In this month’s Aircraft Comparative Analysis, Mike Chase provides information on two popular large cabin & ultra-long-range business jets for the purpose of valuing the Dassault Falcon 7X…
Over the following paragraphs, we’ll consider productivity parameters (payload/range, speed and cabin size) and cover current and future market values for the Falcon 7X. The field in this comparative study includes the Bombardier Global 5000.
Can the three-engine Falcon 7X successfully compete against the twin-engine Global 5000 that offers greater cabin volume? This is one of the questions that we will seek to answer. The Falcon 7X flies faster, farther and higher than any previous Falcon business jet model. Dassault received its FAA and EASA Type Certificate for the aircraft in April 2007, and entry into service followed two months after.
The Falcon 7X is the first fully fly-by-wire business jet. It is equipped with the same Honeywell Primus EPIC EASy avionics used on the Falcon 900EX and later on the Falcon 2000EX.
Worldwide, there are 250 wholly-owned Falcon 7Xs in operation, three in shared ownership, and two in fractional ownership giving a total fleet size of 255. Nine percent of the Falcon 7X fleet is leased, according to JETNET. Europe has the largest fleet percentage (42%), followed by North America (30%) and Asia (17%).
US Flight Activity
Table A shows that the number of Falcon 7X flights within the US decreased by -2.2% in 2015 versus 2014. The distance travelled (-19.8%) and flight hours (-11.2%) also declined over that timeframe.
Payload & Range
The data contained in Table B are published in the B&CA, May 2016 issue, but are also sourced from Conklin & de Decker. A potential operator should focus on payload capability as a key factor. The Falcon 7X ‘Available payload with Maximum Fuel’ at 1,660 pounds is considerably lower than the Global 5000 (2,930 lbs).
According to Conklin & de Decker, the Falcon 7X cabin volume is 1,506cu.ft. and its cabin length is 39.1ft. The Global 5000 has a larger cabin volume (1,889 cu. ft.) and is slightly longer (42.5ft). Chart A, courtesy of UPCAST JETBOOK, shows the cross-section comparisons.
Depicted in Chart B, using Luxembourg as the origin point, the Falcon 7X shows more range coverage than the Global 5000, as sourced from Aircraft Cost Calculator (ACC).
Note: For jets and turboprops, ‘Seats-Full Range’ represents the maximum IFR range of the aircraft at Long-Range Cruise with all passenger seats occupied. ACC assumes NBAA IFR fuel reserve calculation for a 200nm alternate. The lines depicted do not include winds aloft or any other weather-related obstacles.
The Falcon 7X is powered by three Pratt & Whitney Canada PW307A engines, each with 6,042 lbst, while the Global 5000 is powered by two Rolls-Royce BR 710-A2-20 engines, each offering 14,750 lbst.
Cost Per Mile
Using data published in the May 2016 B&CA Planning & Purchasing Handbook and the August 2015 B&CA Operations Planning Guide, we will compare our aircraft. The nationwide average Jet A fuel cost used from the August 2015 edition was $5.25 per gallon at press time, so for the sake of comparison we’ll chart the numbers as published.
Note: Fuel price used from this source does not represent an average price for the year.
Chart C details ‘Cost per Mile’ and compares the Falcon 7X to its competition factoring direct costs and with each aircraft flying a 1,000nm mission with a 1,600 lbs (eight passengers) payload. The Global 5000 shows the highest cost per nautical mile at $6.73 compared to $5.33 for the Falcon 7X. This is a difference of $1.40 (26.3%) per nautical mile.
Total Variable Cost
The ‘Total Variable Cost’ illustrated in Chart D is defined as the Cost of Fuel Expense, Maintenance Labor Expense, Scheduled Parts Expense and Miscellaneous Trip Expense. The Total Variable Cost for the Falcon 7X computes at $2,336 per hour, 23.1% less than the Global 5000 at $3,037.
Table C contains the pre-owned prices from Vref Pricing Guide for each aircraft. The average speed, cabin volume and maximum payload values are from Conklin & de Decker and Aircraft Cost Calculator, while the number of aircraft in-operation and percentage ‘For Sale’ are as reported by JETNET.
The Falcon 7X has 10.6% of its fleet currently ‘For Sale’ and the Global 5000 has 11.4%. Note, too, the average number of new deliveries and pre-owned transactions (sold) per month for the Global 5000 is higher at four per month than the Falcon 7X (three per month).
Aircraft that are owned and operated by businesses are often depreciable for income tax purposes under the Modified Accelerated Cost Recovery System (MACRS). Under MACRS, taxpayers are allowed to accelerate the depreciation of assets by taking a greater percentage of the deductions during the first few years of the applicable recovery period.
In certain cases, aircraft may not qualify under the MACRS system and must be depreciated under the less favorable Alternative Depreciation System (ADS) where depreciation is based on a straight-line method, meaning that equal deductions are taken during each year of the applicable recovery period. In most cases, recovery periods under ADS are longer than recovery periods available under MACRS.
There are a variety of factors that taxpayers must consider in determining if an aircraft may be depreciated, and if so, the correct depreciation method and recovery period that should be utilized. For example, aircraft used in charter service (i.e. Part 135) are normally depreciated under MACRS over a seven-year recovery period or under ADS using a twelve-year recovery period.
Aircraft used for qualified business purposes, such as Part 91 business use flights, are generally depreciated under MACRS over a period of five years or by using ADS with a six-year recovery period. There are certain uses of the aircraft, such as non-business flights, that may have an impact on the allowable depreciation deduction available in a given year.
Table D depicts an example of using the MACRS schedule for a 2016 Falcon 7X aircraft in private (Part 91) and charter (Part 135) operations over five- and seven-year periods, assuming a used retail value of $53.8 million, per Vref Pricing guide.
Asking Prices vs Age, Airframe Total Time & Quantity
Chart E, sourced from the Multi-Dimensional Economic Evaluators Inc. (www.meevaluators.com), shows a Value & Demand chart for the pre-owned Falcon 7X. The current pre-owned market for the Falcon 7X aircraft shows a total of 27 aircraft ‘For Sale’ with nine displaying an asking price, thus we have plotted them.
For measure, we have added the pre-owned Global 5000, Global 6000 and Gulfstream G550 into our study group. Asking prices range from $12-42.8m. The equation that we derived from these asking prices and other criteria used should enable sellers and buyers to compare, and perhaps adjust their offerings, if necessary.
While each serial number is unique, the Airframe (AFTT) hours and age/condition will cause great variations in price. Demand and Value are on opposite sides of the same Price axis. Thus, the market for used Falcon 7X, Global 5000, Global 6000 and G550 responds to at least four features: Years, AFTT, Quantity, and Asking Prices.
Of course, the final negotiated price remains to be decided between the seller and buyer before a sale is completed.
Value Retention/Market Status
Table E shows a Value Retention table for the Falcon 7X, courtesy of AircraftPost. If we view a 2007 vintage Global 5000 and Falcon 7X, the former had a price-point of ~$35m new, and the latter ~$42m new. Fast-forward to year-end 2015, a 2007 Global 5000 had a ~$19.5m value on the resale market and the 2007 Falcon 7X ~$23.2m. To convolute matters further, a 2007 Global XRS that sold new for ~$46m had an average resale in 2015 of ~$24m.
As these aircraft age, the price differentials are getting smaller, which directly translate to more choice for the dollar in an already saturated marketplace.
The condition of the current market for our comparative aircraft does not seem to be improving. If sales continue to track on par with the first five months of 2016, the number sold could be down 13% over 2015.
Of the 204 Global 5000s in service at year-end 2015, 36 aircraft came on the market, representing 17.6% of the available fleet. That was an increase over 2014 when 31 Global 5000s were on the market. 2013 showed 24, and 2012 just 12 aircraft on the market.
The Falcon 7X fleet reached 254 in-service year-end 2015, with a total of 28 aircraft (11% of the fleet) showing on the current market. That compares to 21 aircraft on the market in 2014, 20 in 2013 and 13 in 2012.
The points in Chart F are centered on the same aircraft. Pricing used in the vertical axis is as published in the Vref Pricing Guide. The productivity index requires further discussion in that the factors used can be somewhat arbitrary. Productivity can be defined (and it is here) as the multiple of three factors:
1. Range with full payload and available fuel;
2. The long range cruise speed flown to achieve that range;
3. The cabin volume available for passengers and amenities.
Others may choose different parameters, but serious business aircraft buyers are usually impressed with Price, Range, Speed and Cabin Size. After consideration of the Price, Range, Speed and Cabin Size, we conclude that the Falcon 7X displays a high level of productivity.
Popular attributes of the Falcon 7X are the lower cost per mile, lower variable costs and fuel consumption, and slightly more range compared to the Global 5000. Operators should weigh their mission requirements precisely when picking the option that is the best for them, however.
The Dassault Falcon 7X continues to be very popular in the market today. Operators should find the preceding comparison useful. Our expectations are that the Falcon 7X will continue to do well in the pre-owned markets for the foreseeable future.