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 three popular business jets for the purpose of valuing the Gulfstream G650 for sale.
Over the following paragraphs, we’ll consider productivity parameters (payload, range, speed and cabin size) and cover current market values for the Gulfstream G650.
The Gulfstream G650 began production in 2012 and is still being produced today. In 2014, Gulfstream launched the G650ER offering even further extended range capabilities. The Gulfstream G650 has the distinction of being a clean-sheet design aircraft, and is one of the fastest and longest-range purpose-built business jets ever manufactured.
The fuselage cross section is a unique oval shape with eight large cabin windows on each side. The wing uses greater sweep than previous Gulfstream models and no leading-edge high-lift devices. Aircraft controls are completely fly-by-wire, while the construction is metal for the wings and fuselage and composite materials for the empennage, winglets and engine cowlings.
The Gulfstream G650 is powered by two Rolls-Royce BR700-725A1-12 engines each offering 16,900 lbst. The aircraft has a PlaneView II cockpit with Gulfstream Enhanced Vision System (EVS), Rockwell Collins Head-Up display, ACARS, and Enhanced GPWS with windshear protection.
There are currently 131 wholly-owned G650s and one in shared ownership flying. With none fractionally owned, 132 Gulfstream G650 business jets are in operation worldwide. By continent, North America has the largest fleet percentage (52%), followed by Europe (23%) and Asia (19%) for a combined total of 94%. A total of 11 (8.3% of the Gulfstream G650 in operation fleet) are leased, according to JETNET.
US Flight Activity
Table A shows virtually no difference in the number of US G650 flights in 2015 versus 2014. However, the distance travelled over those flights decreased -9.2%, while flight hours increased 4.6%.
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. As we have mentioned in past articles, a potential operator should focus on payload capability as a key factor. The Gulfstream G650 ‘Available Payload with Maximum Fuel’ at 1,800 pounds is less than the Global 6000 at 2,804 lbs and the G550 at 2,500 lbs of payload capability.
In addition, Table B shows the fuel usage by each aircraft in this field of study. The Gulfstream G650 burns less fuel per hour at 453 Gallons per Hour (GPH) compared to the Global 6000 (461GPH), according to data sourced from Aircraft Cost Calculator. The Gulfstream G550 is the most frugal with 402GPH, 11.2% and 12.8% less than the G650 and Global 6000 respectively.
According to Conklin & de Decker, the Gulfstream G650 cabin volume is 2,421 cubic feet and its cabin length is 53.6 ft. The Global 6000 offers less volume (2,002 cu. ft.), and length (48.35ft) while the G550 has the least volume (1,812 cu. ft.) but a length of 50.1ft.
Chart A (courtesy of UPCAST JETBOOK) shows the side-by-side comparisons.
As depicted by Chart B and using Dallas, Texas as the origin point, the Gulfstream G650 and G550 show more range coverage than the Global 6000 business jet, 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, the Gulfstream G650 is powered by two Rolls-Royce BR700-725A1-12 engines each offering 16,900 lbst. The Global 6000 and G550 are also powered by a pair of Rolls-Royce engines offering 14,750 lbst and 15,385 lbst each, respectively.
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 Gulfstream G650 to its competition, factoring direct costs and with each aircraft flying a 6,000nm mission with a 1,600 pound (eight passengers) payload. The Global 6000 shows the highest cost per nautical mile at $6.45 compared to $5.98 and $5.91 respectively for the G550 and G650. (That’s a difference of 8.4% cost per nautical mile in favor of the G650 vs the Global 6000.)
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 G650 computes at $2,821 per hour, which is 4.2% less than the Global 6000 at $2,945 per hour. The G550 offers the lowest variable cost at $2,616.
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 Gulfstream G650 has 8.3% of its fleet currently ‘For Sale’ compared with the Global 6000 (6.0%) and the G550 (6.2%). Note, too, the average number of new deliveries and pre-owned transactions (sold) per month for the G550 is higher (seven per month) than either the G650 or the Global 6000 (five 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 Gulfstream G650 business aircraft in private (Part 91) and charter (Part 135) operations over five and seven-year periods, assuming a new retail value of $66.8m, per Vref Pricing guide.
Asking Prices vs Age, Airframe Total Time and Quantity
Chart E, sourced from the Multi-Dimensional Economic Evaluators Inc. (www.meevaluators.com), shows a Value and Demand chart for the pre-owned Gulfstream G650. The current pre-owned market for the Gulfstream G650 aircraft shows a total of 11 aircraft ‘For Sale’ with only five displaying an asking price, thus we have plotted them.
We also added the Gulfstream G650ER, G550 and Bombardier Global 6000 into our study group, with asking prices ranging from $17.95m to $68.95m. The equation that we derived from these 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 Gulfstream G650 and others respond to at least four features: Months from first delivery, cabin volume, quantity and asking prices. Of course, the final negotiated price remains to be decided between the seller and buyer before the sale 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 Gulfstream G650 displays a high level of productivity.
The high level of productivity is largely due to the fact that the Gulfstream G650 offers a larger cabin, longer range and lower cost per mile compared to the other study aircraft in our comparative analysis.
However, the Gulfstream G650 ‘Available Payload with Maximum Fuel’ at 1,800 lbs is considerably lower, while the purchase price is higher than that of the Global 6000 and G550 aircraft. 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, we depict the Maximum Maintenance Equity the G650 has available, based on its age. The data is sourced from Asset Insight, Inc.
Note: 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 percent of the Maximum Maintenance Equity that an average aircraft will have available based on its age, assumes:
- Average annual utilization: 425 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 Gulfstream G650 for sale continues to be very popular. Those operators in the market should find the preceding comparison useful. Our expectations are that the Gulfstream will continue to do well in the pre-owned markets for the foreseeable future.