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 a variety of light/very light jets for sale (including the Embraer Phenom 100/100E) for the purpose of valuing the Cessna Citation M2.
While primarily seeking to compare the Cessna Citation M2 with Embraer’s Phenom 100 in the light jet category, this month we reference the smaller Citation Mustang and Eclipse 500/550 business jets in our field of study for some additional perspective. Over the following paragraphs, we’ll consider a variety of productivity parameters, including Payload, Range, Speed and Cabin size.
The Cessna Citation M2 started delivering in 2013 and has a Maximum Take-off Weight (MTOW) of 10,700 pounds. The traditional divide between the light and entry-level jet categories is 10,000 lbs MTOW, placing the M2 in the light jet category. The Phenom 100 MTOW is almost 10,500 lbs.
The Citation M2 was developed to offer a pressurized cabin accommodating a crew of two and up to six passengers. Two FADEC-controlled Williams International FJ44 turbofan engines are pylon-mounted on the rear fuselage and fuel is stored in the wings. Space for baggage is provided in the nose and tailcone. The wingtip extensions on the M2 are too subtle to be called ‘winglets’, thus Cessna calls them ‘swooplets’.
Additionally, the Citation M2 became the first light jet to feature Garmin’s G3000 system flat-panel avionics. The G3000 is an evolution of the G1000-based system that comes standard in the Citation Mustang and all of Cessna’s current single-engine models.
Today there are 118 wholly-owned Citation M2s and five in shared ownership, giving a total fleet of 123 in operation worldwide. Eight (or 6.5% of the fleet) are leased, according to JETNET. By continent, North America has the largest fleet percentage (78%), followed by Europe (12%) and South America (7%) which, combined, account for a total of 97% of the worldwide fleet.
US Flight Activity
In a comparison of Citation M2 operations (2015 versus 2014), Table A reveals a 74% increase in the number of Citation M2 flights during 2015, while the distance travelled by the operational fleet increased by 59% and flight time increased 61%. This is perhaps unsurprising as the worldwide Citation M2 fleet increased from 58 at the end of 2014 to 99 at the end of 2015.
Payload & Range
The data contained in Table B 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 Citation M2 ‘Available Payload with Maximum Fuel’ (504 lbs) is less than that offered by the Phenom 100 (580 lbs). Also, shown are the selection of Very Lights Jets with the Citation Mustang leading all jets at 600 lbs.
Additionally, Table B shows the fuel usage by each aircraft (sourced from Aircraft Cost Calculator). There is 22gph or 22% difference in the fuel usage of the Citation M2 (121 gallons per hour) and the more frugal Phenom 100 (99gph). In terms of fuel usage, however, the Eclipse 500/550 burns only 68gph, while offering an Available Payload with Maximum Fuel of just 2 lbs less than the Citation M2.
Among the major gains for Light Jets over Very Light Jets is in cabin volume. According to Conklin & de Decker, the Citation M2 cabin volume is 201 cubic feet and offers a length of 11 ft. By comparison, the Phenom 100 offers slightly more volume (212 cu. ft.), but the same 11 ft. length.
Chart A, courtesy of UPCAST JETBOOK, offers a cabin cross-section comparison where we begin to understand where the Phenom 100 gains in volume over the M2. The Citation M2 offers less width (4.83ft vs 5.08 ft), and less height (4.75ft vs 4.92ft).
(For reference, the Citation Mustang and Eclipse 500/550 cabin volumes are 163 and 109 cubic feet, respectively.)
As depicted by Chart B and using Independence, Kansas, as the origin point the Citation M2 shows less range coverage than the Phenom 100 and Citation Mustang, but greater range than the Eclipse 500, 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.
As mentioned, the Citation M2 is powered by two Williams FJ44-1AP engines, each offering 1,965 lbst. The Phenom 100 is powered by two Pratt & Whitney PW617F-E engines with 1,695 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 Citation M2 to its competition, factoring direct costs and with each aircraft flying a 600nm mission with an 800 pound (four passengers) payload.
The Phenom 100 shows the lower cost per nautical mile at $2.20 compared to the Citation M2 ($2.47). That’s a difference of 10.9% cost per nautical mile in favor of the Phenom 100. Unsurprisingly, those jets in the Very Light Jet category offer lower costs per 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 Citation M2 computes at $908 per hour, which is 21.4% more than the Phenom 100 at $748 per hour. Again, unsurprisingly, the Very Light Jets included for illustrative purposes offer lower variable costs per hour.
Aircraft Comparison Table
Table C contains the used 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 Citation M2 has 2.5% of its fleet currently ‘For Sale’ and the Phenom 100, 10.1%. The number of pre-owned transactions (sold) per month for the Citation M2 and Phenom 100 is exactly the same at five units 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 (see Table D).
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 E depicts an example of using the MACRS schedule for a 2016 Citation M2 business aircraft in private (Part 91) and charter (Part 135) operations over five and seven-year periods, assuming a new retail price of $4.595m, per Vref Pricing guide.
Asking Prices & Quantity
Chart E, sourced from the Multi-Dimensional Economic Evaluators Inc. (www.meevaluators.com), shows a ‘Demand’ chart for the Citation M2. The current pre-owned market for the Citation M2 aircraft shows a total of three aircraft ‘For Sale’ with none displaying an asking price.
We added the pre-owned Phenom 100, Citation Mustang and Eclipse 500/550 with asking prices ranging from $675k to $2.995m. 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. Our research suggests that the market for used Citation M2s responds to the following features: Years from First Delivery, Range, Quantity and Asking Prices.
Of course, the final negotiated price remains to be decided between the seller and buyer before the sale of an aircraft is completed.
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:
Range with full payload and available fuel;
The long range cruise speed flown to achieve that range;
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 Citation M2 displays a fair level of productivity, and – along with the Phenom 100 provides a good step-up model for VLJ operators looking to upscale.
The Citation M2 and Phenom 100 representing the Light Jet group show higher prices and greater productivity compared to the Very Light Jet group. The Very Light Jet group has the operating cost advantage but with small cabin volumes.
All competitive models are currently showing good monthly full retail sale transactions ranging from 4 to 7 aircraft per month with nearly 1,200 combined units in operation worldwide.
Operators should weigh up their mission requirements precisely when picking which option, and indeed which category, is the best for them.
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, however.
The Citation M2 continues to be popular today. Those operators in the market should find the preceding comparison useful. Our expectations are that the Citation M2 will continue to do well in the new and used markets for the foreseeable future.