cjp 2010, jetaviva citation market report
DESCRIPTION
The following presentation was given by Cyrus Sigari of jetAVIVA at the 2010 Citation Jet Pilots owners conference on the state of the Citation Market.TRANSCRIPT
1
Citation Market Update
Cyrus Sigari, jetAVIVA
+1.310.405.1439
September 2nd 2010
Companion course
In April 2009, Doug White was riding in his King Air 200 (a nine-seat turboprop) when his pilot suddenly fell unconscious during the climb through 10,000’.
Doug had flown small Cessnas before, but never anything as large or fast as the King Air.
2
3
Congrats to the Companions 25 ground school attendees 13 flying students over tomorrow and
Saturday Aircraft owners/pinch hitters: Stand up! If your companion couldn’t attend
groundschool or flight training, we can come to you. See Meghan in the back at next break.
We have extra checklists available. Mustang CJ1+/CJ2+/CJ3
4
Schedule
5
Owner's Name Student Name Aircraft Type Day Time Instructor
Lockhard, Don Lockhard, Jane Mustang Friday 8:00:00 Ben Marcus
Gregoire, Jerome Gregoire, Stephanie CJ1+ Thursday
TBD Casey Miller
Armstrong, Doug Armstrong, Liz Mustang Friday 8:00:00 Cyrus Sigari
Andersen, Jorgen Andersen, Lizzie Mustang Friday 8:00:00 Neil Singer
Hayes, John Quale, Jane Mustang Friday 11:30:00 Neil Singer
Boyd, Russell Boyd, Amy Mustang Friday 11:30:00 Cyrus Sigari
Gee, Thomas Gee, Anne Mustang Friday 11:30:00 Ben Marcus
Price, Rob Price, Susan Mustang Friday 15:00:00 Ben Marcus
Tracy, Pat Tracy, Susan Mustang Friday 15:00:00 Cyrus Sigari
Bretcher, Steve Ogolin, Kendra Mustang Saturday 8:00:00 Cyrus
Lunger, Brett Lunger, Caroline Mustang Saturday 8:00:00 Neil Singer
Frantz, Jim Frantz, Janet Mustang Saturday 11:30:00 Ben Marcus
Before we start
Special thanks… lots of data from: UBS Bank of America JetNet GAMA Aircraft Blue Book jetAVIVA Research Staff
6
A look back at a little history
Learn from the past Let’s look at:
DJIA 11 yr Inventories Value:1996 C-525
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A history lesson
8
19
99
Q2
19
99
Q3
19
99
Q4
20
00
Q1
20
00
Q2
20
00
Q3
20
00
Q4
20
01
Q1
20
01
Q2
20
01
Q3
20
01
Q4
20
02
Q1
20
02
Q2
20
02
Q3
20
02
Q4
20
03
Q1
20
03
Q2
20
03
Q3
20
03
Q4
20
04
Q1
20
04
Q2
20
04
Q3
20
04
Q4
20
05
Q1
20
05
Q2
20
05
Q3
20
05
Q4
20
06
Q1
20
06
Q2
20
06
Q3
20
06
Q4
20
07
Q1
20
07
Q2
20
07
Q3
20
07
Q4
20
08
Q1
20
08
Q2
20
08
Q3
20
08
Q4
20
09
Q1
20
09
Q2
20
09
Q3
20
09
Q4
20
10
Q1
20
10
Q2
0.00
2000.00
4000.00
6000.00
8000.00
10000.00
12000.00
14000.00
16000.00
Dow Jones on Left Axis
^D
JIA
Last year’s CJP conference
A history lesson
9
19
99
Q2
19
99
Q3
19
99
Q4
20
00
Q1
20
00
Q2
20
00
Q3
20
00
Q4
20
01
Q1
20
01
Q2
20
01
Q3
20
01
Q4
20
02
Q1
20
02
Q2
20
02
Q3
20
02
Q4
20
03
Q1
20
03
Q2
20
03
Q3
20
03
Q4
20
04
Q1
20
04
Q2
20
04
Q3
20
04
Q4
20
05
Q1
20
05
Q2
20
05
Q3
20
05
Q4
20
06
Q1
20
06
Q2
20
06
Q3
20
06
Q4
20
07
Q1
20
07
Q2
20
07
Q3
20
07
Q4
20
08
Q1
20
08
Q2
20
08
Q3
20
08
Q4
20
09
Q1
20
09
Q2
20
09
Q3
20
09
Q4
20
10
Q1
20
10
Q2
0.00
2000.00
4000.00
6000.00
8000.00
10000.00
12000.00
14000.00
16000.00
500
1000
1500
2000
2500
3000
3500
Dow Jones on Left Axis, BizJet Inventory on Right Axis
DJIA
Jet Inventory
^D
JIA
Last year’s CJP conference
1999
Q2
1999
Q3
1999
Q4
2000
Q1
2000
Q2
2000
Q3
2000
Q4
2001
Q1
2001
Q2
2001
Q3
2001
Q4
2002
Q1
2002
Q2
2002
Q3
2002
Q4
2003
Q1
2003
Q2
2003
Q3
2003
Q4
2004
Q1
2004
Q2
2004
Q3
2004
Q4
2005
Q1
2005
Q2
2005
Q3
2005
Q4
2006
Q1
2006
Q2
2006
Q3
2006
Q4
2007
Q1
2007
Q2
2007
Q3
2007
Q4
2008
Q1
2008
Q2
2008
Q3
2008
Q4
2009
Q1
2009
Q2
2009
Q3
2009
Q4
2010
Q1
2010
Q2
0.00
2000.00
4000.00
6000.00
8000.00
10000.00
12000.00
14000.00
16000.00
500
1000
1500
2000
2500
3000
3500
Dow Jones on Left Axis, BizJet inventory and Price ($1000's) on Right Axis
DJIA
'96 CE525 Pricing
Jet Inventory
^DJI
A
A history lesson
Source: JetNet, DowJones, Aircraft BlueBook, GAMA
Lag Historic
build rates
2008 – 1300 shipments/yr
Inv x 2
Last recovery
2003 – 670 shipments/yr
Lag
Last down turn, inventory doubled
DJIA ≈ 12,000 -> 7,800
+ ind
Last year’s CJP conference
UBS Survey
11
Index between 0-49, incrementally weakening conditionsIndex between 50-100, incrementally strengthening conditions
Source: UBS August business jet survey
What about Europe?
12
Percentage of total deliveries to Europe 2005-2010
Source: UBS August business jet survey
Strong $ = Weak EU Markets
13
8/25
/09
9/5/
09
9/16
/09
9/27
/09
10/8
/09
10/1
9/09
10/3
0/09
11/1
0/09
11/2
1/09
12/2
/09
12/1
3/09
12/2
4/09
1/4/
10
1/15
/10
1/26
/10
2/6/
10
2/17
/10
2/28
/10
3/11
/10
3/22
/10
4/2/
10
4/13
/10
4/24
/10
5/5/
10
5/16
/10
5/27
/10
6/7/
10
6/18
/10
6/29
/10
7/10
/10
7/21
/10
8/1/
10
8/12
/10
8/23
/10
1.15
1.2
1.25
1.3
1.35
1.4
1.45
1.5
1.55
EUR /USD
20% Reduction in Euro Value in 8 months
$5M pre-owned CJ3 = $6M to Euro buyer today
Dealer Quotes The summer season has seen a drop-off in activity levels.
Activity, including prospective consultations and RFPs, suggest the recovery may start around the end of 2010.
Our confidence level is far better than six to nine months ago, but we are still very cautious.
The market seems to be quieter in the last 45 days and may remain so until after midterm elections.
Most Buyers are ‘one-hit wonders’, meaning that they make an offer, and if you attempt to negotiate, they just vaporize.
It seems that sellers firmed up their pricing in expectation of a better market.
We sold 15 airplanes Q1-Q2. In July alone, we closed on seven. Activity has seen marked improvement, but deals are far more complex and take much longer to conclude.
Financiers are still reluctant to increase loan-to-value dynamics.
14Source: UBS August business jet survey
Translation
15
Things are slower than earlier this
year, but we think it is going to get
better…
12 month outlook
16
Takeoffs & Landings
“Flight activity is a leading indicator…of general market conditions.”
All biz jet cycles up 8% from last year. Citation up 5%
Citation makes up for 37% of cycles
Source: UBS August business jet survey
Source: UBS August business jet survey
Supply What drives production at OEMs?
Buy new if we can… Pre-owned aircraft markets…
• Market liquidity?• What are models trading at?
OEMS at about ½ where they were a two years ago (people, production, etc)
Source: UBS August business jet survey
Let’s focus on the pre-owned market for a bit...
MUSTANG – 525 – 525A – 525B
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Stratified Markets
Not realistic about market (or upside down), bad pedigree (once the oranges are gone)50%
Not realistic about market (or upside down), good pedigree (once the yellows are gone)20%
Realistic about market but not a good pedigree machine
(once the greens are gone)20%
Realistic about market and a good pedigree machine… (30-90 days)
10%
UPSIDE DOWN
Bank Assets
What is good pedigree?
Damage history Time on airframe/engines Program enrollments Options Operational history Ownership history Country of registry Interior condition styling Exterior condition styling
DON’T ASSUME YOU KNOW WHAT IS IMPORTANT TO A BUYER
Liquidity
23
Mus-tang
CJ CJ1 CJ1+ CJ2 CJ2+ CJ30.00%0.50%1.00%1.50%2.00%2.50%3.00%3.50%4.00%4.50%5.00%
% of Fleet Sold per Quarter (Q1/Q2 2010)
Mus-tang
CJ CJ1 CJ1+ CJ2 CJ2+ CJ30.00%
4.00%
8.00%
12.00%
16.00%
20.00%% of Fleet for Sale
Mus-tang
CJ CJ1 CJ1+ CJ2 CJ2+ CJ30.000.050.100.150.200.250.300.350.400.45
Liquidity Index Liquidity Index =% of fleet sold per quarter divided by % of fleet for sale.
Bigger the number, the better the liquidity (today).
Source: JetNet, jetAVIVA Research
Mustang
300+ units delivered Darling of light jet market Strong liquidity Factory slow down… good news
for owners Roughly two pre-owned planes are
trading per month
Mustang
25
Jun
07
Aug 0
7
Oct 0
7
Dec 0
7
Feb 0
8
Apr 0
8
Jun
08
Aug 0
8
Oct 0
8
Dec 0
8
Feb 0
9
Apr 0
9
Jun
09
Aug 0
9
Oct 0
9
Dec 0
9
Feb 1
0
Apr 1
0
Jun
100
10
20
30
40
50
60
Mustang Inventory
Inventory
2007s: $2M-$2.3M2008s: $2.25M-$2.35M2009s: $2.35M-$2.6M2010s: $2.6M-$2.8M
Positions: 10Delivered planes: 20
Delivery positions
270 Mustangs built during this period… % of fleet for sale relatively constant
CitationJet/CJ1/CJ1+
26
CJ/CJ1/CJ1+
27Source: JetNet, jetAVIVA research
Jun
07
Aug 0
7
Oct 07
Dec 0
7
Feb 0
8
Apr 0
8
Jun
08
Aug 0
8
Oct 08
Dec 0
8
Feb 0
9
Apr 0
9
Jun
09
Aug 0
9
Oct 09
Dec 0
9
Feb 1
0
Apr 1
0
Jun
100
10
20
30
40
50
60
70
80
CitationJet Inventory
525
CitationJets: $1.3M-$1.8M
CJ/CJ1/CJ1+
28Source: JetNet, jetAVIVA research
Jun
07
Aug 0
7
Oct 07
Dec 0
7
Feb 0
8
Apr 0
8
Jun
08
Aug 0
8
Oct 08
Dec 0
8
Feb 0
9
Apr 0
9
Jun
09
Aug 0
9
Oct 09
Dec 0
9
Feb 1
0
Apr 1
0
Jun
100
10
20
30
40
50
60
70
80
CitationJet/CJ1 Inventory
525CJ1
CitationJets: $1.3M-$1.8M CJ1s: $1.9M-$2.5M
CJ/CJ1/CJ1+
29Source: JetNet, jetAVIVA research
Jun
07
Aug 0
7
Oct 07
Dec 0
7
Feb 0
8
Apr 0
8
Jun
08
Aug 0
8
Oct 08
Dec 0
8
Feb 0
9
Apr 0
9
Jun
09
Aug 0
9
Oct 09
Dec 0
9
Feb 1
0
Apr 1
0
Jun
100
10
20
30
40
50
60
70
80
CitationJet/CJ1/CJ1+ Inventory
525CJ1CJ1+
CitationJets: $1.3M-$1.8M CJ1s: $1.9M-$2.5MCJ1+s: $3M-$3.8M
TMPE = The Mustang and Phenom 100 Effect; 470 new combined deliveries
CJ2/CJ2+
30
CJ2/CJ2+
Source: JetNet, jetAVIVA research
Jun
07
Aug 0
7
Oct 07
Dec 0
7
Feb 0
8
Apr 0
8
Jun
08
Aug 0
8
Oct 08
Dec 0
8
Feb 0
9
Apr 0
9
Jun
09
Aug 0
9
Oct 09
Dec 0
9
Feb 1
0
Apr 1
0
Jun
100
5
10
15
20
25
30
35
40
45
CJ2/CJ2+ Inventory
CJ2
CJ2s: high $2Ms to mid $3Ms
CJ2/CJ2+
Source: JetNet, jetAVIVA research
Jun
07
Aug 0
7
Oct 07
Dec 0
7
Feb 0
8
Apr 0
8
Jun
08
Aug 0
8
Oct 08
Dec 0
8
Feb 0
9
Apr 0
9
Jun
09
Aug 0
9
Oct 09
Dec 0
9
Feb 1
0
Apr 1
0
Jun
100
5
10
15
20
25
30
35
40
45
CJ2/CJ2+ Inventory
CJ2CJ2+
CJ2s: high $2Ms to mid $3Ms CJ2+s: high $3Ms to low $5Ms
International: 14USA: 3
2 taking delivery of CJ4; 1 taking delivery of XLS+
CJ3
Source: JetNet, jetAVIVA research
Last year… CJ3 market
34
Contract 9
/3/2009
Closed 9/2/2009
Contract 9
/3/2009
Pre-buy 9/3/2009
Source: jetAVIVA research
CJ3
Source: JetNet, jetAVIVA research
Jun
07
Aug 0
7
Oct 07
Dec 0
7
Feb 0
8
Apr 0
8
Jun
08
Aug 0
8
Oct 08
Dec 0
8
Feb 0
9
Apr 0
9
Jun
09
Aug 0
9
Oct 09
Dec 0
9
Feb 1
0
Apr 1
0
Jun
100
5
10
15
20
25
30
35
40
CJ3 Inventory
CJ3s: Mid $4Ms to Low/Mid $6Ms
72% Increase in Inventory
Last year’s CJP conference
TCJ4E
CJ4
36
• Too new for there to be a resale market• SO GO GET ONE!
Summary
Strong Mustang liquidity… price it right, it will sell
Older generation (525, CJ1, CJ2) struggling
Tangible market impact due to CJ4 arrival, in particular CJ2+/CJ3 market
Last year we said:
THE PRE-OWNED RECOVERY HAS BEGUN…
SPECIFICALLY IN NEWER MARKETS
This year:
39
• Recovery came and has slowed
• Europe will respond when/if Euro rebounds
• Watch for November/Year end rush for domestic buyers
• CJ3 pricing at risk
What are your options?
If you are happy with your plane – HOLD… (exception)
If you need to sell – SELL SMARTLY If you are thinking about upgrading –
NOW IS THE TIME TO ACT Straight Trades or Trade + Cash Sell now… take your hit… then go hitting
Talk to Cessna/Used market
Q & A
(Reminder: get with your instructor for keys… see Meghan for a checklist and/or more info)