Buying High Time Jets: Value or a Risk?

What should buyers consider when shopping the market for older, higher-time aircraft? Professional appraiser Jeremy Cox shares some of the risk areas to consider that could inform the Cost-Benefit analysis…

Jeremy Cox  |  10th June 2020
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Jeremy Cox
Jeremy Cox

Jeremy Cox was president, JetValues-Jeremy LLC and enjoyed direct interface between aircraft purchasers...

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Private jet on runway viewed from behind

Is it worth your while shopping for older, higher-time aircraft? What are the risks you should be aware of, and how can you mitigate these? Aircraft appraiser Jeremy Cox shares some thoughts…

The airlines target at least 3,000 hours annually for each of their aircraft in order for their business models to work. Hence their target retirement/scrap age starts at around 20 years (or 60,000 hours) and could be as high as 30 years (90,000 hours).

By comparison, the world’s business jet fleet doesn’t come anywhere close to these numbers, and should therefore (in my opinion) be classed as the ‘boutique’ category of aviation.

It’s unusual for any business jet to fly more than 400 hours per year. Consequently, a business jet with 30,000 hours on its airframe is very rare indeed, particularly in an aviation segment where 10,000 hours total-time is considered ‘high-time’.

A snapshot analysis of all 21,341 active business jets worldwide, per AMSTAT data, returns an average of 3,488 hours total time-in-service. Age (in years) is where business jets surpass the airlines, with 34% of all the world’s active business jets currently older than 21 years of age (see Table below).

How do Age and Time Factor in Aircraft Appraisals?

It could be that your aircraft purchase budget pushes you towards older aircraft. If it does, there’s a one-in-three chance that you’ll will be shopping for aircraft dating from the late 1990s and earlier.

Naturally, older aircraft have history, and they will also have accumulated flight hours over the years. In the case of an aircraft built in 1999 that has consistently flown 400 hours annually (since new), the engines and airframe will have amassed 8,400 hours, or more.

Age and total time are both factors in an aircraft appraisal when determining its value.

Let’s consider the example of the Gulfstream G550 to illustrate. The older the aircraft is, and the more hours that are accumulated over time, the greater the devaluation of the subject aircraft.

Theoretically, when the year/hours ratio is projected on a spreadsheet, you’ll find that below the first 1,000 flight-hours, each flight hour of a new Gulfstream G550 is actually worth $5,280. By comparison, for the first 1,000 flight-hours flying a 2004 Gulfstream G550, each flight-hour is worth $1,260.

Why the Maintenance Schedule Matters…

Let’s consider Engines Total-Times of the Gulfstream G550 since new. The Rolls-Royce BR710-C4-11 engines used on the G550 are maintained on either a ‘Hard-Time’ or ‘On-Condition’ schedule (it’s the owner’s/operator’s choice) regarding Mid-Life and Overhaul Inspections.

Hard-Time keeps the powerplants on a ten-year Mid-Life Inspection, and 8,000-hour Overhaul Inspection. On-Condition, meanwhile, might stretch the serviceability of the engine to 9,500 hours (which is very rare), or the monitored engine performance parameters degrade enough to require an Inspect & Repair As Necessary (IRAN) event at 1,000 (or more) hours below the Hard-Time Overhaul interval.

As the age-old saying goes, you’ll either pay now, or you’ll pay later. You may save on downtime when following the On-Condition protocol, but ultimate engine restoration costs will be much higher than those of a Hard-Time schedule, especially if the engine is in its third semester as applies to Life Limited Parts (LLPs).

One might see a US$5m IRAN/Overhaul of each engine when multiple LLPs need to be replaced. So buyers in the market for older, higher time aircraft ought to factor the maintenance schedule of the aircraft as part of the risk analysis.

Diminishing Supplies of Parts and Components

Now let’s consider ‘out of production’ models. There comes a natural attrition of components and parts availability once an OEM drops a specific model from their production line.

While all service and support doesn’t end at that point, let’s assume that the aircraft make/model has been out of production for more than 10 years. At this point, availability of components and parts can tend to tighten.

Part of this natural attrition attracts non-OEM companies to take up some of the slack, either via the manufacture and PMA of new rotables (when the companies that used to make them for the OEM stop producing them), or as aircraft are dropped from the active fleet, they’re cannibalized by many of the used parts supply houses.

Obviously, an overhauled rotable is more desirable than a ‘serviceable as removed’ unit with traceability, and many of the used parts supply houses will develop in-house overhaul capability or outsource this requirement.

Another aspect to consider is ‘wear and tear.’ A moving part or assembly cannot do so indefinitely without it experiencing wear.

Obviously, safety of flight components have a combination of calendar and/or hours/cycles limitations established by the OEM to ensure failure doesn’t occur before the affected component is removed for servicing.

However, panel screws, fasteners, securing nuts and bolts whose life may not be tracked by the maintenance program can only loosen and tighten so many times before they’re no longer serviceable.

Lastly, it is rare for avionics equipment to be included in life-tracking (notwithstanding the transponders, altimeters and RVSM recertification requirements), and as wiring cooks, gases-off and ages, random electrical interruptions and spikes become more prevalent. These electrical events often cause solid-state components to ‘fry’ and fail.

The bottom-line issue with older aircraft is the diminishing availability and supply of parts, components and service. The older the business jet, and the greater the total-time, the simple decision of “Do I want it, or not?” (when you buy new) becomes a reasonably complicated Cost-Benefit analysis.

Is Age-Related Safety a Real Risk in BizAv?

Finally, let’s consider safety. The 1977 crash of Zambia Airways’ leased Boeing 707 was one of the first major commercial aircraft accidents caused by age and metal fatigue. The horizontal stabilizer spars were fatigue cracked, and after inspection more than 15% of the ‘then’ in-service fleet were found to have the same problem.

In 1988 when the Aloha Airlines accident took place, unnoticed corrosion caused an explosive decompression of a Boeing 737 mid-flight to take off its roof. Mainly thanks to the over-built strength that was inherent in the design of the B737, the damaged aircraft was able to make a safe landing. The Federal Aviation Administration (FAA) immediately leapt into action and created an ‘Ageing Aircraft’ Task Force to review the technical issues that were the result of aircraft aging in service.

Apart from issues with the embrittlement of conductors and the breakdown of insulation in electrical wiring, as well as crack formation and growth within some metal structures caused by stress and/or corrosion, the FAA found that the majority of aging issues found in older-high-time aircraft were likely to be serious only in areas that had been structurally modified or repaired.

In Summary…

While I don’t know of any business aircraft that have been catastrophically ‘downed’ due to age or high total-time, I would suggest any risk that comes with buying a high-time business jet is purely of a financial nature.

On the upside, significant savings can be immediately realized by shopping high-time and older jets – as long as you have the relevant expertise at your side to help you sort the wheat from the chaff.

Do you have a specific aircraft maintenance, upgrade or repair need?

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