By CJP Director Cyrus Sigari, JetAVIVA
As we reflect on where we are thus far in 2014, JetAVIVA remains optimistic that the light jet industry is seeing signs of improvement. The last two quarters represented some of the most active times in the single pilot turbine segment since pre-2008. Just about every market in which we trade and cover has seen a significant pick up in market activity, and in some cases, price appreciation.
Despite conflicts throughout Eastern Europe and in the Middle East, US equities continue to trade at record highs providing much of the tailwind experienced in the covered markets. Barring a ‘black swan’ event in the near-term, the segment will likely continue to enjoy the positive activity associated with a strong economy and a robust new product roll out across most the major OEMs.
The Citation light jet market falls into the trends we’ve recognized above and the paragraphs below provide insight into each of the specific model markets.
This has been a dynamic year so far for the Citation Mustang with several new, and a few legacy trends, positively affecting the market. Waning production of new Mustangs, declining inventory levels, increased transaction levels, and sub-$2.0m median pricing have all worked harmoniously to build the Mustang market into one of the most robust in the entire light jet industry.
We expect activity in the Mustang market to continue to show strength through end-of-year 2014, but anticipate it may slow slightly as we continue into 2015 as new-to-market Mustangs become available, with their owners preparing for M2 deliveries.
At the time of this writing, 40+ M2s have been delivered to retail customers, with almost all of them going to USA-based owner/operators. With over 10 months of operating history under the M2’s belt, Cessna’s upgraded CJ1+ has had very positive reviews from the owners and the market.
Recent news that the previously announced, all-electric windshield for the M2 has hit a certification roadblock will not allow Cessna to offer the system as previously committed. As the M2 is still fairly new, there has yet to be any development in the pre-owned market. New M2s are selling for $4.5M+.
The second and third quarter of 2014 saw very positive activity for the M2’s ProLine 21 equipped predecessor, the CJ1+. Pricing for the CJ1+ continues to stay mostly flat, due to dwindling inventory levels, with units trading in the low $2Ms to mid $2Ms depending on pedigree. As for the “Legacy” CJ and CJ1, values have continued on a slow but steady decline as inventory levels have remained at record highs. Pricing on an average CJ is around $1M, whereas the CJ1 is in the mid $1Ms.
In Q1 of 2014, the future of the CJ2+ became a little bit clearer. Cessna announced that the CJ2+ would no longer be produced; however, current owners will have the opportunity to upgrade their aircraft to a Garmin G3000 cockpit with Cessna’s new “Alpine Edition” CJ2+ – essentially delivering new paint, new interior, new cockpit, and new wiring to a ProLine 21-equipped jet for approximately $1M in upgrade cost. The above being said, the CJ2+ market has stayed relatively consistent in terms of transaction activity and healthy inventory levels. Approximately half of the CJ2+s that are for sale are in non-USA markets. The majority of the non-USA aircraft for sale are based in Europe. In general we continue to see CJ2+s trading in the high $3M to low $4M range. With the limited number of new aircraft coming to market, we see the CJ2+ continuing to be bolstered.
While there have been no announcements for the Alpine Edition improvements to be available on the CJ2, we see this model as representing an excellent value for a light jet under $3M. Pricing for the CJ2 has ranged from the mid to high $2Ms.
The new CJ3+ has the upgraded G3000 cockpit along with the upgraded seats and interior appointments found in the new M2. Now, with the CJ3+, operators who are fluent in Garmin have an easy option to transition to – making it likely that the CJ3+ will drive a significant number of current turbine G1000/G3000 operators into its fold. With this Garmin demographic being so vast, the pathway to the CJ3+ has significantly widened to a much broader market.
Meanwhile, the ProLine 21-equipped, pre-owned CJ3 market has heated up dramatically since Q1 of this year with record transaction volume. Demand for lightly used, low-time pre-owned units continues to increase, and supply in that quadrant of the inventory matrix continues to dwindle. CJ3s are trading from the low $4Ms to low $5Ms. The CJ3 represents one of the few light jet markets that has seen price appreciation over the last quarter.
Cessna continues to deliver an impressive number of CJ4s, with nearly 20 new aircraft delivered YTD 2014, and only four pre-owned aircraft available for purchase out of the 160+ total units in operation. With the CJ4 being the largest and fastest of the single pilot Citations, there isn’t a clear upgrade path for these operators, reducing the likelihood of current CJ4 owners migrating out of their birds. Less than a dozen pre-owned CJ4s have traded hands since first production, with prices in the mid $6M to low $7M range.
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About the author:
Cyrus Sigari is the founder and CEO of jetAVIVA, the world’s leading seller of pre-owned light jets, and is a founder of CJP and sits on the board of directors of CJP. Sigari’s firm has transacted well over a billion dollars’ worth of light jets and has been a long time partner to both CJP and CJP members.