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Monday, June 9, 2008

Eclipse 500 Price Changes to $2+ million

With increased costs, Eclipse Aviation said the price of the Eclipse 500 is transitioning to $2,150,000 prompted by a re-examination of its cost-driven pricing model. “The new Eclipse 500 price has been set based on a number of factors, including higher manufacturing costs and a slower than anticipated production ramp rate,” said the company. The new Eclipse 500 price is effective immediately and set in June 2008 economics. The move is expected to increase the value of available delivery positions and pre-owned aircraft with dozens of both already on the market. “The Eclipse 500 remains the industry’s lowest-priced and highest-value VLJ,” said the company. “The Eclipse 500 is still priced below today’s current entry-level jets while delivering fuel burns that are half that of similar VLJs, the industry’s lowest overall direct operating costs and total aircraft integration levels unmatched by comparable aircraft.”
Prices for used corporate jets have raised thanks in large measure to anxious entrepreneurs who do not want to wait for the lengthy delivery dates of new jets. Consequently, prices in the secondary market are often more than what the same equipment would cost new. These customers, mostly from the Middle East, Russia and other hot markets such as India, are also fueling a market in aircraft delivery positions.
The trick is to match the speculators who book a delivery position, never intending to take delivery with impatient buyers. A recent Forbes article on the subject quoted Len Liotta, director of business development for consulting and brokerage firm, Leading Edge Aviation Solutions LLC, as saying: “I remember one case three or four years ago in which a couple of buyers bought six or seven slots for Challenger 300 midsize jets made by Bombardier at $13.5 million apiece and were able to flip them at $18.5 million less than a year later.”
But that doesn’t seem to be the case for the Eclipse 500, according to Amstat Corporation Executive Vice President Tom Benson, who reviewed the secondary market for the aircraft for Aviation Today’s VLJ Report. Amstat, a leading provider of market research information and services to the corporate aviation industry, showed 66 Eclipse 500s in its database for sale, 36 of which were delivery positions with another eight actually having time on the aircraft.
“This tells you there is a lot of speculation in the market,” said Benson, who indicated that perhaps 10 percent of the Citation delivery positions were on the market. “We track the resale market and of the 66 for sale, 32 show on asking price from a low of $1.05 million to a high of $1.9 million and an average of $1.6 million. The asking price for delivery positions average about $1.52 million and a high of $1.8 million. Although these prices were before the company’s price hike, they are likely to increase not. But, even compared with the old price, it does not indicate a price premium on delivery positions. For the eight previously owned aircraft the average price is $1.78 million and a high of $1.85 million and low of $1.65 million.” Eclipse has delivered 200 aircraft.
Benson, who characterized the firm’s Aircraft Shopper Online (ASO) business unit as the leading source of pre-owned aircraft for sale, expects a price premium for near-term deliveries. AS0 currently lists only a dozen Eclipses for sale, one for as little as $595,000.
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