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 popular light business jets for the purpose of valuing the Embraer Phenom 300 for sale.
Over the following paragraphs, we’ll consider productivity parameters (payload/range, speed and cabin size) and cover current and future market values for the Embraer Phenom 300. The field in this comparative study includes the Cessna Citation CJ4 for sale.
The Phenom 300 has a capacity for six passenger seats in its normal configuration with a single pilot. Interior configurations also offer options of a side-facing seat and belted toilet. Powered by two Pratt & Whitney PW535E engines, the Phenom 300 first flew in May 2008, earning FAA Certification in December 2009. First customer delivery took place that same month.
In its cockpit, the Phenom 300 utilizes either the Garmin G1000 or G3000 avionics panel.
An early indicator of the future success the Phenom 300 would enjoy came through its selection by leading fractional providers NetJets and Flight Options/Flexjet, each placing large orders. Today, there are 87 Phenom 300s in fractional operation representing 26.5% of the total fleet of 328 Phenom 300s in operation.
Aside from the 87 in fractional ownership programs, there are also 236 wholly-owned and five Phenom 300s in shared ownership. Thirteen Phenom 300s are leased, according to JETNET. North America has the largest fleet share percentage (57%), followed by South America (22%) and Europe (16%), for a combined total of 95% of the world’s fleet.
US Flight Activity
Table A shows that the number of flights increased by 23.7% in the US, and the distance travelled (18.5%) and flight hours (19.9%) also increased in the comparison between 2014 and 2015.
Payload & Range
The data contained in Table B are published in the B&CA, May 2016 issue, but is 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 Phenom 300 ‘Available Payload with Maximum Fuel’ at 942 lbs is less than the Citation CJ4 at 1,052 lbs.
The fuel usage by each aircraft in this field of study is also represented in Table B. The Phenom 300 burns 16% less fuel at 158 gallons per hour (GPH) compared to the Citation CJ4 (188 GPH), according to Aircraft Cost Calculator.
According to Conklin & de Decker, the Phenom 300 cabin volume is 324 cubic feet. While this is larger than the CJ4s overall cabin volume of 293 cu. ft., the CJ4 offers a slightly longer cabin at 17.3 ft versus the Phenom 300’s 17.17 ft. As depicted by the Cabin Cross-Section comparison in Chart A (courtesy of UPCAST JETBOOK), the Phenom 300 offers greater cabin width and height.
As depicted in Chart B, using Wichita, Kansas as the origin point, the Phenom 300 offers marginally more range than the Citation CJ4, 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.
As mentioned previously, the Phenom 300 is powered by two Pratt & Whitney PW535E engines each offering 3,360 pounds of thrust (lbst). The Citation CJ4 offers a pair of Williams FJ44-4A engines with 3,621 lbst each.
Cost Per Mile
Using data published in the May 2016 B&CA Planning and 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 Phenom 300 to its competition, factoring direct costs and with each aircraft flying a 1,000nm mission with a 800 lbs payload. The Citation CJ4 shows the highest cost per nautical mile at $2.84 compared to $2.46 for the Phenom 300. This is a difference of 13.4% in favor of the Phenom 300.
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 Phenom 300 computes at $1,130 per hour, which is 11.2% less than the Citation CJ4 ($1,273 per hour).
Aircraft Comparison Table
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 Phenom 300 has 5.2% of its fleet currently ‘For Sale’ and the Citation CJ4 has 6.5% for sale. Also, the average number of new deliveries and pre-owned transactions (sold) per month for the Phenom 300 is higher at 8 units per month than the Citation CJ4 (5 per month), as shown in the last column in Table C.
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.
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. 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 Phenom 300 business aircraft in private (Part 91) and charter (Part 135) operations over five and seven-year periods, assuming a new retail value of $8.995 million, per Vref Pricing guide.
Asking Prices vs Age, Airframe Total Time and Quantity
Chart F, sourced from the Multi-Dimensional Economic Evaluators Inc. (www.meevaluators.com), shows a Value and Demand chart for the pre-owned Phenom 300. The current pre-owned market for the Phenom 300 aircraft shows a total of 19 aircraft ‘For Sale’ with only three displaying an asking price, thus we have plotted them.
We also added the pre-owned CJ3, CJ4, XLS+ and the Learjet 70 business jets in our study group with asking prices ranging from $3.9m - $9.0m. 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.
Demand and Value are on opposite sides of the same Price axis. Thus, the market for used Phenom 300 and others respond to at least four features: Years, AFTT, Range, Quantity and Asking Prices.
While each serial number is unique, the airframe (AFTT) hours and age/condition will cause great variations in price. The final negotiated price remains to be decided between the seller and buyer before the sale is completed.
The points in Chart G 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 Phenom 300 displays a high level of productivity.
The high-level of productivity for the Phenom 300 is largely due to the fact that it offers a larger cabin and lower operating costs including a 30 GPH (16%) average fuel burn saving over the Citation CJ4. The purchase price is also lower than that of the CJ4 aircraft.
Nevertheless, the Phenom 300 ‘Available Payload with Maximum Fuel’ at 942 lbs is lower than that of the Citation CJ4. Operators should weigh up their mission requirements precisely when picking which option is the best for them.
Maximum Scheduled Maintenance Equity
Exclusive to our online content, the following Chart depicts the Maximum Maintenance Equity the Phenom 300 has available, based on its age, courtesy of Asset Insight, Inc.
• The Maximum Maintenance Equity figure was achieved the day the aircraft came off the production line – since it had not accumulated any utilization toward any maintenance events.
• The percentage of the Maximum Maintenance Equity that an average aircraft will have available based on its age, assumes:
- Average annual utilization: 230 Flight Hours
- All maintenance is completed when due
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 Phenom 300 continues to be very popular today. Those operators in the market should find the preceding comparison useful. Our expectations are that the Embraer Phenom 300 for sale will continue to do well in the pre-owned market for the foreseeable future.