JetSwiss Pilatus PULSE - April 2023

PILATUS PC-12 & PC-24 MARKET OVERVIEW FOR APRIL 2023

PRICING STANDSTILL

I was recently reflecting with a client of ours on the state of the market. He was particularly interested in the inventory levels and how they compared to recent years. In a very quick calculation, I told him that the market today reminded me of Q3 2021. If we go back and think about what had just occurred during that time, we were coming out of COVID and there were a lot of new entrants in private aviation. At the end of 2020, there was a run on airplanes for various reasons. 100% bonus depreciation was in place, the DOW was recovering rapidly, people had been sitting on cash, interest rates were low, and companies were coming off record years despite a global pandemic. That momentum continued into and throughout 2021. If you were to use an X / Y axis to plot the trends, at that time the market was preparing itself for an exponential increase in pricing while heading toward record-low inventory. Today, we are on an inverse path except for pricing. Inventory is ticking upward, and pricing is remaining level. The market has reset, and aircraft owners/buyers are starting to realize such. We aren’t in a bubble.

Let’s take a look at August 2021 and see what that snapshot in time looked like:

There were approximately 45 airplanes for sale with asking prices ranging from $1.95M to $4.51M. At this time, new airplanes (NGX variant) were delivered for approximately $5.5M and there was about a 1-year backlog. On the pre-owned side, a 2020 NG with 300 hours sold for $4.925M (98% residual value). Further, a 2009 NG with 2,500 hours sold for $3.2M (original sicker for $4.1M).

Now, let’s take a look at the market today, almost 2

Now, let’s take a look at the market today, almost 2 years later:

There are 43 airplanes for sale with asking prices ranging from $2.8M to $7.5M. New airplanes are delivering for around $6.0M and there is north of two years’ worth of backlog. Side note, Pilatus does not release production levels more than 18 months in advance, so backlogs are an estimation. Lastly, looking back at the airplanes mentioned which sold in August 2021, the 2020 NG would sell today for $6.0M and the 2009 NG would sell for $4.2M commensurately.

Thus, the pre-owned market has reset its value by $1M.

If you secretly ask dealers if their backlog is growing, they will almost always say yes. However, they will also admit that some people have jumped out of the game (moving people up in line). Therefore, we really don’t know the extent of the “dealer backlog” and the full picture. As the dealers most definitely have movement within their folds, one could easily assume some folks have exited. It was this backlog that allowed the preowned market to reset its baseline pricing in the first place. As inventory levels of preowned airplanes increase, the market will return to equilibrium allowing for standard depreciation rates to return. However, it should be noted that the baseline values have been reset. Keep in mind, 45 airplanes for sale in August 2021 was historically low at the time. As a reference point, in August 2020 there were 95 airplanes for sale. So, until the market feels downward pressure from the top or inventory jumps to 70+ airplanes for sale, we won’t experience a drastic decline in pricing.

MARKET CHANGES IN THE LAST 30 DAYS BY MODEL

YEAR

$3.585M PC-12/45 AVERAGE ASKING PRICE $3.735M PC-12/47 AVERAGE ASKING PRICE

$5.081M PC-12NG AVERAGE ASKING PRICE

$7.283M PC-12NGX AVERAGE ASKING PRICE

$12.839M PC-24 AVERAGE ASKING PRICE

WHERE IN THE WORLD IS YOUR NEXT PILATUS?

We are always on the search for great pilatus projects for great people. Whether you’re looking to buy or sell, we’d like to start the conversation!

TALK TO THE EXPERTS.

2% of the Pilatus fleet is for sale.

35% of JetSwiss projects sell to owner pilots.

23% of PC-12 pre-owned transactions are JetSwiss projects.

SCAN FOR YOUR COMPLIMENTARY AIRCRAFT EVALUATION.

$7,000,000

$6,000,000

$5,000,000

Asking Price By Total Hours AIRCRAFT TOTAL TIME VS. ASKING PRICE For Sale Under Contract

$8,000,000 0 2500 5000 7500 10000 12500 15000

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

$4,000,000

$3,000,000

Asking Price Total Hours

DOUBLED $2,000,000

“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.

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.

PILATUS

PROJECTS PER YEAR. WE ARE THE WORLD WIDE LEADER OF PILATUS PRE-OWNED SALES.

PC-24

OWNERS UPGRADE FROM THE PC-12NG MORE THAN ANY OTHER AIRCRAFT.

6 AVAILABLE FOR SALE

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.

189 TOTAL NEW DELIVERED

PC-24 BY THE NUMBERS

ASKING PRICE BY TOTAL HOURS

Asking Price By Model Year

THE PC-12NGX

This chart reflects the current market for Pilatus PC-24 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.

THE PC-24 WAS NINTH BEST.

SECOND

WAS BEST SELLING AIRCRAFT IN THE WORLD IN 2022.

TIME ON MARKET

0-30 Days on Market

31-60 Days on Market

61-90 Days on Market

4-6 Months on Market

7-12 Months on Market

CHARITABLE FLYING

BY DANIEL CHEUNG, CPA AT AVIATION TAX CONSULTANTS LLC

Having been involved in the general aviation industry for over two decades, I have always recognized the positive contributions our industry provides to society. Whether it is natural disasters, transporting veterans and ordinary folks needing medical treatments, or pets that need rescued or relocated, pilots and aircraft owners, fixed base operators, and numerous other stakeholders in our industry step up to provide invaluable support.

The Internal Revenue Code offers support for aircraft owners who fly for charitable organizations. For an aircraft owner who utilizes the aircraft in a business, tax deductions are available. With the tax law changes in recent years, business owners can deduct the full costs of operating the aircraft when the charitable flights are handled correctly.

Overview

To enable deductibility, the flight needs to be for a qualified charity. Numerous organizations are registered with the Internal Revenue Service (IRS) as qualified charities. Educational and religious organizations generally qualify. An inquiry with the group that you fly for can confirm its status.

Deductible charitable flights must be directly related to a qualified charity’s exempt purposes. Flying a patient for medical treatment, organized by a qualified charity, will be a tax-deductible flight. A flight to a charity fundraiser gala or flying a charity’s board member to attend a board meeting is not considered a tax-deductible charitable flight.

Tax treatment for private aircraft owners:

Only direct operating expenses can be deducted – fuel and oil. If you purchase a special insurance policy for the charitable flight, this premium can be deductible. Any fixed costs cannot be deducted. You also cannot deduct the value of the time that you spend on a flight.

Deductible expenses for your charitable flying can be deducted on Schedule A, Itemized Deductions, on your personal income tax return, Form 1040.

Tax treatment for business aircraft owners:

The general rule for business aircraft deductions is that the flight is conducted for business travel. By definition, a charitable flight is not a business flight. With some recent changes to the tax code, however, a business owner can now take full tax advantage of certain non-business flying, defined as a personal non-entertainment (PNE) flight.

A PNE flight is defined as a personal flight that is not for the entertainment of the taxpayer. A charitable flight will qualify as a PNE flight (despite the significant personal satisfaction and joy a taxpayer will experience). Medical and bereavement travels are other examples of PNE flights.

A PNE flight is treated as a tax-deductible compensation use of the aircraft by the taxpayer. Valuation of this compensation can be based on the Standard Industry Fare Level (SIFL) method. The valuation rate is published and updated by the IRS every six months. SIFL income shall be reported to the taxpayer as a noncash fringe benefit.

Income tax treatment can vary based on your corporate and aircraft ownership structure. Consult with your tax advisor for the proper treatment of your charitable flying.

Daniel Cheung, CPA is the co-founder of Aviation Tax Consultants, which is celebrating its 20th anniversary in 2023. Daniel recently joined the Board of Directors of Angel Flight West (https://www.angelflightwest.org) and he encourages readers to identify a charity that aligns with their values and enjoy the most satisfying flying one can experience!