Used Aircraft Maintenance Analysis – April 2019

April brought a 1.7% inventory increase to the Asset Insight tracked fleet, with asset quality improving nearly 1.2%, while Maintenance Exposure improved 1.4%. But which models were affected the most? Tony Kioussis explores…

Tony Kioussis  |  16th May 2019
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    Tony Kioussis
    Tony Kioussis

    As President, Asset Insight, LLC, Tony provides valuations, audits, analytics and consulting services,...

    Gulfstream GIV-SP Private Jet

    April brought a 1.7% inventory increase to the Asset Insight tracked fleet, with asset quality improving nearly 1.2%, while Maintenance Exposure improved 1.4%. But which models were affected the most? Tony Kioussis explores…
    Asset Insight’s April 30, 2019 market analysis covering 96 fixed-wing models and 1,684 aircraft listed for sale revealed the average Ask Price for the tracked fleet increased just under 1% to post a figure approximately $60k above the record low value.
    April’s Aircraft Value Trends

    While Large Jet values lost substantial ground and Turboprops were also negatively impacted, Ask Price increases recorded by Medium and Small Jets led to the month’s pricing increasing.
    • Large Jet values decreased 2.5% in April (8.2% Year-to-Date);
    • Medium Jets gained 4% and 7.5% thus far this year;
    • Small Jet values increased 2.6% and are up 4.2% in 2019;
    • Turboprops suffered a relatively small loss of 0.5% and are now down 1.6% YTD.
    April’s Fleet For Sale Trends

    The total number of used aircraft listed for sale within Asset Insight’s tracked fleet increased by 28 units in April:

    • Large Jet inventory posted a 4.6% increase (16 units);
    • Medium Jet inventory decreased 0.6% (three units);
    • Small Jets increased another 3.5% (18 units); and
    • Turboprops decreased 1.1% for the second consecutive month (three units).
    April’s Maintenance Exposure Trends

    Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) for the latest inventory fleet mix improved (decreased) 1.4% to $1.4m from last month’s $1.42m, virtually tying the fleet’s 12-month average. Results for each of the four groups varied as follows:
    • Large Jet Maintenance Exposure fell (improved) 3.1%;
    • Medium Jet Exposure improved 2.1%;
    • Small Jets were virtually unchanged with an increase of only 0.2%;
    • Turboprop Maintenance Exposure increased (worsened) by 2.6%.
    April’s ETP Ratio Trend

    The Maintenance Exposure and Ask Price figures led to the average ETP Ratio figure for April decreasing (improving) to 63.6% from March’s 66%, with all but the Turboprop category contributing. Why is this information important…?
    The ETP Ratio calculates an aircraft's Maintenance Exposure as it relates to the Ask Price. This is achieved by dividing an aircraft's Maintenance Exposure (the financial liability accrued with respect to future scheduled maintenance events) by the aircraft's Ask Price.
    As the ETP Ratio decreases, the asset's value increases (in relation to the aircraft's price). ‘Days on Market’ analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s Days on Market increase (in many cases by more than 30%).
    So, for example, aircraft whose ETP Ratio exceeded 40% during Q1 2019 were listed for sale an average 62% longer than aircraft whose Ratio was below 40% (237 days versus 384 days on the market, respectively), while during Q4 2018 aircraft whose ETP Ratio exceeded 40% took over 57% longer to sell (246 versus 386 Days on Market).
    How did each group fare as we closed out April?
    • Turboprops continued to post the lowest (best) ETP Ratio at 54.9%, but that was only 0.1% better than the worst figure the group has ever recorded;
    • Large Jets improved to 60.2% from March’s 62.2%;
    • Small Jets recorded their best 12-month figure at 61.6%, versus March’s 62.0%;
    • Medium Jets yet again posted the highest (worst) ETP Ratio, but April’s 72.9% was substantially lower than March’s 79.5%.
    Excluding models whose ETP Ratio has remained over 200% during the previous two months (considered outliers), following is a breakdown of which individual business jet and turboprop models fared the best and which fared the worst in April 2019.
    April 2019 Most Improved Business Jet & Turboprop Models

    All but one of April’s ‘Most Improved’ models (the Hawker Beechjet 400) posted a Maintenance Exposure improvement (decrease). The Gulfstream GIV registered no change in price, while the remaining models posted the following price increases:
    • Hawker Beechjet 400  +$136,667
    • Gulfstream GIV-SP (MSG3) +$ 1,916,667
    • Bombardier Learjet 60 +$121,583
    • Hawker Beechjet 400A +$38,260
    • Dassault Falcon 900B +$127,500
    Hawker Beechjet 400

    Headlining April’s ‘Most Improved’ list, the Beechjet 400 posted two transactions in April, and there are now four aircraft on the market for sale (10% of the active fleet). While the model saw a Maintenance Exposure increase approaching $38k, its substantive price increase was more than sufficient to improve its ETP Ratio.
    At nearly 113%, however, the model’s ETP Ratio is unlikely to attract a huge fan base among buyers. The figures are not surprising for an aircraft of this age.
    Gulfstream GIV

    The model registered one transaction in April, but another aircraft was withdrawn from inventory and another entered the inventory pool. The 12 aircraft currently listed for sale equate to only 6.9% of the active fleet. The changes in the inventory fleet mix resulted in Maintenance Exposure improving (decreasing) nearly $594k which, even without any change in price, was sufficient to secure second place on the Most Improved list.
    One can wonder if an ETP Ratio exceeding 136% can lead to many opportunities for sellers, but the market continues to make it clear that life still exists for this model, especially for units whose engines are enrolled on an Hourly Cost Maintenance Program.
    Gulfstream GIV-SP (MSG3)

    One aircraft transacted last month and the seven in inventory for April equate to 8.6% of the active GIV-SP fleet. The model did post a Maintenance Exposure decrease exceeding $244k. But April’s substial price increase was due to one of only two posted Ask Price aircraft trading. Meanwhile a previously unpriced listing is now showing a much higher price than the departing asset.
    The 40% ETP Ratio may be more ‘technical’ than real, but this model, like its GIV older brother continues to have a strong and justifiable, following.
    Seller Advice:With overall availability of Large Jets increasing, sellers should expect downward pricing pressure, as April’s figures demonstrate. Sellers are advised to carefully consider any offers they receive.
    Bombardier Learjet 60

    We recorded four trades in April, but twice as many aircraft entered inventory and the 34 units now listed for sale equate to 11.4% of the active fleet. Nevertheless, the Learjet 60 earned its place on this list through a Maintenance Exposure decrease approaching $261k, along with a substantial increase in Ask Price.
    An ETP Ratio of 80.6% is likely to create challenges for sellers, but owners that have enrolled their aircraft on an engine Hourly Cost Maintenance Program (HMCP) should see their decision pay dividends.
    Hawker Beechjet 400A

    With the Beechjet 400A’s ETP Ratio dropping to the mid-fifties (thanks to a $171k decrease in Maintenance Exposure and an Ask Price increase), one would think that this model has a substantially better future than its older brother... However, with 20.6% of the active fleet listed for sale (58 units), the challenges for sellers are numerous, especially those who elected not to enroll their engines on HCMP.
    For those that have, their HCMP Adjusted ETP Ratio may well score below the 40% demarcation point creating some opportunities (though they’re likely to encounter stiff competition for the limited group of buyers).
    Dassault Falcon 900B

    This model rightfully earned the final spot on April’s ‘Most Improved’ list through a Maintenance Exposure decrease exceeding $223k, and a price increase approaching $128k. Three aircraft transacted in April, and the nine inventory units amount to just 5.8% of the active fleet.
    Considering that the model’s average ETP Ratio is 48%, and that the majority of the fleet has engines enrolled on Hourly Cost Maintenance Programs, buyers and sellers should have ample room to negotiate mutually acceptable prices.
    Most Deteriorated Models

    Excepting the Bombardier Learjet 35A, all models on April’s ‘Most Deteriorated’ list registered a Maintenance Exposure increase, while all but the Beechcraft King Air 300, which posted a $50,467 Ask Price increase, experienced ask price decreases, including:
    • Cessna Citation VI   -$30,500
    • Bombardier Learjet 35A  -$99,685
    • Bombardier Challenger 601-3A -$865
    • Bombardier Learjet 45XR  -$313,143
    • Bombardier Learjet 45  -$6,250
    Cessna Citation VI

    With 16.7% of the active fleet listed for sale, the Citation VI became the ‘Most Deteriorated’ model for April, thanks to a Maintenance Exposure increase exceeding $175k, along with a price decrease of $30.5k.
    Two aircraft transacted during April, but six still populate the inventory – and with an ETP Ratio exceeding 126%, the few willing buyers out there are definitely in the driving seat when it comes to transaction prices.
    Bombardier Learjet 35A
    While only 8.6% of this model’s fleet comprises the available inventory, and three transactions did close in April, the 41 aircraft listed for sale ultimately place buyers in the driver’s seat.
    The Learjet 35A held second position on the ‘Most Improved’ list during March and earned its fall from grace with a price decrease approaching $100k, even though Maintenance Exposure decreased $28k.
    Buyer Advice:With an ETP Ratio exceeding 150%, make certain that what you are paying represents good value, not just look for a low price, as you may well be the aircraft’s final owner.
    Bombardier Challenger CL-601-3A

    Considering that 20.8% of the active fleet is listed for sale (26 aircraft), and the model’s ETP Ratio equates to a Maintenance Exposure figure nearly twice the asset’s value, the only surprise is that the Challenger 601-3A is not headlining April’s ‘Most Deteriorated’ list.
    No aircraft transacted in April, but two more units entered the inventory. The model earned its position on this list through a $186k Maintenance Exposure increase along with a marginal Ask Price decrease. While these aircraft can be acquired at a low price, buyers ought to be prepared to own a disposable asset.
    Beechcraft King Air 300

    The 11 assets listed for sale represent only 5.5% of the active fleet, and with an ETP Ratio of 52.5%, many of the listed units are infinitely marketable (although no transactions were recorded during April). One aircraft was withdrawn from the for-sale pool while another joined the inventory.
    This aircraft has a well-deserved following, and while ‘technically’ on the ‘Most Deteriorated’ list due to a Maintenance Exposure increase exceeding $132k along with a price decrease, sellers should have little trouble locating willing buyers.
    Bombardier Learjet 45XR

    With an ETP Ratio averaging 35.6%, the model’s ‘technical’ deterioration and appearance on this list should not impede the opportunities available for sellers.
    Two aircraft transacted in April, and the nine current inventory units represent a very manageable 4.4% of the active fleet. The two sales and one addition to the fleet mix led to a Maintenance Exposure increase approaching $197k, and a substantive price decrease, to earn the model a spot on this list.
    Bombardier Learjet 45

    The story is only slightly less favorable for the Learjet 45, as 10.7% of the active fleet is listed for sale (nine units) and its ETP Ratio is pushing 64% (due to a Maintenance Exposure increase approaching $199k and a slight Ask Price decrease).
    There were no Learjet 45 transactions in April, but one aircraft was withdrawn from inventory proving, yet again, how much statistics can move when dealing with a small group.
    The Seller’s Challenge

    It is important to understand that the ETP Ratio has more to do with buyer and seller dynamics than it does with either the asset’s accrued maintenance or its price. For any aircraft, maintenance can accrue only so far before work must be completed.
    But as an aircraft’s value decreases, there will come a point when the accrued maintenance figure equates to more than 40% of the aircraft’s ask price. When a prospective buyer adjusts their offer to address this accrued maintenance, the figure is all-too-often considered unacceptable to the seller and a deal is not reached.
    It is not until an aircraft undergoes some major maintenance that a seller is sufficiently motivated to accept a lower figure, or a buyer is willing to pay a higher price and the aircraft transacts, ultimately.
    A wise seller needs to consider the potential marketability impact early maintenance might have on their aircraft, as well as its enrollment on an Hourly Cost Maintenance Program where more than half of their model’s in-service fleet is enrolled on HCMP.
    Sellers also need to carefully weigh any offer from a prospective buyer against the loss in value of their aircraft for sale as the asset spends more days on the market awaiting a better offer while simultaneously accruing a higher maintenance figure.

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    Tony Kioussis

    Tony Kioussis

    Editor, Aircraft Value & Maintenance Analysis

    As President, Asset Insight, Tony provides valuations, audits, analytics and consulting services, and a uniform methodology for grading an aircraft’s maintenance condition.

    Asset Insight is owned by JETNET LLC, and has devised a uniform methodology for grading an aircraft’s maintenance condition allowing it to provide timely current and residual aircraft values, projected maintenance costs, and future marketability information.

    Previously Tony worked with GE Capital’s Corporate Aircraft Finance group; Jet Aviation; and JSSI, developing the ‘Tip-to-Tail’ airframe maintenance program.



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