When I started doing this exercise about six years ago the private fleet was growing very slowly, with ultralights leading, followed by amateur-builts. The number of certified aircraft in private hands was actually slowly shrinking.
The really low Canadian dollar was preventing people from buying airplanes. The lowest point was in 2002 when the Canadian dollar was at $1.62 against the US dollar. Even an old mid-sixties Cessna 150 with a half time engine was around $30,000 and most older 172s were in the $60,000 range. Fleet growth was between 1-2% per year and certified aircraft were being sold south of the border to Americans with their strong currency.
Then things started heating up. As most people know our currency started to rebound as US debts running the war in Iraq mounted and confidence in the US dollar slid. As our dollar surged, aircraft, all priced in US dollars, got cheaper and cheaper. Growth in the Canadian private fleet climbed and the trend in certified aircraft reversed.
By 2004 Canadians were going south of the border and buying up American aircraft, especially older certified aircraft. The average import was probably a 1965 Mooney or C-182.
By 2005 the growth in the private fleet was over 2.5%, which is a lot. Airplanes had come down in price, insurance was cheaper as hull values slipped, meaning owners didn't have to buy as much coverage, and fuel, while not cheap, wasn't too expensive. Demand for hangars soared at small airports to take all the new aircraft.
Looking at the pilot population numbers over the last few years the same story wasn't being told there. The pilot numbers weren't growing much at all. It all added up to a picture like this: existing pilots were buying up aircraft through 2004-06 and at an increasing rate each year.
We know that this growth was directly fueled by the low US dollar. That $30,000 average Cessna 150 from 2002 was worth $21,600 when the dollar stalled out around $1.17 at the end of 2006. The $60,000 C-172 from 2002 could now be purchased for $43,300.
The airplane buying spree was probably also fueled by the “pent-up demand” driven by aging baby boomers, the leading edge of which hit age 60 in 2006. These are people who wanted to buy an aircraft in 2002, but couldn't afford it. The climbing Canadian dollar opened the floodgates on aircraft ownership. Between September 2001 and September 2006, there were 2385 more private aircraft added to the register in Canada. This represented growth in the private fleet of 11% over five years.
By 2006 annual fleet growth rate had hit just under 3% per year.
I am planning to look at the year-end numbers as I do every year, because I want to continue to see how the fleet is changing over time. But I also wanted to find out what has happened in the last twelve months, since the Canadian dollar has shot up again, making airplanes very, very cheap. Since January, the Canadian dollar has gained 22% and so airplanes are 22% cheaper than they were at the beginning of the year. I wanted to know if this had driven fleet growth to new heights or not. It should have.
That Cessna 150 that cost $30,000 in 2002 should now cost $17,600 in the fall of 2007. The $60,000 C-172 is now worth $35,300.
So I analyzed the most recent numbers, which were for September 2007, looking back at the same time of year through the past seven years to see what was happening annually. The results were interesting.
The growth increased each year since 2001 as we know, until this year. Here are the Sept-Sept annual growth numbers:
2001 0.83%
2002 1.40%
2003 1.56%
2004 1.96%
2005 2.62%
2006 2.92%
2007 2.49%
As you can see the growth dropped off in 2007 by 15%, even through airplanes have become much cheaper during this period. Normally a drop in price like that would result in increased demand, but it hasn't this year and I am not sure why that is.
Here are a few theories. It is possible that it could be due any or all of these:
- Perhaps the pent-up demand is satisfied – everyone in Canada who wants an airplane has pretty much got one now
- Perhaps people expect the dollar to go higher – they are waiting for better bargains
- Perhaps used airplane prices in Canada have not caught up with the market, are far too high and buyers in 2007 are intimidated by shopping in the USA
- Perhaps fuel prices are worrying people – the price of oil has increased from $60 to $93 a barrel this year, although Canadians haven't seen great increases at the pumps recently due to the dollar climbing with the price of oil
- Perhaps people are concerned about climate change and owning a gas-burning toy doesn't fit those concerns
- Perhaps our aging population means that people are worried about losing their medicals and so aren't buying
- Perhaps aging baby-boomers are more concerned about retiring than buying planes since planes have proven to be a really bad investment since 2001. Perhaps these same baby-boomers aren't buying because airplane values may drop even further soon
- Perhaps it is some other reason that I haven't thought of.
Post your thoughts here on this blog. Let me know if you did or didn't recently buy an aircraft. If you did, why did you buy recently? If not then what is the reason that you haven't? Are you planning to buy an aircraft?
