Out of Production Beechcraft Premier 1 and Premier 1A Used Prices

Hawker Beechcraft has received court approval to exit bankruptcy as a standalone company producing only prop aircraft as Beechcraft Corp.  The court has also allowed HBC to discontinue warranty and support programs for the Hawker 4000 and Beechcraft Premier I/IA.  What impact does the lack of warranty support and being out of production have on Premier aircraft?

There are slightly less than 300 Beechcraft Premier aircraft in service, of which approximately 60% are out of warranty or close to being out of warranty.  In many industries 300 units would be too small of a number to provide support.  However, in the aviation industry, with long economic lives for aircraft, this is a significant number of aircraft that will need parts and service.  As a result of bankruptcy many of the vendors will be released from their proprietary contracts with HBC and be allowed to sell and repair parts.  The biggest negative might be a pool of rotatables, however I suspect some maintenance providers will see value in inventorying those as well.

The market place quickly factored in the bad news of the Premier being out of production and the news HBC would not stand behind their warranty and support agreements.  Some of this is over-reaction since the engine and avionics package is modern and desirable in the light jet market.  JSSI has announced an option for Premier owners to help guarantee their operating costs.  Likely not to be inexpensive, operators will at least obtain the ability to forecast their operating costs.  However there are issues to operating a Premier that you don’t have with other competing aircraft.  Price will offset some of those and it appears the marketplace has adjusted prices accordingly.

What to do if you own a Premier?  I have two suggestions.  First, is to fly it and keep it as long as originally planned.  When the time comes to trade you won’t be shocked by the lower values and will understand that the market place can be cruel but there will be a market.  You may experience some parts issues however they should not be severe.  You will have gotten good transportation at a higher life cycle cost than planned but it still provided efficient transportation.  Second, is to bite the bullet with the lower values and take advantage of the weak overall market that exists for the replacement aircraft.  More than likely we will not see a big percentage increase in future Premier values, but we will see competing aircraft become more expensive.  You will soften the downside and help your future life cycle costs.

Hawkeye Aircraft Acquisitions has over 30 years of aviation experience and is an aviation consulting and acquisition firm.  Our product is the peace of mind of knowing you have made the most informed decision available.  Call or email to learn more about our services.

Mike McCracken

President

Hawkeye Aircraft Acquisitions LLC

727 796 0903

info@hawkeye-aircraft.com

www.hawkeye-aircraft.com

Out of Production Hawker 750/800XP/850XP & 900XP Used Prices

Hawker Beechcraft has received court approval to exit bankruptcy as a standalone company producing only prop aircraft as Beechcraft Corp.  How does being out of production affect Hawker jet aircraft? What potential impact will there be on service and second prices?

There are a large number of Hawker series aircraft in service around the globe.  This represents a captive market and provides the various vendors with an incentive to sell, produce, and maintain inventory on those parts.  HBC made very few components on these aircraft, with Airbus manufacturing the fuselage and wings.  Although Airbus might not be inclined to build those parts, there are various out-of-service aircraft that parts could be procured from.

Additionally, there are a large number of service providers around the world that have the technical expertise and capabilities to maintain the Hawker.  Bottom line is that support should not be an issue and there is always the possibility that someone will buy the Hawker production rights and even re-start production.

What about Hawker prices?  The market continues to factor in the worst case scenario and the result is depressed prices.  In my opinion, prices are a result of the suspended production and bankruptcy is already factored in.  The fluctuations moving forward will be the result of what the mid-size market as a class experience.  

Hawkeye Aircraft Acquisitions has over 16 years of Hawker experience.  Our product is the peace of mind of knowing you have made the most informed decision available.  Call or email to learn more about how we can provide assistance in your next aircraft transaction.

Mike McCracken

President

Hawkeye Aircraft Acquisitions LLC

727 796 0903

info@hawkeye-aircraft.com

www.hawkeye-aircraft.com

Hawker Jet Values/Prices Post Chapter 11

In light of the financial situation at Hawker Beechcraft I often get asked what is the real value of the Hawker jet products and what will their price be moving forward.  Tough questions in any market.  Much more tough with the current events.

Lets look at this from both an owner’s and a future owner’s perspective.

In my opinion the market place started to factor the financial situation of HBC into used prices starting in 2010.  By the middle of 2011 the signs of a desperate company were more obvious and the market place reacted with even lower valuations. The Hawker once led the mid size market in resale value.  As the company fortunes continued to sink the Hawker values sank with it, mostly driven by deep discounting by HBC to generate cash.

There is a maxim in the industry that the used aircraft market responds to the actual selling prices of the new/similar aircraft model in production.  In other words, the method of basing used prices on a percentage of original list is not valid when new planes are already selling at the same percentage of list as a five year old aircraft.  I have applied various market conditions to come up with an economic model that reflects the common knowledge of our industry.  In it’s most simple terms, used prices reflect aircraft values based on assumptions of market conditions, manufacturer stability, new models entering the market segment and what the model most similar to the used plane is actually selling for new in the marketplace.

Based on this scenario HBC, by lowering prices to sell potential white tails for cash, has continued to place downward pressure on used values.  Eventually, they will reach a price point where it does not make any economic sense to discount.  This will be the low point.  Once this happens we should see market stability.  I think we have reached the point where it doesn’t make any sense to continue to sell a product at the potential for a loss just to generate cash.  The last few 400XP’s are examples of reaching a point that it just doesn’t make sense to continue.  The 900XP and the 4000 market are probably at that point now.

Scenario #1  Hawker Beechcraft continues to navigate chapter 11 filing and emerges later in the year a much financially stronger and healthier company.  New prices will still be depressed with uncertainty in the market place and a demand to generate cash flow while the details on the emerging company are worked out with the new owners.  I do not see any upside in resale values until the end result of the company's future is established and definitely not until the new prices reach a point where they are able to increase sales prices.

Scenario #2.  Hawker Beechcraft is liquidated or parts of the company are sold.  Complete liquidation of the whole company is a very long shot.  Parts of the company being sold off is a very likely possibility. The comfort for both a current owner and a future owner of Hawker 900XP's and earlier Hawker models is that whoever ends up with the Hawker line will have bought a strong installed base of customers and a good brand with a potential of producing a strong cash flow from parts and support.

Owners of King Airs and traditional Hawkers have safety in numbers.  Most of the parts are accessible through alternate venues and for new aircraft the warranty will be honored by the various venders.  The new products like the 4000 and the Premier 1A represent more risk.  Like a risky stock or bet in Las Vegas, it could pay off big, you just need to understand that it is a risky bet.

If you are a current owner, don’t panic.  You have an aircraft that you can maintain through alternate sources if need be and the news barring a complete liquidation is as bad as it will get.  If you are considering a used Hawker Beechcraft product the market place is factoring the risk and the market is at or near the bottom.  If you are considering a new aircraft, the purchase should factor the risk of lower resale values and the risks of the unknown.  You might need to administer your own warranty and some items normally warrantied by HBC might end up being on your nickel.  Their current sales prices reflect some of that risk. 

As in all market values it is about buying below the line.  Whether new or used there are opportunities for those who understand purchasing right.

Hawkeye Aircraft Acquisitions is there to help you understand the risks and the potential values.  Having worked for Hawker Beechcraft for over 28 years and 26 years as a salesman I don’t have all the answers, however I can help you better understand the risk/reward.

Mike McCracken

President

Hawkeye Aircraft Acquisitions

www.hawkeye-aircraft.com