their respective prices continue to deteriorate, regardless of aircraft type. This can be attributed to the global economic downturn as well as market saturation. In 2010 we saw on average 6.4% of the fleet of current production aircraft on the market. By 2014 the percentage had increased to 12% and YTD 2016 we are seeing 15.1% of the available fleet(s) on the market. To exacerbate the saturation problem, we have ask price cuts from $500K to over $5M on the upper end of the markets on a weekly basis and of course as ask prices drop so do sell prices.
To the potential buyer, this can be seen as good news. However to current owners it can have a negative impact on future values. As G650 ask prices continue to drop (4 of 15 G650s currently on the market are now asking 52 – $53M) the selling prices will trend in kind. As they migrate to the high 40s, buyers in the long range aircraft markets will have more choices creating an unimaginable pricing scenario. Brand loyalty aside, consider there are 2 new Global 6000s on the market with ask prices in the 45M-$49M range, 2-2014 G550s at the $40M price point, not to mention the potential impact the pre-owned 650 market could have on new aircraft such as the Falcon 8X (list ~$57M) or the upcoming Global 7000 ($72M) and even the G500 ($46M). The proven capabilities of the G650, such as its 7,000 nm range at .88M (.92 Mmo), spacious 3-zone cabin that affords a 4K’ cabin altitude at 45K’, complete fly-by-wire system, coupled with pre-owned price levels has the potential to undermine pricing or outright sales in near term pre-owned markets as well as sales for new aircraft.