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Market Analysis: Pre-owned Dassault Falcon 7X – Asian Sky Quarterly 2020 Q1

by Global Sky Team

Market Analysis: Pre-owned Dassault Falcon 7X – Asian Sky Quarterly 2020 Q1

Introduction

Manufactured by Dassault Aviation, the Dassault Falcon 7X entered service in 2007. It is a large-cabin aircraft, with a range of 5,950 nautical miles – linking Paris to Tokyo and Shanghai to Seattle – and one of only two trijets in production; with two Pratt & Whitney PW307A turbofan engines on the side of the fuselage and one in a center position.

Enter Position

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The 7X is the first business jet to incorporate a Digital Flight Control System (fly by wire), which provides a greater safety envelope and a smoother flight. It comes equipped with the Honeywell Primus Epic “Enhanced Avionics System” (EASy), that was used on the Falcon 900EX and later on the Falcon 2000EX. 

Its unique wing design, offering increased lift-to-drag ratio, allows the aircraft to land and stop in just 2,070 feet (630 m). As a result, it can access hundreds of airports other jets cannot, including those with hot and high conditions, steep approaches and stringent noise restrictions. 

This aircraft is marketed as having large-cabin comfort, long range and the agility of a small jet.

Operating Fleet & Age Distribution

There are now over 290 Falcon 7X aircraft in operation around the world. The majority of these aircraft are based in North America, Western Europe & Greater China. The US operates the largest 7X fleet, with over 100 in operation, while Greater China is home to the second-largest fleet – 30 in total, 26 of which are based in mainland China. According to ASG’s Business Jet Fleet Report, by year-end 2019, Sino Jet, BAA and Deer Jet operate the majority of these Chinese 7X aircraft. 

From 2009 through 2015, the 7X reached its highest rate of annual deliveries – achieving its highest production volume in 2013 with 40 7X deliveries. The number has tailed off since then, as Dassault’s own customer base has moved on to the current 8X and future 6X programs.  

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Operators in Asia Pacific

Illustrating its versatility as a large cabin regional aircraft and the preference in the region, the 7X fleet in the Asia Pacific is most often used for flight missions between one to three hours: 30% are flights between one to two-hours; and 23% are flights in the two to three-hour range. 

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Although the 7X is capable of long range international flights, only 22% of 7X flights in the Asia-Pacific region are actually over five hours. 

Operation-wise, nearly 60% of all 7X flights in the region are performed by aircraft management companies with AOCs. Private Part 91 and charter Part 135 flights only make up around 20%.

Pre-owned Market Analysis

Currently, the average asking price for a pre-owned Falcon 7X is around US$23M; at the high end US$30M for a 2015 model; and at the low end US$18M for a 2009 model. This compares to a current budgetary price for a new 7X of US$50M. The pre-owned market supply has been dynamic over the past couple of years; there are currently 23 F7Xs on the market — in line with the past six months, however, about twice as many as compared to year end 2018 when there were only around 10 on the market.

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7X market inventory values peaked in the mid-2017 given the pre-existing and strong buyer’s market at the time. Average 7X asking prices consequently ranged in the low 20s, with the possibility of paying under US$20M for a final sale. Astute buyers then viewed the 7X as tremendous value and, similar to other large cabin pre-owned markets at the time, started buying and more transactions took place. The demand quickly consumed the 7X market’s perceived over supply which then led to a five-year low inventory value at the end of 2018, with less than 10 aircraft listed for sale. Correspondingly average “days on market” drop to under 100 days and the 7X’s depreciation curve flatten out. This “buying spree” was also stimulated by a number of tax relief measures and other corporation friendly policies enacted in the US at the time.

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A Seller’s market and this dearth of supply at the end of 2018 and through 2019 though ultimately over time pushed the average asking price back up to a high of around US$25M, to where the market sits today with 23 aircraft for sale and an average asking price of US$23.3M.

Based on its in-service fleet size, the Falcon 7X is a good market performer compared to its competitors. The Gulfstream G550, perceived by some as the most popular pre-owned market model, has around 590 aircraft in operation and currently 6.7% of its fleet (around 40 aircraft) listed on market for sale, with about two to three transactions taking place per month. Around 6.8% of the Falcon 7X fleet is for sale, with one or two transactions taking place each month. 

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Summary

Addressing the current economic situation, 7X inventory values are climbing again as we are trending back towards a Buyer’s market and there are more 7Xs to sell. Asking prices are fluctuating as the market tries to find buyers but, given there are few actual transactions, the market has yet to set a new market price. On average asking prices are dropping, with days on market increasing. 

7X residual values are trending down more recently as well. But this is not unique to the 7X as we are seeing this trend with comparable aircraft models too and in general with the whole market as COVID-19 continues to make an impact. The 8X and 6X aren’t impacting values at this time either and aren’t expected to in the future as the 7X presents a unique value proposition to buyers.

Compared to its main competitors – the G550 or Global 6000– the 7X has less cabin space (smaller in cabin volume and shorter in length) and less range. However, the 7X offers fighter jet technology, excellent field performance, lower operating costs, arguably a more comfortable cabin, as well as an ever popular French flair for design. It has proven itself to be a worthy competitor and the pre-owned 7X market remains robust and active leading to expectations that it will be around for years to come.

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