JetSwiss Pilatus PULSE - October 2023

PUBLISHED BY

JETSWISS AVIATION

PILATUS MARKET DATA | OCT 2023

THIS MONTH’S BACK PAGE FEATURE: THREE ERRORS THAT CAN GROUND

PRE-OWNED PILATUS MARKET: WHAT IS A “NORMAL” MARKET?

YOUR AIRCRAFT TRANSACTION

SHOWN HERE:

2 0 0 8 P I L AT U S P C -1 2 N G

F O R S A L E AT J E T S W I S S . C O M

INTRODUCTION

PILATUS PC-12 MARKET OVERVIEW FOR OCTOBER 2023 What is a “normal” market?

If you’re selling a plane today, there’s a good chance that you purchased the aircraft for less than what you’re currently asking for it (that is, IF you purchased it prior to the run on airplanes at the end of 2020). You may have upgraded or made modifications, but regardless, what you’re asking today is completely relevant to your cost basis and what you’re willing to negotiate or price your aircraft.

How much is your cost basis determining the market today?

As the market slows down, cost basis certainly has an impact.

Today 43% of the current aircraft for sale were purchased during calendar 2021 and after. These sellers have a vastly different cost basis than their competition (the other 57% for sale). Today buyers have more available aircraft to choose from. As inventory levels tick upward, the seller who bought prior to 2021 may be more apt to negotiate lower pricing because of their low relative cost basis. This dynamic will be in direct contrast to the current sellers who bought post 2021 at a much higher cost basis.

As we have said before, not only did your Pilatus go up in value, but so did all other aircraft. Commensurately, your entry point into your next aircraft will be at a higher value as well, but you are also capturing more value for your existing aircraft today—relatively a wash here. This delta impacts those exiting aircraft ownership or entering it for the first time.

So, what is a normal market?

We can talk about absorption rate; we can talk about how many PC-12s the world will consume pre-owned on a yearly basis. It’s traditionally around 115 units worldwide. This year, we estimate around 90-100 units. We know that 65% of our clients pay cash, which means some people are still using financing.

Does this affect someone’s attitude to purchase an aircraft economically as well? In the little Pilatus world we live in, people don’t use their last dime to buy an aircraft. When they go to sell that aircraft, what are they doing? Are they going to have to pay a premium on that other aircraft? Are they walking away from aviation? Are they replacing with a brandnew aircraft? Factoid time! Statistically, 28% of the time the latter is true—when someone buys a pre-owned Pilatus, they turn around and buy a new one down the road. Also, 28% of

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the time that a person purchases a new Pilatus, they end up buying another brand new one in the future.

How does this affect the ups and downs of the Pilatus market we live in? I would suggest it keeps the highs and lows from being too crazy. We’ve had a myriad of aircraft for sale over the last few weeks. We’ve had everything from a 25-year-old aircraft to 5-year-old aircraft. What we’ve noticed is the potential buyer activity is virtually the same for the young airplane and the 25-year-old machine. Don’t you find that interesting? In addition, we also see airplanes that are less than 5 years old, with low time, like our 2019 for sale, garnering premium values.

Go figure. Here are some valuable comparisions of the preowned Pilatus market worth noting: 1.

2.

3.

Last month there were 59 pre-owned PC-12s for sale. This month there are 66.

Last month the average PC-12 price was $4,756,500. This month the average price is $4,694,500 - a 1.3% decrease.

Last year during this time, there were 88 pre-owned PC-12s delivered. This year to date there have been 78 delivered.

In the end, what is a normal market?

A normal market is what a willing buyer and seller will transact the asset at today. The key to this “Captain Obvious” comment is that this willing buyer and willing seller equation changes with model year, equipment, etc.—and, as we’ve pointed out, the seller’s cost basis.

We feel that it’s our job at JetSwiss to give willing buyers and clients real-world feedback that will help navigate the course for making offers, establish asking prices and negotiating their best price and terms when selling. It’s our goal to paint a picture of the new ‘normal market’ to our clients. This may mean we are searching for sellers with low cost basis in some instances, and conversely, we are advising our selling clients to be priced correctly. Placing an aircraft for sale with “pie in the sky” pricing will not fly today. Those days are over…. Do your homework, kids.

Fly safe, Bub

M A R K E T AT A G L A N C E

MARKET CHANGES IN THE LAST 30 DAYS

BY MODEL YEAR

17 1996 1997 2004 2007

NEW ENTRANTS TO MARKET

2008 2008 2009 2010

2010 2011 2013 2019

2019 2020* 2021 2022 2023*

12 1998 2006 2007 2009

5%

UNDER CONTRACT

2011 2011 2013 2014

2017 2022 2021* 2021*

14 2000 2002 2006 2006

OVERALL MARKET

25%

SOLD FROM MARKET 2008 2014 2018 2018

133%

2018* 2019 2020* 2022* 2022*

*PC-24

/45

/47

NG

NGX

PC-24

TOTAL

New to Market

3

1

9

2

2

17

Number Currently Available

18

4

35

9

13

79

Number Sold in the Last 30 Days

2

2

5

1

4

14

2

1

6

1

2

12

Number Under Contract

*Sales data only includes preowned transactions. Numbers may vary slightly based on delayed FAA filings.

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CURRENT MARKET PRICING

A I R C R A F T TOTA L T I M E V S . A S K I N G P R I C E

Asking Price By Total Hours $9,000,000 $8,000,000

Similar to the Asking Price vs Model Year chart, this information helps our clients determine “the mileage on the car” for their specific budget.

“Want to own a low time aircraft?” This chart will give you an indication on what you will spend. Note: aircraft under 1,000 hours total time historically yield much higher prices.

$7,000,000

Asking Price

$6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 Under Contract

0

2500

5000

7500

10000

Total Hours

No Contract

JETSWISS

SEES MORE

PRE-OWNED

PC-12

TRANSACTIONS

THAN ANYONE IN THE WORLD.

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12500

15000

17500

20000

ASKING PRICE BY MODEL YEAR

Asking Price By Model Year

$9,000,000 $8,000,000 $7,000,000 $6,000,000

Asking Price

This chart reflects the current market for Pilatus PC-12 aircraft that are on the retail market. Want to know how much your Pilatus dollars will buy?

This is a great place to start. As you can see, the aircraft model year plays a key factor in pricing of the aircraft, and thus generates a commensurate trend curve. This data provides a baseline for our aircraft evaluations.

$5,000,000 $4,000,000 $3,000,000 $2,000,000

$1,000,000 1990 Under Contract No Contract

1995

2000

2005

2010

2015

2020

2025

Model Year

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T R A N S ACT I O N A L DATA

ASKING PRICE BY MODEL

AV E R AG E AS K I N G PR I C E SINCE LAST MONTH

$3.265M

1.5%

$3.850M

2%

$4.608M

5%

$7.055M

1%

$12.863M

0%

PC-12/45

PC-12/47

PC-12NG

PC-12NGX

PC-24

Max of Current Ask Price

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Avg of Current Ask Price

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Min of Current Ask Price

SEPTEMBER SAW

8 MORE

CLOSINGS THAN AUGUST.

TIME ON MARKET

5%

(3 AIRCRAFT)

B R E A K D OW N O F DAY S O N M A R K E T F O R P I L AT U S P C -1 2

0-30 Days on Market 31-60 Days on Market

23%

22%

(12 AIRCRAFT)

(13 AIRCRAFT)

16%

61-90 Days on Market 4-6 Months on Market 7-12 Months on Market 1-2 Years on Market

18%

(10 AIRCRAFT)

(9 AIRCRAFT)

16%

(9 AIRCRAFT)

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THREE ERRORS THAT CAN GROUND YOUR AIRCRAFT TRANSACTION WITH GREG REIGEL, AVIATION ATTORNEY

If you are purchasing an aircraft, you need to plan up front to ensure a smooth and successful transaction.

Here are three areas that require special attention to avoid problems with your aircraft transaction before it even takes off.

Incomplete Purchase Agreement. An aircraft purchase agreement should be used to provide a flight path for the transaction. It should, at a minimum, identify: 1.

2.

3.

4.

5.

6.

7.

8.

The parties; The aircraft; The financial terms for the transaction (e.g., purchase price, deposit, any other financial considerations); The documents required to close the transaction; The scope of the pre-purchase inspection; Warranties, if any; Remedies in the event of a default; and Any other requirements for the transaction that are important for one or both parties.

Without a complete purchase agreement, the parties could end up in a dispute over an issue that could have/should have been addressed in the purchase agreement.

Inadequate State Tax Planning. An aircraft purchaser must properly plan for and address sales and use tax that may be imposed that may be imposed upon the purchaser as a result of the transaction, including any applicable exemptions and their requirements (e.g., fly-away, sale for resale, commercial use, casual/ occasional/isolated sale, etc.).

The purchaser should also determine whether the state in which the aircraft is to be located or operated postclosing will assess personal property or ad valorum tax on the aircraft. In some states this tax is assessed and paid on annual basis. It may be separately assessed by the state or county, or it may be included along with an aircraft’s annual registration. However, as with sales and use tax, some states also provide exemptions from personal property tax depending upon location and use of the aircraft.

®

LE AVE TH E NA VI G A TI NG TO U S

®

Improper Use of an LLC. Although an aircraft purchaser may be able to benefit by using an LLC for ownership of an aircraft, the aircraft purchaser also needs to be aware of the regulatory issues that may result from this ownership structure. One of the primary regulatory concerns may arise when an aircraft is purchased by, and operated from, what is commonly referred to as a “flight-department company.” In this scenario, the purchaser, which may be an individual or a business, purchases an aircraft.

Intending to limit personal liability, the purchaser forms a separate LLC to own the aircraft. The LLC then operates the aircraft for the purchaser under FAR Part 91.

Unfortunately, if this arrangement is not structured properly, the FAA could view the LLC’s operation of the aircraft on behalf of the purchaser as a commercial operation requiring an air carrier certificate. Accordingly, any operation of the aircraft by the LLC on behalf of the purchaser or others without an air carrier certificate could subject the pilot(s) actually flying the aircraft to an FAA enforcement action and subject the LLC that owns and operates the aircraft to a civil penalty action.

Similarly, depending upon how this arrangement is structured, the Internal Revenue Service could view the LLC’s operation of the aircraft as a commercial operation requiring the collection and payment of Federal Excise Tax on any flights performed on behalf of the purchaser.

ABOUT GREG REIGEL Greg Reigel is an aviation attorney who represents clients throughout the country in aviation and business law matters. He has more than two decades of experience working with airlines, charter companies, fixed base operators, airports, repair stations, pilots, mechanics, and other aviation businesses in aircraft purchase and sales transactions, regulatory compliance including hazmat and drug and alcohol testing, contract negotiations, airport grant assurances, airport leasing, aircraft-related agreements, wet leasing, dry leasing, and FAA certificate and civil penalty actions. For assistance, call 214-780-1482, email: greigel@shackelford.law, or Twitter: @ ReigelLaw

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