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Pre-Owned Market Spotlight – Gulfstream G650 & G650ER

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Pre-Owned Market Spotlight – Gulfstream G650 & G650ER

HISTORY AND MODEL INTRODUCTION

Although Gulfstream began working on the G650 in 2005, it wasn’t officially announced to the world until 2008. After receiving its type and production certification from the Federal Aviation Administration (FAA) and type certification from the European Union Aviation Safety Agency (EASA), the G650 officially entered service in December 2012, with the OEM making multiple deliveries on the same day.

Though the business jet market has evolved, the G650 is still the gold standard for its class, as it balances a comparatively low maximum take-off weight and long range, with a maximum speed that makes it the second fastest flying business jet currently available.

Deriving from Gulfstream’s G550 – a model superseded by the G600 in 2014, the Gulfstream G650 family’s cabin altitude when flying at 51,000 feet (15.5 kilometers) is 4,850 feet, which at the time of the aircraft’s introduction, was the lowest one of any purpose built business jet. Cabin altitude, which refers to cabin pressure in terms of altitude above the mean sea level, is normally maintained at an altitude of 8,000 feet or less as a result of compromise between the physiological needs of the crew and passengers and an aircraft’s structural limitations.

The aircraft is fitted with 16 of Gulfstream’s hallmark oval-shaped windows which are 16% larger than any of Gulfstream’s previous windows. The window blinds can be adjusted via a control panel embedded by the window, as well as Gulfstream’s downloadable app, which can also access the aircraft’s temperature, lighting, and entertainment system.

Most cabin layouts see the living area at the rear of the aircraft used as a VIP cabin, where the divan or couch can convert into a bed and transform the room into an exclusive bedroom. Journeys are relatively quiet; sound levels inside the G650 cabin are similar to those of a household refrigerator.

The G650ER, as its name suggests, is an extended-range version of the G650 that can fly an additional 500 nautical miles. In fact, the aircraft set a speed record in 2014 between Los Angles and Melbourne, flying non-stop in just under 15 hours – an hour less than commercial aircraft.

The Gulfstream G650 family features Gulfstream’s PlaneView II flight deck which is based on a Honeywell system and includes a nose-mounted infrared camera to provide an enhanced view of airport conditions and terrain in poor visibility. The heads-up device can transmit data on a transparent screen, enabling the pilot to read and respond without distraction as they no longer need to look down to see critical information.

In 2013, the G650 made history when a pre-owned aircraft was sold on the secondary market for more than USD$10 million above the aircraft’s list price. The aircraft was sold by the wife of Formula One owner Bernie Ecclestone to Thai business magnate Vichai Srivaddhanaprabha several weeks after the aircraft was delivered. A clause in G650 sales contracts forbids owners to sell on their aircraft’s position before delivery, as Gulfstream wanted to ensure that the aircraft that were ordered and delivered went to those that wanted the aircraft, and not companies that were looking to speculate on it.

FLEET DISTRIBUTION

Data Source: Amstat

As of the end of Q3 2022, there was a combined total of 495 G650s and G650ERs in operation worldwide, with over half (54%) in operation in the US. Of the total fleet, over 60% are G650ERs. The second highest share of aircraft are based in Asia, with Greater China home to 12% of all delivered G650 family aircraft.

Diving into the Asia-Pacific region, mainland China and Hong Kong Special Administrative Region (SAR) have the largest G650/G650ER fleet. The top two Asia-Pacific charter operators with the most G650/G650ERs are Phenix Jet and TAG Aviation. (For more information about Asia-Pacific’s charter fleet, please see Global Sky Media’s Charter Report 2022.) Supply chain issues and labor shortages brought about by COVID-19 related lockdown have had a negative effect on deliveries since 2020, with the number of new aircraft handed over to new owners almost being cut in half.

Data Source: Asian Sky Group – Business Jet Fleet Report

Having sold more than 500 aircraft, Gulfstream unveiled the G650’s successor in 2019. Named the G700, the aircraft is based on the G650ER, but with a 500-nautical-mile boost in range, and a larger cabin. Gulfstream said the G700, which is expected to enter service in early 2023, will eventually replace the G650 family.

PRE-OWNED MAKET ANALYSIS

As of September 30, 2022, approximately 3% of the total active G650 family aircraft are listed on the market. From July 2019, inventory of available aircraft saw a shift from the baseline G650 to the G650ER, partly because there are more G650ERs in operation. The number of G650/G650ERs for sale gradually climbed from 14 to 24 from May to October 2020. Supply in the pre-owned market has shown an upward trend since November 2022, with most sellers based in the US. 

Data Source: Amstat

Prior to 2021, the average asking price of the G650 family had been on a downward trend. However, this trend has been reversed, with pre-owned prices for both the baseline G650 and the G650ER seeing increases. Many factors may contribute to the price increase. One possible reason is buyers in the US look to benefit from the 100% bonus depreciation before the end of 2022. Another is new consumers with no prior exposure to business jet aviation decided to step into the market after the COVID-19 outbreak. Prices may continue to rise for the Christmas season and will most likely soften as the market begins to normalize. 

Data Source: Amstat & Asian Sky Group

Transactions have been more active since the second half of 2022. This is partly due to an increase in new users coming into business aviation for the first time. Although this had a small impact on the number of direct transactions, several charter operators looked to increase their fleets due to the increased numbers of charter enquiries that they were receiving. Transactions in 2021 were concentrated in the latter half of the year, which has seen fewer transactions compared with the same period of 2020, with many looking to travel during the Christmas holiday period. The US Tax Cuts and Jobs Act was behind the exceptional number of transactions that occurred in December 2020.

Aircraft usually depreciate over time and rarely see an increase in their values. For example, a 2015-build G650 saw a drop in value of 51% by the end of 2020. Indeed, the G650 has been more sensitive to the external environment, seeing a 29% decrease in values between the first and the fourth quarter of 2020. This accelerated depreciation conflicts directly with the other aircraft in the Long Range category, which was stable within the same period.

Demand from first-time buyers is stronger than before, which gives sellers in the secondary market more room to sell at a higher price, resulting in an abnormal trend in historical prices. The value of a 2015 G650 picked up by 27% from the third quarter of 2021.

Several operators have already disclosed their G700 orders, whilst the market for the G650/G650ER remains active. On September 26, 2022, Gulfstream delivered the 500th aircraft of the G650 family. Mark Burns, Gulfstream Aerospace President, said at the time, “This milestone delivery is a strong testament to the tremendous work of our dedicated Gulfstream team. […] We continue to invest in the G650 and G650ER to ensure continuous improvement throughout the growing fleet for our customers.” During its second-quarter investor call, the parent company of Gulfstream-General Dynamics said the demand for a new G650ER continues.

Tags

Gulfstream Gulfstream G650 Gulfstream G650ER

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