Did Falcon Create Its Own Competitor?

Did Falcon Create Its Own Competitor?

November 23, 2016

The introduction of the Falcon 8X will be an interesting moment in the private jet markets as it will be a direct test to the resale values of the Falcon 7X. The buyer profile of a Falcon 7X is identical to the buyer profile of a Falcon 8X, and we find that in this extreme upper segment, price is often much less of a concern than the requirement to have the biggest, best and most modern aircraft available. Simply put, someone who can afford a $57 million USD aircraft can typically afford a $65 million dollar aircraft.

As a recent example, the introduction and delivery increase of the G650 precipitated a massive decline in values for the G550 as owners upgraded en masse, creating a sudden supply increase that is requiring new price declines to find adequate demand to absorb. Typically, direct upgrades result in such a phenomenon as the typical buyer profile is already an owner of the existing flagship, as opposed to finding a new market niche. Whether or not the 8X and 7X fit this mould remains to be seen, but if so, watch for significant changes in the 7X market. In terms of timing, if any price declines occur they would not be instantaneous. In the G650 / G550 example, it took about 12 – 18 months for the supply increase in the 550s to result in a material and noticeable price decline. Since the end of 2014 (when price declines really increased), the slide has continued unabated. It will take some time for a significant number of 8X deliveries to occur, therefor any price effects on the 7X may only be slight at first. But if the example of the G650/550 is a template to follow, there will be some interesting opportunities ahead for buyers of the Falcon 7X.

*Photo Credit: Alex Henthorn, on flickr at IOM Aviation Photography

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