Used Aircraft Maintenance & Marketability Analysis – April 2021

Overall availability continued to shrink as we entered Q2, and Asset Insight’s April 30, 2021 market analysis covering 134 fixed-wing models accounted for 1,633 aircraft, equating to a year-to-date (YTD) decrease of 14.6% for the tracked fleet.

The pace of transactions continued to be brisk, and decreased the inventory group’s Quality Rating for the third consecutive month, this time by 0.3% to 5.296.

That figure kept the fleet within the ‘Excellent’ range, on Asset Insight’s scale of -2.5 to 10, but the Rating decrease signifies that assets in the latest fleet mix will have to complete a few more near-term maintenance events.

April’s Aircraft Value Trends

The tracked fleet’s average Ask Price remained virtually unchanged in April, maintaining its 1.5% contraction YTD, while decreasing 4.2% year-over-year (YoY).

• Large Jets were the only group to post an increase – a very respectable 3.6%.
• Mid-Size Jets lost 9.3% of their Ask Price to post a 12-month low figure.
• Light Jet prices decreased another 5.6%, the group’s seventh consecutive monthly loss (a drop of 13.6% YTD and 18% YoY), resulting in a record low figure, and the first time the group’s average Ask Price was below that of Turboprops.
• Turboprop Ask Prices dropped 0.8%, but are still up 0.2% YTD.

April’s Fleet for Sale Trends

Asset Insight’s tracked fleet has now posted an inventory decrease for ten consecutive months. In April, the 1.5% inventory reduction equated to a decrease of 28 units, bringing the year-to-date figure down by 14.6% (-279 units). By aircraft group, results were mixed…

• Large Jets: Inventory increased 0.8% (three units) but is still down 9.3% YTD (-40 aircraft).
• Mid-Size Jets: Recorded a 2.3% (-12 units) inventory decrease reducing YTD availability by 16.1% (-84 aircraft).
• Light Jets: Inventory decreased 4.5% (-25 units), decreasing YTD availability by 19.7% (-109 aircraft).
• Turboprops: Posted their first inventory increase of 2021 (1.5% - six units), but the figure was below the group’s December 2020 inventory level by 11.3% (-46 aircraft).

April’s Maintenance Exposure Trends

Defined as the aircraft’s accumulated/embedded maintenance expense, Maintenance Exposure improved (decreased) by 0.4% to $1.485m for the month.

What does this mean for inventory aircraft? While the fleet will, on average, experience more near-term maintenance events by virtue of the lower Quality Rating, the overall cost to complete those events is forecast to be a bit lower. By individual group…

• Large Jets: Improved/decreased 1.0%, although the figure is only slightly better than the 12-month worst figure the group posted in March, and 4.4% higher/worse YoY.
• Mid-Size Jets: Decreased 2.0% for the month to a 12-month low/best value, while also improving 1.0% YoY.
• Light Jets: Maintenance Exposure improved by 1.0% in April, but the group’s figure is 14.8% higher/worse YoY.
• Turboprops: Increased/worsened by 6.7% to just below the 12-month high/worst value. However, Maintenance Exposure remained 0.6% lower YoY.

April’s ETP Ratio Trend

For the second consecutive month, our inventory fleet’s ETP Ratio increased/worsened to an all-time high, climbing from 74.4% to 75%.

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 the Market increases, in many cases by more than 30%.

During Q1 2021, aircraft whose ETP Ratio was 40% or greater were listed for sale 69% longer than assets with an ETP Ratio below 40% (285 days versus 482 days). For the month of April, each group fared as follows…

• Turboprops: For the seventeenth consecutive month, Turboprops posted the lowest/best ETP Ratio. At 44.5%, the figure climbed further above the 40% demarcation Ratio, after posting a figure below 40% from December through February.
• Large Jets: With a figure that was half-way between the group’s 12-month best, and 12-month average figures, Large Jets came in second with a Ratio of 61.1% – slightly better/lower than March’s 61.3%.
• Mid-Size Jets: The group’s ETP Ratio rose/worsened to 72.2%, from March’s 70.5%, representing a figure half-way between the 12-month average and worst figures.
• Light Jets: The group demonstrated the effect of its record low Ask Price by establishing a third consecutive record-high (worst ever) figure, at 113.8% versus March’s 113.6%.

Excluding models whose ETP Ratio was over 200% during one of the previous two months (considered outliers), following is a breakdown of the business jet and turboprop models that fared the best and worst during April 2021.

Most Improved Models

All six ‘Most Improved’ models for April posted Maintenance Exposure decreases (improvements). The Gulfstream G100, Cessna Citation ISP, and Dassault Falcon 2000 recorded Ask Price decreases of $16,667, $21,816, and $116,696, respectively, while the Bombardier Learjet 55 had no Ask Price change.

The other two models posted the following price increases:

• Gulfstream G200: +$170,143
• Bombardier Learjet 60: +$93,451

Gulfstream G100

Making an impressive climb to the top position on April’s ‘Most Improved’ list is the Gulfstream G100, which placed next to last on March’s ‘Most Deteriorated’ group. The G100 did so with a Maintenance Exposure decrease exceeding $1m that easily overcame an Ask Price decrease approaching $17k.

Two units transacted in April, while one joined the ‘for sale’ fleet. The six, higher-quality assets comprising the remaining inventory equate to 28.6% of the active fleet.

While the G100’s ETP Ratio dropped dramatically, courtesy of the inventory mix change, the 107% average is not likely to provide many additional opportunities for sellers.

Gulfstream G200

Next on April’s Most Improved list is a model that fared only slightly better than the G100 in March, having placed fourth on the ‘Most Deteriorated’ list. The Gulfstream G200 earned its spot here with a Maintenance Exposure decrease exceeding $366k, along with an Ask Price increase exceeding $170k.

One unit transacted in April, but another joined the inventory, maintaining 19 assets available for sale. That represents only 8.0% of the active fleet, and with an ETP Ratio of 48.4%, any seller whose aircraft is enrolled on an Hourly Cost Maintenance Program (HCMP) should find value-based opportunities, especially considering the model’s market appeal.

Cessna Citation ISP

Not a stranger to either one of these two lists, the Cessna Citation ISP also climbed out of March’s ‘Most Deteriorated’ grouping, where it held second position. Unfortunately, the good news ends there, as no transactions were recorded last month.

While four aircraft were withdrawn from inventory, an equal number joined the competition, leaving 52 assets (19.2% of the active fleet) to vie for buyer interest. With that much selection, and an ETP Ratio approaching 142%, sellers have little, if any, bargaining room.

Bombardier Learjet 60

The final model to move from March’s ‘Most Deteriorated’ list to April’s ‘Most Improved’ is the Bombardier Learjet 60. Two transactions, one withdrawal, and three additions to inventory created a pool of 28 aircraft, or 9.8% of the active fleet.

On the other hand, a Maintenance Exposure decrease approaching $86k and an Ask Price increase exceeding $93k were only able to lower the ETP Ratio to 119.4%.

For any seller whose aircraft is not enrolled on an HCMP, our advice is to carefully consider any, and all offers.

Bombardier Learjet 55

Another frequent flyer among these two lists, the Bombardier Learjet 55 managed to find its way onto the ‘Most Improved’ table in April, by virtue of a Maintenance Exposure decrease exceeding $90k, along with no change in Ask Price.

The 147.2% ETP Ratio was actually created by four changes to inventory – but only one was a sale. The three additions raised availability to 13 units (13.7% of the active fleet), a figure likely to lower the model’s average Ask Price if any sellers are desperate to dispose of their aircraft.

Dassault Falcon 2000

The Dassault Falcon 2000 arrived on April’s ‘Most Improved’ list through higher quality assets joining the inventory fleet, thereby lowering Maintenance Exposure by over $619k. The resulting 56.5% ETP Ratio could have decreased further, had Ask Price not fallen by nearly $177k.

The 21 aircraft now listed for sale (by virtue of one transaction, one withdrawal, and five additions), represent 9.5% of the active fleet, providing sufficient selection for buyers, and negotiating room for sellers.

Most Deteriorated Models

All six ‘Most Deteriorated’ models posted a Maintenance Exposure increase in April. The Beechcraft King Air 350 (Post-2000 models), Cessna Citation VII, and Beechcraft King Air C90 posted Ask Price increases of $15,725, $3,660, and $4,080, respectively. The remaining three models experienced the following price decreases:

• Bombardier Challenger 601-3R: -$62,083
• Dassault Falcon 50: -$100,000
• Bombardier Learjet 45: -$50,000

Beechcraft King Air 350 (Post-2000)

One Beechcraft King Air 350 (post-2000 models) sold in April, another one was withdrawn, and three were added to raise Maintenance Exposure by over $210k and help the model secure its place on April’s ‘Most Deteriorated’ list, even with an Ask Price increase approaching $16k.

However, the news is definitely not bad for sellers, as the model’s ETP Ratio is only 33.3% and the 18 aircraft comprising the current inventory equate to only 6.3% of the active fleet.

Cessna Citation VII

Sellers of the Cessna Citation VII are a little less fortunate, as this model’s ETP Ratio is 80.6%, and the 12 inventory aircraft account for 10.6% of the active fleet. The model achieved its April status through one sale, one withdrawal, and one addition, raising Maintenance Exposure by nearly $110k (even though Ask Price increased by nearly $4k).

With all aircraft now more than twenty years of age, sellers need to be realistic about their asset’s value.

Beechcraft King Air C90

With 35 Beechcraft King Air C90s listed for sale (9.6% of the active fleet), there is ample selection for buyers to consider. For sellers, the model’s 117.6% ETP Ratio provides ample justification to consider whatever offer buyers make.

The model attained its post on April’s ‘Most Deteriorated’ list through a Maintenance Exposure increase approaching $51k that overcame a nominal $4k Ask Price increase. This is a fine airplane, especially for certain operating environments. Keep in mind, however, that the youngest one is 39 years old.

Bombardier Challenger 601-3R

After occupying the fourth position on March’s ‘Most Improved’ list, the Bombardier Challenger 601-3R fell to this spot through a Maintenance Exposure increase exceeding $304k and an Ask Price decrease exceeding $62k.

There were no transactions noted during the month of April, but there was an addition to the inventory fleet to generate the ETP Ratio change that, at 131.9%, will not help sellers. To add insult to injury, even though only eight aircraft are listed for sale, they represent 14.3% of an aging fleet.

Dassault Falcon 50

In next to last position is a model whose operating characteristics managed to generate two sales in April. While four Dassault Falcon 50s joined the inventory fleet, the 17 units listed for sale represent only 9.1% of the active fleet.

The main hurdle for sellers is the model’s near-107% ETP Ratio, perpetuated by a Maintenance Exposure increase exceeding $121k and a price decrease of $100k. Keeping in mind that the first production aircraft left the factory over 40 years ago, some sellers may actually be their unit’s final owner.

Bombardier Learjet 45

Capturing the ‘Most Deteriorated’ spot for April is a model that actually posted three sales during the month, as well as one aircraft withdrawal from inventory.

The problem is, the Bombardier Learjet 45 jets leaving inventory were of a higher Quality Rating, and that ended up increasing the available pool’s Maintenance Exposure by nearly $143k – while concurrently causing the Ask Price to drop $50k.

The 14 available units only equate to 9.5% of the active fleet, however, with an ETP Ratio of 108.5%, any seller who did not enroll their aircraft on HCMP is likely to regret that decision.

The Seller’s Challenge

It is important to understand that an aircraft’s 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 HCMP where more than half of their model’s in-service fleet is enrolled on one.

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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