Used Aircraft Maintenance & Marketability Analysis – December 2021

Since peaking in June 2020, inventory has now decreased 62.5%. Sales for the tracked fleet during Q4 2021 were lower than those posted during Q4 2020 (587 vs. 624 units). However, the cause was not a lack of demand, but a lack of availability – especially in young, low-time aircraft.

The 134-model fleet reviewed by Asset Insight decreased another 6.6% in December (126 fewer units), 25.7% during Q4 2021, and 53.8% Year-over-Year (YoY), or 1,028 units, a figure that exceeded 2020’s inventory fleet decrease of 902 units.

With buyer preference centered on the best available aircraft, the Quality Rating decreased 0.8% in December to 5.146, the tracked fleet’s third consecutive 12-month low, equating to a decrease of 1.9% during Q4, and 3.8% YoY.

Available assets remained within ‘Very Good’ territory, but potential buyers should note that most listed aircraft are facing more near-term maintenance events.

December’s Pre-Owned Aircraft Value Trends

To understand current aircraft values, one must differentiate between Ask Prices and Transaction Values. Average Ask Price for the meager, and heavily picked-over, tracked fleet decreased 18.7% during December, 17.5% during Q4, and 18.9% YoY, resulting in a record low figure.

On the other hand, younger, lower-time inventory has moved quickly, often without a public listing. And sometimes the Transaction Value has exceeded the seller’s expectation, primarily due to buyer demand. Therefore, to assume that values have decreased for desirable aircraft would be erroneous.

By individual group, the Ask Price changes were as follows…

• Large Jets: Ask Price decreased 6.5% for the month, but was still up 14.5% for Q4, and 11.5% for the calendar year.
• Mid-Size Jets: Set a new record-low Ask Price, tumbling 20.1% in December, 33.3% during Q4, and 30.4% for the year.
• Light Jets: The listed Light Jet fleet’s Ask Price average continued to be lower than for Turboprops, posting a 12-month low by decreasing 13.6% in December, 12.6% for Q4, and 24.3% YoY.
• Turboprops: Ask Price decreased 0.6% for December (to a figure just above the group’s 12-month low), 0.1% during Q4, and remained fairly consistent, YoY, by decreasing a nominal 0.3%.

December’s Fleet for Sale Trends

Asset Insight’s tracked fleet posted a new record-low inventory figure to end 2021 at 4.1%, with availability for the overall active aircraft fleet recording an even lower percentage. By way of comparison, inventory rested at 10.1% of the active fleet at Year-End 2020. Availability has now decreased every month since peaking during June 2020.

Overall demand ended the year at a record-high 4.40, on Asset Insight’s scale of 0.00 (lowest) to 5.00 (highest). With new aircraft positions not available for up to 24 months, production figures unlikely to increase significantly during H1 2022, and an inventory comprised of too many undesirable assets, private aviation truly finds itself in uncharted territory.

• Large Jets: Registering the highest demand among the four groups, 4.65, and the lowest availability (3.5% of the active fleet), Large Jets posted 172 transactions during Q4 2021. For December, listings dipped 25% (56 units), equating to a 40.8% decrease during Q4, and 61% (263 units) for the calendar year. The group’s Quality Rating decreased 2.3% to post a 12-month low figure that was also 0.5% lower for the quarter and 4.5% for the year. At 5.426, the Quality Rating decrease dropped Large Jets from the ‘Outstanding’ to ‘Excellent’ range.
• Mid-Size Jets: Q4 2021 produced 140 transactions. Overall, Mid-Size Jets saw a 5.2% availability decrease for the month (27 units), 22.5% for Q4 (69 units); and 55.7% YoY (290 units). The number of sales came from an all-time high demand of 4.32, and lowered availability to 4.9%, versus 10.7% one year ago. The fleet mix change resulted in the Quality Rating falling to a 12-month worst figure. At 5.012, it decreased 1.9% for December, 4.6% for Q4, and 6.5% YoY, but remained within the ‘Very Good’ range.
• Light Jets: With demand at a record-high 4.16, 155 transactions closed during Q4 for Asset Insight’s 29-model tracked fleet, resulting in a 3.1% inventory decrease during December (17 units); 16.3% during Q4 (52 units); and 51.7% YoY (a 286-unit decrease). The group’s availability ended 2021 at 4.0% of the active fleet, compared to 9.6% in 2020. The latest inventory fleet mix led to a 1.0% lower (worse) Quality Rating, that was also 3.8% lower for Q4, and 2.4% lower YoY.  However, at 5.025, the Rating was able to keep the group within the ‘Very Good’ range.
• Turboprops: With 120 transactions compiled during the quarter, the group’s 17 tracked models represent 7.1 trades per model, the highest ratio among the four groups. Turboprops also registered the second-highest demand rate at 4.45, and the statistics led to a 6.4% inventory decrease for December (26 units), along with a drop of 24.6% for Q4 (71 units) and 46.4% YoY (189 units). The latest fleet mix improved the group’s Quality Rating by a nominal 0.2% during December, and 1.4% during Q4, but the figure was 2.4% lower (worse) YoY.

December’s Maintenance Exposure Trends

The listed fleet’s Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) increased (worsened) a substantive 7% in December 2021, 2.7% during Q4, and 6% YoY.

Accordingly, buyers should expect maintenance events for the limited inventory to cost more to complete. By individual group, the Maintenance Exposure figures were as follows…

• Large Jets: Maintenance Exposure improved (decreased) by 7.0% in Q4 2021, but was still 1.6% higher (worse) than Q3 2021’s figure, and 8.9% higher YoY.
• Mid-Size Jets: Maintenance Exposure increased 3.1% for December, 3.6% in Q4 2021, and 3.1% YoY.
• Light Jets: Maintenance Exposure worsened (increased) 2.1% during December 2021, but actually improved (decreased) a nominal 0.1% during Q4, and 7.7% YoY.
• Turboprops: The group’s Exposure increased (worsened) 0.5% for December, 0.6% for Q4, and 7.85% YoY.

December’s ETP Ratio Trend

Twenty-twenty-one closed with the ETP Ratio at 81%, a record high figure but unsurprising, considering the 12-month high Maintenance Exposure and record low Ask Price figures. The current ETP Ratio statistically evidences the difficulty sellers are encountering in remarketing older aircraft, and the reason why the listed fleet’s Days on Market increased 11% during Q4 2021.

For anyone not familiar with the ETP Ratio, the statistic is a useful indicator of an aircraft’s marketability. It is computed by dividing the asset's Maintenance Exposure (the financial liability accrued with respect to future scheduled maintenance events) by its Ask Price.

As the ETP Ratio decreases, the asset's value increases in relation to its price. ‘Days on Market’ (DoM) analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s time on the market increases, usually by more than 30%.

During Q4 2021, assets whose ETP Ratio was 40% or higher were listed for sale more than 59% longer (on average) than aircraft whose Ratio was below 40% (340 versus 541 DoM). Additionally, nearly 59% of our tracked models and over 64% of all aircraft posted an ETP Ratio above the 40% excessive mark. As 2021 closed, each group fared as follows:

• Turboprops: At 42.7%, the ETP Ratio continued to hover just above the 40% excessive point and the group posted the best (lowest) figure for the past 24 months.
• Large Jets: Changes to the listed fleet mix negatively impacted the ETP Ratio, increasing the figure to 65.7%, a number half-way between the group’s 12-month average and high figures.
• Mid-Size Jets: The ETP Ratio rose to 83.6%, the group’s 12-month high (worst) figure.
• Light Jets: Increase to 118%, which was 10.5% points higher than December 2020’s figure.

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

Most Improved Models

Five of the six ‘Most Improved’ models in December 2021 experienced a Maintenance Exposure decrease (improvement). The Hawker 800A was the lone exception. All six models posted an Ask Price increase, as follows:

• Cessna Citation VII: +$3,250
• Beechcraft King Air C90: +$24,167
• Hawker 800A: +$208,333
• Bombardier Challenger 601-3A: +$83,750
• Dassault Falcon 50: +$100,000
• Hawker 4000: +$277,500

Cessna Citation VII

The Cessna Citation VII earned top spot on December’s ‘Most Improved’ grouping through a Maintenance Exposure decrease that exceeded $117k, along with an Ask Price increase of a mere $3k. This is the model’s second appearance on this list, and its third mention in one of these reports.

One aircraft traded in December, and when a second was withdrawn from inventory it left seven assets listed for sale, or 6.2% of the active fleet. At 64.1%, the listed fleet’s ETP Ratio is not alarmingly high, providing sellers whose aircraft is enrolled on an Hourly Cost Maintenance Program (HCMP) a substantially lower HCMP-adjusted ETP Ratio that offers opportunity to structure a value-based transaction.

Beechcraft King Air C90

We captured a single aircraft trade in December 2021, and the 28 aircraft currently listed for sale equate to 7.9% of the Beechcraft King Air C90 active fleet.

This represents the model’s twelfth appearance on our monthly report, and its seventh in the ‘Most Improved’ group. This time, it earned its spot through a Maintenance Exposure decrease approaching $27k, along with an Ask Price increase exceeding $24k.

Alas, even though the model has a string following, an ETP Ratio approaching 94% will not make structuring value-based transactions easy for sellers.

Hawker 800A

Only six Hawker 800A assets were listed for sale as December came to a close (3.6% of the active fleet). One December trade was recorded, one addition joined the inventory, and one unit was withdrawn.

The latest fleet mix led to a Maintenance Exposure increase exceeding $168k, but an Ask Price decrease of more than $208k reduced the group’s ETP Ratio sufficiently, allowing it to join this month’s ‘Most Improved’ list.

As we have stated in previous reports, the model has quite an industry following. Nevertheless, with an ETP Ratio approaching 121% it could require “one heck of a deal” for a savvy buyer to acquire one of these aircraft.

Bombardier Challenger 601-3A

While dropping three levels, the Bombardier Challenger 601-3A managed to remain on the Most Improved list in December, following November’s top showing – but the new ETP Ratio of 138.9% will change very little for sellers.

One December sale, and one addition to the inventory kept listings at eight units (7% of the active fleet), reduced Maintenance Exposure by more than $34k, and increased the average Ask Price by nearly $84k. Whether or not anyone is willing to pay an average $1.9m for one of these assets remains to be seen…

Dassault Falcon 50

The Dassault Falcon 50 has found its way into our reports eight times in the past, and this is its third appearance on the ‘Most Improved’ list. One inventory unit traded in December, and the remaining 11 equate to 6% of the active fleet.

The model earned its spot through a minor Maintenance Exposure decrease of $9k, along with a price increase of $100k when one seller raised their Ask Price by 25%.

While an ETP Ratio approaching 92% may appear to make selling one of these assets quite a challenge, engine HCMP enrolment; need for the model’s operating performance; and limited available options could potentially affect sellers’ fortunes.

Hawker 4000

Making its first appearance in one of these reports is a model that, statistically, should have little trouble selling, considering its ETP Ratio stood at 33.1% when December closed. Having said that, none were sold that month, and while the five listings equate to only 7.4% of the active fleet, the Hawker 4000 is something of a niche aircraft thanks to its limited production run and composite structure.

The model earned the final spot on the ‘Most Improved’ list through a Maintenance Exposure decrease approaching $129k, along with an Ask Price boost approaching $278k. The price increase resulted from a second seller posting an Ask Price for their aircraft that was 15% higher than the only other priced asset on the market.

While the model’s cabin size is appealing, selling one of these aircraft will require catching the attention of a discerning buyer.

Most Deteriorated Models

All but one model on the ‘Most Deteriorated’ list (the Bombardier Challenger 604) posted a Maintenance Exposure increase, while all six models experienced the following Ask Price decreases:

• Hawker 800XP: -$233,750
• Cessna Citation III: -$57,133
• Beechcraft Premier 1A: -$349,667
• Bombardier Challenger 604: -$2,050,000
• Dassault Falcon 20-5: -$777,000
• Cessna Citation V 560: -$406,000

Hawker 800XP

The third of four Hawker/Beechcraft models on December’s report topped the ‘Most Deteriorated’ list. If the Hawker 800XP seems familiar on these reports, it’s probably because this is its eleventh appearance – and the fifth on the ‘Most Deteriorated’ list.

To earn its spot, three units traded in December, and the 12 jets comprising the current for-sale fleet amount to only 3.1% of the active fleet. Changes in the fleet mix increased Maintenance Exposure by over $37k while lowering the average Ask Price by nearly $234k to raise (worsen) the ETP Ratio from 58.4% to 68.8%.

With most of these aircraft carrying engine HCMP coverage, however, and the model’s strong industry following, the aircraft’s marketability is likely to be better than the existing ETP Ratio suggests.

Cessna Citation III

From fifth place on November’s ‘Most Improved’ list, the Cessna Citation III landed here in December through a Maintenance Exposure increase exceeding $20k, and an Ask Price decrease of more than $57k.

There are times when a statistic creates a conundrum, and that is the case with this model’s ETP Ratio: At 179.7%, one would anticipate few, if any, transactions. However, the current market resulted in four sales during December, and the eleven aircraft listed for sale represent only 6.7% of the active fleet.

Beechcraft Premier 1A

The Beechcraft Premier 1A has occupied a slot in this grouping for the past three months, improving one position in December.

Its Maintenance Exposure increased $43k, but what really solidified its position was an Ask Price decrease approaching $350k that occurred when the youngest inventory aircraft sold. Listed with an Ask Price approximately 94% higher than the average of all other aircraft displaying a price, the single unit’s departure from the listed fleet created the large price drop.

Eight aircraft, equating to 5.2% of the active fleet, remained available at the close of December 2021, following entry of two more assets to the inventory.

Bombardier Challenger 604

When the ETP Ratio averages 65.6%, sellers whose aircraft are under HCMP coverage usually have few challenges structuring value-based transactions. Such is the case with the Bombardier Challenger 604.

The model found its way onto this list when the unit with the highest listed price was sold and the next two highest priced aircraft were withdrawn from inventory, leaving only the lowest priced aircraft displaying an Ask Price. The $2.05m Ask Price decrease overrode a Maintenance Exposure improvement (decrease) exceeding $143k to earn the model its spot on this list, but the bad news stops there…

The seven aircraft left in inventory amounted to only 2.0% of the active fleet. Given the asset’s strong market interest, nothing here would appear to spell trouble for sellers.

Dassault Falcon 20-5

Appearing on this report five times, but on the ‘Most Deteriorated’ list for the first time, is the Dassault Falcon 20-5. No transactions were registered as December ended, but one substantially lower-priced unit entered the inventory to create a four-aircraft group that equated to 4.9% of the active fleet.

The new fleet mix increased Maintenance Exposure by over $232k, dropped the average Ask Price by $777k, and sealed the model’s fate raising the ETP Ratio to 109.6%

Cessna Citation V

Working very hard to earn its ‘Most Deteriorated’ slot this month was the Cessna Citation V. It achieved its dubious distinction through two sales (after November’s analysis had closed), plus three inventory additions during December.

The effect was a Maintenance Exposure increase approaching $22k, and an Ask Price decrease of $406k that raised the ETP Ratio to nearly 125%. If there’s one piece of good news for sellers, it’s probably the limited number of aircraft (nine units) occupying inventory, which account for only 3.6% of the active fleet.

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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