Latest / VREF | The Truth About the Aviation Market / The "Red Hot" Jet That No One Is Selling | EP 51
Transcript
- Addison: Welcome back to the truth about the aviation market. I'm Jason Zilberbrand. I'm president of VRef. Every week we pull back the curtain on what's really happening in the aviation marketplace, what aircraft are actually worth, and what they actually cost to own. And the things that the glossy listing sheets won't tell you. There's no spin, there's no sales pitch, just the truth about the market. And today's episode is a magic trick, but we're going to perform it in reverse. I'm going to show you exactly how the trick works. How this industry takes factory paperwork and dresses it up as market activity, how an airplane that has never once traded on the open market became everyone's favorite proof that the market is on fire, and how to spot the trick yourself the next time somebody performs it on you. So bring your skepticism, because you're going to need less of it by the end of the show because I brought the data. So if you ask any broker about the seller's market. And I'll give you two minutes before they cite the Challenger 3500. It's impossible to find, there's waiting lists, blah, blah, blah, buyers begging. See, it's exhibit A that business aviation is running hot. So I did what I do. I pulled every Challenger 3500 transaction in existence, all of them, every CL number, every recorded transfer since the first one delivered in 2021. 210 aircraft have been built, 200 of them are in operation. The balance are currently waiting to be delivered. The number currently carrying an asking price is zero, and that's confirmed serial number by serial number, all two hundred and ten of them. There's been three hundred and twenty-five recorded transactions over roughly three years, and virtually every one of them begins with the same three words, manufacture to something, because it's bombardier delivering aircraft. And then there's the number this whole episode turns on. The number of times a Challenger thirty five hundred has ever been resold. One owner selling to another on the open market in the entire history of the aircraft type. One, not low, not a handful, one airplane, one closing, one data point. And I'm going to tell you everything about it, because that single transaction is the entire resale market for the most talked about super midsize aircraft on Earth. And what it sold for will surprise you. Today, what one data point can tell you what it absolutely cannot, and how an industry builds a hot market narrative on a sample size of one. So let's get into it. And one note on sourcing before we begin, the census comes from the VREF transaction database, every recorded transfer cross-checked serial number by serial number against the in operation fleet, and as of this week, and it's plus industry reported sales data. And we had one reported deal. And when I say one, that's a count. It's really not a figure of speech, guys. So let's establish the facts because everything else hangs on them. And while we're at it, how about a little heritage first? Because the 3500 didn't come from nowhere. The Challenger 350 that preceded it, along with the Challenger 300, is arguably the most successful super mid-sized program ever. The fractional fleets bought them by the dozen. Corporate America made it the default answer to what we need a super mid-size aircraft to be. And they made more than 350 deliveries in a decade. The 3500 is that airplane modernized with a redesigned cabin. It has auto throttle now. And it also has lower cabin altitude. It's an evolution. It's a derivative. More importantly, it's definitely not a gamble. So when I tell you the order book is deep. Understand it's deep for a good reason. The airplane earned its backlog. What the airplane has not earned yet, what no amount of backlog can earn, is a resale track record. Those are different accomplishments, and this industry keeps handing out the second trophy for winning the first race. And full disclosure, on why I get to talk about this airplane family with a straight face, I bought and sold twenty-seven Challenger three hundreds new twenty-seven paper airplanes, pre-delivery. I was in these airplanes when the Super Mid category was being invented. I sat across from Bombardier on those deliveries. I watched the first 300s come off the line. I remember when it was the Continental. And then I watched it evolve. And watch something the 3500 has never experienced. I watched the model's resale market get born, the first pre-owned 300 listings, the first price discovery, the first gap between what sellers believed and what buyers paid. I know what the birth of a resale market looks like because I was standing in the delivery room. Writing checks, I was there when it was a premium market. So when I tell you thirty five hundred hasn't had that moment yet, that everything quoted about it is its used value is prenatal. That's not a database talking, guys. That's someone who's done this exact dance with this exact family of aircraft 27 times. So the Challenger 3500 entered into service in late 2022. It is, like I said, a refreshed Challenger 350. New cabin, auto throttle, low cabin altitude, but it's got the same wing, it's got the same engines, and that's what made the 350 the best-selling super mid-size of its generation. Bombardier has built about 210 of them across the years from 2021 through today. And as I said, 200 are in operation, 10 are waiting to be delivered, none have been retired. So it's what we call a young, healthy working fleet. Now let's talk about who owns these aircraft. Here's the first structural fact the hot market crowds like to skip. Did you know a fifth of this fleet can never come to market? Right now that's about 40 aircraft. 40 of the 210 sit inside fractional ownership programs. Flexjet, well, they operate 31. AirShare, they operate seven. NetJets has six. So those aircraft aren't tight supplied, they're just no supply at all. They're owned. By dozens of individuals broken up into shares who contractually cannot list the aircraft for sale. And they exit through the program's own remarketing machinery years from now on the program's schedule, not the markets. And while we're counting, as I said, ten more airframes are sitting brand new at Bombardier built, but they haven't been delivered yet, which tells you the order book is still eating everything the line produces. So of the 210 built, subtract the fractional and the factory's own inventory. And the theoretical sellable fleet now has dropped to 160 aircraft. 155 of the operating fleet is based in the United States. Every one of them with an owner who fought through a multi-year backlog to get that aircraft. So think about the psychology of that owner. He fought for a position slot. He waded through a long backlog. He took delivery of the newest super mid-size on the market, and the replacement, if he decides to sell it. Is the same waiting list he just got out of. See, selling means surrendering a piss a position that he can't get back, so nobody sells. Not because the airplane is appreciating like a Ferrari two fifty GT, because the exit door leads back into the same line. And the census proves it. I ran the asking price column across all two hundred and ten aircraft this week. It is empty. Not one aircraft anywhere on Earth carries an asking price. Add it up. And you get the can the consensus number that started this episode. Zero of 210 for sale. And I want to be precise about what that number really is because the entire industry is imprecise about it. Some of them on purpose. There's zero availability. That's a fact about supply. It's not a fact about price. Let's hold that thought because it's the whole show. Compare the census to any normal type of aircraft. So you have a baseline for how strange this is. The Challenger 350 fleet, the 3500's own older sibling. It runs a healthy resale market. There's listings at any given moment. There's dozens of genuine pre-owned closings a year. There's dealers who even specialize in the model. Price history is going back a decade. It's the same wing, it's the same engines, it's the same mission profile. It's even made by the same company for the same customers. See, the 350 is a market. The 3500 four years into service, it's a waiting room. Every claim about what a 3500 is worth on the resale market is actually a claim about what the 350s market implies, plus a guess about the Delta. And it's worth remembering that the guess is doing most of the work. Now the fun part. Because when I pulled the transaction file, the headline number looked impressive. 325 closed sales in roughly three years on a fleet of 210 airplanes. That's velocity. That's liquidity. Hell, that's a market, right? Well, let's look closer. 325 sales across only 173 distinct airframes, nearly two recorded sales per aircraft. How does that happen on a model that almost never comes back to market? Well, to answer that, you need to know how aircraft deals actually get recorded. 30 seconds of plumbing, and it'll change how you read every transaction count you ever see. When an airplane changes hands in this country, and I can only speak to the FAA because that's where we are. The paperwork gets filed with the FAA registry in Oklahoma City, a bill of sale, a registration application, the financing documents if there's a lender, all of that gets filed. Here's the thing: a single new airplane delivery doesn't generate one filing, it generates a chain. The factory transfers title to one of its own holding companies for tax and export mechanics. And then if the customer is financing, the title passes through the bank or the leasing company. Then it lands with the customer or the fractional program or the charter operator. One airplane, one delivery, one check, and two, sometimes three recorded transfers along the way. Every link in that chain shows up in the database as a sale. That's the whole mystery of the 325 number. It's a delivery paperwork, right? It's real deliveries, let me be clear. Nothing phantom about any of these deals. There's real customers who wrote real checks for real airplanes, and they did so at a pretty healthy clip because the prices have held very strong. But the count is inflated by the title chain, which is why we see 325 recorded sales collapse to 173 actual aircraft. You want it concrete? Serial number 21120 sold June 19th. That's the factory moving title to its own entity. And then it sold again July 1st. That's the airplane landing with the actual end customer. Same aircraft, 12 days apart, but there's two entries in the file, and the total number of market events that occurred is one delivery. So serial number two one one two two, that's another one. But it's the same pattern and it happened 11 days apart. So now here's the detail that actually matters. It's not the double counting. Look at who's on the selling side of every one of those deliveries. It's the factory, it's Bombardier. Every one of these sales was OEM direct. The factory's own sales team, factory's contract, factory's delivery center, straight to the customer. No broker, no dealer, no intermediary anywhere in the chain. Hold that up against what you hear at every static display. Brokers talking about the Challenger 3500 market, how strong it is, how scarce they are, what they're seeing in the market. But I say seeing it from where? Because until March of this year, every single deal in this aircraft model's history was OEM direct. And the entire brokerage community's collective experience selling challenge at 3500s was zero. Today it's one. One quiet deal marketed as make offer. 91 days to close. 91 days for the hottest aircraft in the world. It closed March 24th. And we'll spend the whole next segment on it. But unless the broker talking to you is the one who closed that one deal, he's narrating Bombardier's order book secondhand and calling it market intelligence. And when industry transaction counts get you quoted, remember what's inside them. Real deliveries, plus their title chain, the paperwork, all counted, all the factory activity that says nothing about what happens when an owner tries to sell the plane. And the prices, well, let's talk about prices. Of three hundred and twenty five recorded sales, exactly nine disclosed a price. Nine under three percent, averaging about twenty three point seven million dollars, which is no surprise because that's new delivery pricing. Because that's what every one of them is. One more thing, and it's the professionally humbling part, so I'll say it myself before somebody says it for me. When I first ran this census from the registry alone, the resale count came back zero. The one resale that exists never showed up the way you'd expect. The airplane kept the same tail number through the sale, the kind of a quiet transfer that slides right past registry based detection. It took cross-checking, industry reported sale data to surface it. Remember that the next time anybody, me included, quotes you a transaction count with total confidence in a market this thin that the resale activity that does happen is structured quietly, marketed off book, and half invisible to every database in the industry. If the only resale in a model's history can hide, imagine what the aggregate numbers miss. Quick intermission. And I'll keep this pitch honest. This episode exists because we count things nobody else counts. And that work is funded by exactly no sponsors. There's no OEM money. There's no brokerage money. There's no association money, which you may have noticed in this reoccurring theme of this show's life choices. So the entire distribution strategy is you. If you please hit follow, hit subscribe on YouTube or your podcast app. Like this episode, leave us a review, and send this one to somebody who just told the super mid market is on fire. Ten seconds, some thumbs, that's the whole ask. I am not above pleading. I'm a father. I've had practice. Okay, let's get back to it. Now the segment that's going to annoy everyone on both sides of this argument because the one data point cuts both ways, and I'm going to give it to you straight in both directions. So here's the sale. 2022 Challenger 3500 entered service in May of 23, one owner, 680 hours, engines and APU on JSSI, 9 passenger interior, 3-year-old paint, listed with no publish ask, make offer. Took 91 days to resell it. It closed March 24th, 2026, at $25.8 million. Now let me tell you why that number is remarkable. The estimated values floating around for this fleet that model outputs run from about 19.8 to To twenty five point seven million dollars, the handful of disclosed factory delivery prices average about twenty three point seven. This airplane, used, three years old, almost seven hundred hours, sold above the top of the estimate band and above the average new delivery. The buyer paid a big premium over new pricing to skip a multi-year waiting list. On that one Tuesday in March, the scarcity story wasn't a story, it was a wire transfer. So the bulls get their point. The premium is real. I've been there. I established it. I actually think I created the premium market at one point. It's documented. One owner captured it. And now here's the point the bulls have to sit still for. It's one data point, guys. One, a sample size of one tells you a single motivated buyer, probably for tax reasons, existed on a single date for a single beautifully spec'd, low-time program engine airplane that was marketed so quietly it never carried a public ask. And you guys probably didn't even know it existed. It does not tell you the second buyer exists. It does not tell you what a 3,000 hour example brings, or a high utilization one that was flown by a charter company, or one that has to sell in 60 days instead of whispering it make offer for ninety one. In statistics, we don't even call one a point or a trend line. We call it an anecdotal data point with a decimal. Actually, in statistics, it's an outlier. And we would throw it out. But we have to run and this movie because we've done it before. So let me give you the case study. Let me remind you of another aircraft model that did exactly the same thing. And I'm talking about the Gulfstream G650 because in 2013 and in 2014, list price around $65 million. There was a five year waiting list. Early delivery positions were very hard to find. And I don't think there were any available in the very first few months or year. The ones that did come to market were flipping at big premiums. They were going for $70 million and up. The scarcity story was gospel. And for the moment, in a market with almost no supply, it was true. Exactly as true as the $3,500, $25.8 million is today. But then you know what happened to the G650? Deliveries caught up. The early speculators exited, they got their premiums, real resale supply arrived, and the premium didn't erode, it just evaporated completely. Used G six fifties went to trading well under list like every large cabin jet in history, and the owners who paid the big premiums ate the difference. Some of them seven figures at a time. So the thirty five hundred today is the G six fifty in twenty fourteen. Or maybe it's a seven X back in two thousand seven. Maximum narrative, peak scarcity, and now exactly one premium print to hang it on. Everyone quoting that print as the market should be required to say just like the G650 premiums out loud, so we can all hear how it ends. Because a market isn't price, a market is a price that repeats. One print above new is price discovery's opening bid. It's genuinely thrilling, it's informative, and roughly as load-bearing as one swallow making a summer. And if you want the one-sentence version for the next industry dinner, here it is. One sale is a headline, two sales is a coincidence. It takes a lot more than that to make a comp. So who's performing this magic trick? And why does it keep working on us? Well, let's start with the obvious. How about the entire brokerage community citing the Challenger 3500 as proof of the hot market? As most of the brokerage has actually never even sold one. And whoever quietly closed the one in March, and I know who it is, but I'm not telling you, for everyone else, it remains the perfect talking point. Nearly costless, nearly unfalsifiable, and flattering to everybody. And now it's better than unfalsifiable. It's got a proof text. Watch how 258 gets deployed this fall. One makeoff or sale of a cherry low time programmed engine airplane will be quoted as a 3500 market and a hundred pitch decks. Stripped of its hours, its spec, its Jesse coverage, and its ninety-one quiet days to resell. That's how a data point becomes a narrative. Subtract the context, keep the number. Also, guys, notice what the story is never used for, which is caution. In a rational world, this asset has never traded would appear in risk of disclosures. Instead, it only appears as a selling point. Scarcity when the audience is a buyer, strength when the audience is a lender, validation when the Audience is the press. Same fact, three costumes, and none of them and the plain one, untested. The moment you hear a no transaction fact deployed exclusively in one direction, you've learned everything you need to know about the person deploying it. Now, let me be fair. Because fairness is what separates analysis from ranting, and I am always fair on this show, the Challenger 3500's backlog is 100% real. It's genuine. And it is a real Bombardier success story. This is a grand slam aircraft, guys. I mean, it is the best built, most popular, super midsize ever. Actually, here's a fact. By the time Hawker got the 4000 certified, Bombardier had already delivered over 280 Challenger 300s. So the order book, the delivery pace, the fractional fleet orders, that's the primary market working exactly as the OEM dreams. There's nothing fake about it. The dishonesty isn't in the airplane success. The dishonesty is in the retailing primary market success as secondary market evidence. Those are two different markets with two different physics. And you notice I rarely talk about new aircraft on this show, because one is driven by backlogs, list pricing, escalators, and delivery positions. The other is driven by owners needing liquidity, meeting buyers with alternatives. The 3500 has only ever existed in the first market, and if you cite it as proof of the second, It's like citing sold-out concert tickets as proof of a strong scalper market before a single scalper has sold a ticket. So if you heard our Alphabet Organization's episode, you already know the pattern. The scoreboard gets kept by the players, guys, and the definitions get soupy exactly where the soup helps the house. Delivery chains are counted as transactions. Primary demand is narrated as resale strength. None of it requires anyone to lie outright. It just requires that nobody ask the follow-up questions. So here's the follow-up question. And it's yours to keep. Show me the resale market. Four words. Well, maybe it's five. Watch what happens to the confident smile of that broker. And I'll add the constituency nobody talks about. Appraisers. When a model has no resale history, the appraiser gets squeezed from every side. Because the lender wants a number for the loan file, the owner wants a number that flatters the balance sheet, the broker wants a number that supports the story and the honest answer. This value is a hypothesis pending market evidence. Fits in nobody's box on the form. So numbers get produced. They get anchored to new pricing and analogy. They migrate into loan files and insurance schedules. And 18 months later, everyone treats them as an observed fact. With no one able to tell you which trade. on which date between which parties ever supported them. I signed my name to values for a living, and I'm telling you on a zero resale market type, the difference between a defensible appraisal and a confident guess is whether the report says out loud what the number is standing on. Read that page before you rely on the number. If the report doesn't have that page, that's your answer, guys. Which is exactly why VREf exists. And I'll keep this one short. When we publish a value, It's built on observable evidence. And when the evidence doesn't exist, as you heard on this very show with certain thin fleet types, we'd rather decline the number than invent it. If you're buying, selling, lending, insuring, or you just want values with receipts, that's what VREf online is. And when the asset is genuinely one of a kind, one off, that's a bespoke appraisable from an accredited appraiser who gets conclusions, tested in courtrooms, and loan files. Get your values at vref.com where you can v ref it and know what your aircraft is really worth. So let's get back to the landing. And I'm gonna land this with consequences because every constituency in my audience touches this airplane differently. Lenders and insurance companies first because you have the most at stake. Every Challenger 3500 on your book now has exactly one comp: $25.8 million from March 2026. 680 hour one owner aircraft on JSSI and it was sold at leisure. That print is genuinely useful, and it is genuinely dangerous because it's the best case airplane sold under best case conditions. Lending against it as the market means marketing your whole book to the single most flattering transaction that will ever exist for this type. The estimate models running 1908 to 257 now have one observation to calibrate against. One. The day a second sale prints an older one, a charter flown one, a divorce or an estate, they can't whisper at a market or make offer for three months, that number, not this one, will tell you where the floor really is. Stress test to the second sale, not the first. Buyers. The March print means the premium is real. If you pay over new delivery pricing for a $3,500 today, I don't think you're crazy. You're paying the documented cost of skipping the line. What does two years cost you? But understand what you're buying with that premium. The sellers read of a market with one data point on an airplane that may not match that data point spec hours of program status. Adjust hard for the differences, guys. And price in that lesson I gave you from the G650, because premiums built on backlogs die with the backlog. And the backlog is bombardiers to control, not yours. A word for fractional share owners. Since a quarter share of the 3500 is how many of you actually touch this fleet, your exit isn't the open market. It's the program's repurchase formula. And everything in this episode is why you should read that formula tonight. If your buyout references prevailing market value. or a comparable sales construct on a model with no comparable sales, understand who gets to interpret that silence. The program administrator does. The contract's definitions clause is worth more than any market report. And the time to understand it is before the repurchase window, not during it. I have reviewed enough of these to tell you that the interpretations do not tend to favor the party who didn't read the clause. Now to the owners. Well guys, congratulations you own The rarest thing in business aviation, an asset with no market history. Enjoy the pop cocktail party version. Just understand it cuts both ways. The same silence that lets everyone assume your airplane is worth twenty-four million dollars plus means that on the day you need liquidity fast, you'll be conducting the price discovery yourself. Live with your own money. And everyone else? Every listener who just wants to not get played, the four word or five word question still works. It just has a follow-up now. Show. Me, the resale market. When they show you the one, ask the second question. Show me the second one. If the answer is a transaction, you're talking to the one broker in the world with actual 3,500 resale experience. Buy him a drink and take notes. If the answer is a story about waiting lists, you're talking to the market marketing department, quoting somebody else's comps, guys. Last practical note. Put a watch on the milestone that actually matters. Somewhere out there is the first true Pre-Own Challenger 3500 listing, and behind it the first arm's length resale. When it happens, that single closing will be the most informative data point in the aircraft type's history, more informative than every value, every survey, and every confident broker quote combined. Watch what it lists for. Watch how long it sits. And above all, watch the gap between the ask and the close. If the scarcity story is right, The close will prove it, and I will happily report that on this show. If it isn't, you'll watch the whole narrative reprice in one transaction. But either way, that's the day this market gets born, and you'll be one of the few people who understood you were watching a birth, not a confirmation. So that's the episode. The Challenger thirty five hundred is a terrific aircraft with a real backlog, one historic resale at a genuine premium. And a market narrative doing the work about 200 transactions on the strength of one. If today changed, how you'll hear the next top market pitch, do the thing. Follow, subscribe, review, like, and forward this to the friend who's about to treat one data point as a trend line. Guys, the mailbag drives the show, and fair warning, if you send me a correction, I will happily rewrite an entire episode around it. That's how this one got better. I'm Jason Zilberbrand. This has been the truth about the aviation market. The market doesn't care what you paid, it only cares what it's worth. We'll see you next week. Until then, fly safe and stay smart.