Mike Chase has thirty-five year's extensive global managerial experience in marketing, sales and finance working in the corporate, commercial- airline and supplier aerospace industries. He has worked as vp-... Read More
In this month’s Aircraft Comparative Analysis, Mike Chase provides information on two jets in the mid-cabin business jet category for the purpose of valuing the Bombardier Challenger 350 for sale.
How do the Bombardier Challenger 350 and Gulfstream G280 compare in the market today? Across the following paragraphs, we’ll consider various productivity parameters (payload, range, speed and cabin size) to get an overview.
The Challenger 350’s lineage dates back to the Paris Air Show in 1999 in the form of the Bombardier Continental. The Continental was a "clean sheet" design, assembled in Bombardier's Learjet plant in Wichita. Following much debate about its category (Learjet, Challenger or Global) the Continental was renamed in September 2002, and in 2003 the Challenger 300 received FAA type certification. Entry into service followed in January 2004. 457 Challenger 300s were delivered between 2004 to 2014.
Launched at EBACE in May 2013 the upgraded Bombardier Challenger 350 offers different engines, new winglets, a different interior and new avionics compared to the Challenger 300 it replaced on the production line. For example, the aircraft’s entertainment and communications system includes two 22-inch monitors attached to the cabin bulkheads, and ports for syncing the system with laptops and phones.
Bombardier says that it launched the Challenger 350 to allow it to compete with new models to the market, such as the G280, Dassault’s Falcon 2000, Embraer’s Legacy 500 and Cessna’s Citation Longitude.
Today, there are 100 wholly-owned Challenger 350s and an additional 45 in fractional ownership (total fleet - 145 in operation worldwide). Sixteen (11%) of the Challenger 350 fleet are leased. By continent, North America has the largest fleet percentage (61%) followed by Europe (32%), accounting for a combined 93% of the total Challenger 350 in-operation fleet.
The percentage of Challenger 350 fleet currently ‘For Sale’ is 3.4% with all of these under an exclusive broker agreement. Average days on the market for a Challenger 350 ‘For Sale’ currently stands at 252 days, according to JETNET data.
Payload & Range
The data contained in Table A are published in the B&CA, May 2016 issue, but also sourced from Conklin & de Decker. As we have mentioned in past articles, a potential operator should focus on payload capability as a key factor. The Challenger 350 ‘Available Payload with Maximum Fuel’ (1,800 lbs) is more than that offered by the Gulfstream G280 (1,000 lbs).
Additionally, Table A shows the fuel usage by each aircraft (sourced from Aircraft Cost Calculator). There is a mere 2% difference in the fuel usage of the Challenger 350 at 261 and the Gulfstream G280 at 256 gallons per hour (GPH). Thus, the Gulfstream G280 is marginally more frugal.
According to Conklin & de Decker, the Challenger 350 cabin volume measures 1,002 cu. ft., with 23.7 ft. length. The Gulfstream G280 offers less volume (888 cu. ft.), with a much longer cabin (32.2 ft.).
Chart A, courtesy of UPCAST JETBOOK, offers a cabin cross-section comparison and shows the Challenger 350 offers the same width (7.2 ft) but less height (6.1 ft vs 6.3 ft) than the Gulfstream G280. The key design difference giving the Challenger 350 its larger overall cabin volume is that its 6.1 ft height is achieved with a flat floor design, whereas the G280 has a dropped aisle enabling its 6.3 ft height measurement.
As depicted by Chart B and using Wichita, Kansas, as the origin point the Challenger 350 shows less range coverage than the Gulfstream G280, per data 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 Challenger 350 is powered by two Honeywell HTF7350P engines each offering 7,323 lbst. The Gulfstream G280 is also powered by two Honeywell HTF7250G engines with 7,624 lbst.
Cost Per Mile
Using data published in the May 2016 B&CA Planning and Purchasing Handbook and the August 2016 B&CA Operations Planning Guide we will compare our aircraft. The nationwide average Jet-A fuel cost used from the August 2016 edition was $4.90 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 Challenger 350 to its competition, factoring direct costs and with each aircraft flying a 1,000nm mission with an 800 lbs (four pax) payload. The Gulfstream G280 shows the lower cost per nautical mile at $3.97 compared to $4.00 for the Challenger 350; an insignificant three cents in favor of the G280.
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 Challenger 350 computes at $1,804 per hour, which is slightly greater than the Gulfstream G280 at $1,799 per hour.
Aircraft Comparison Table
Table B 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.
As mentioned above, the Challenger 350 has 3.5% of its fleet currently ‘For Sale’. By comparison, the Gulfstream G280 fleet sees 5.2% currently ‘For Sale’. The average number of new and pre-owned transactions (units sold) per month for the Challenger 350 stands at five units per month compared to the Gulfstream G280 at two units.
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 (see Table C).
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 model Challenger 350 business jet in private (Part 91) and charter (Part 135) operations over five- and seven-year periods, assuming a new retail price of $26.673m, per Vref Pricing guide.
Asking Prices & Quantity
The current used market for the Challenger 350 aircraft shows a total of five aircraft ‘For Sale’ with none displaying an asking price. However, factoring used Challenger 300s as well as Gulfstream G280s and G200s currently ‘For Sale’ into the market offerings should be informative.
Table E shows the various models in this market space that total nearly 950 business jets in operation, with 89 (9.4%) ‘For Sale’. Only 33 present an ask price, however, which range between $2.695m-$15.950m.
While each serial number is unique, the Airframe (AFTT) hours and age/condition will cause great variations in price. Of course, the final price remains to be negotiated between the seller and buyer before the sale of an aircraft is completed.
The points in Chart E 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 can conclude that the Challenger 350 displays a high level of productivity.
The Challenger 350 shows a higher purchase price and greater productivity compared to the Gulfstream G280. The Gulfstream G280 has a very slight operating cost advantage but with a smaller cabin volume.
The Challenger 350 is currently faring well on the used aircraft for sale market, showing monthly full retail sale transactions that currently average five jets per month, compared to Gulfstream’s G280 (average of two per month). Before choosing which aircraft is best for their own flight department, potential operators should weigh their mission requirements with facts presented in this comparison article.
Within the preceding paragraphs we have touched upon several of the attributes that business aircraft operators value. There are other qualities such as airport performance, terminal area performance, and time to climb that might factor in a buying decision.
The Bombardier Challenger 350 jet continues to be popular today. Those operators in the market should find the preceding comparison useful. Our expectations are that the Challenger 350 will continue to do well in the new and used jet markets for the foreseeable future.