Used Aircraft Maintenance & Marketability Analysis – June 2022

Asset Insight’s tracked fleet inventory for sale increased for the third consecutive month as Q2 came to a close, possibly signaling a trend. While Large and Mid-Size Jets were the only groups to post availability increases, June’s 4.9% rise (37 units), along with certain other data points, may indicate the return of traditional aircraft buyers.

Total inventory increased 13.3% for Q2, and 10.5% Year-to-Date (YTD), equating to a 45.4% decrease Year-over-Year (YoY). In fact, listings remain 52.9% below the June 2020 peak.

Compared with April’s 12-month best of 5.347 on Asset Insight’s scale of -2.5 (low) to 10 (high), the listed fleet’s Quality Rating improved 0.1% over May’s 5.303 figure to 5.310 in June. The fleet remained within the ‘Excellent’ Rating range, and reflected a 0.5% improvement YoY.

June’s Pre-Owned Aircraft Value Trends

The average Ask Price for the tracked fleet increased 12.3% in June, ensuring a 13.2% increase in Q2, 26.5% YoY, and 57.0% YTD. While transactions for young, low-time units are still closing at higher values, the volume of ‘off market’ sales is decreasing, partially evidenced by the higher number of listed aircraft.

By category, the Ask Price changes for tracked models were as follows…

• Large Jets: Increased 5.7% in June, but were actually 4.1% lower in Q2. Compared to last year, the figure was up 38.5%, and was up 28.5% YTD.
• Mid-Size Jets: The group posted a 7.8% increase in June that equated to an all-time high value. It was also 36.2% higher than in Q1, up 66% YoY, and 125% higher YTD.
• Light Jets: Decreased 1.2% following May’s 9.3% increase (a number that set an all-time high value). However, the figure was 4% higher for Q2, 48.5% YoY, and 71.4% YTD.
• Turboprops: Rose 5.9% (a 12-month high) during June, 11.8% during Q2, 14% YoY, and 19.2% YTD.

June’s Fleet for Sale Trends

Availability for the tracked models increased to 3.5% of the active fleet in June, compared to 3.1% at the end of Q1. Demand remained strong at 4.66 on Asset Insight’s scale of zero (no demand) to five (maximum possible demand), but has dipped since Q1 (4.68). The fact that no group posted an increase while demand for all jet groups decreased may be signaling a softening in the first-time buyer frenzy.

Quarterly sales increased to 523 during Q2 compared to 416 in Q1, but these were down from 539 during Q2 2021. YTD, sales are down from 962 in H1 2021 to 939 in H2 2022.

Average Days on the Market decreased to 301, the lowest figure posted during the past four years. However, one needs to remember that older listed aircraft with a high ETP Ratio continue to linger, as evidenced by the 156% Days on Market (DoM) differential (see ‘June’s ETP Ratio Trend’ section).

Overall, the market’s buoyant. While some data may be suggesting slower growth ahead, that’s to be expected, considering the pace of recent activity.

• Large Jets: Asset Insight recorded 140 Large Jet transactions during Q2 for its 43-model tracked fleet, compared to 120 during Q2 2021.
  
  Availability increased by 25 units in June to 3.3% of the active fleet; 33 units during Q2, and three units YTD. The figures still represent an availability decrease of 50% YoY, and a 54.4% drop since the June 2020 peak. Demand continued to be strong during Q2 at 4.82, although that was down slightly from 4.87 in Q1.
  
  The group’s Quality Rating decreased 1% during June, 5% for Q2, and 0.5% YoY – but June’s 5.546 left the group in ‘Outstanding’ territory.
  
  
• Mid-Size Jets: 158 transactions were identified during Q2, exactly the same as in Q2 2021.
  
  Availability for the 45-model tracked Mid-Size Jet fleet rose to 205 assets during June (3.8% of the active fleet), an increase of 13.3% (24 units), leaving inventory up 15.2% for Q2, but 11.3% lower YTD, 46.6% lower YoY, and 59% below the June 2020 peak. Demand remained high at 4.57, just below the 4.58 figure posted during Q1.
  
  The group’s Quality Rating, 5.207, was better than the 12-month average, and kept Mid-Size Jets within ‘Very Good’ territory. It also reflected a 1.3% improvement for the month and 1.7% for Q2, but the figure was 2.2% worse YoY.
  
  
• Light Jets: Demand for Light Jets decreased slightly in Q2, dropping to 4.50 compared to Q1’s 4.53.
  
  Listed aircraft for the 29-model tracked Light Jet fleet decreased by 2.3% (six units) totaling 253 assets (4.2% of the active fleet). While inventory is down 5.2% YTD, it is 12.4% higher for Q2. Still, there are 36.4% fewer aircraft available compared to June 2022, and 53.4% less than the June 2020 peak.
  
  Transactions were down to 130 in Q2 2022, compared to 159 in Q2 2021. The Quality Rating worsened 1.6% to 5.264 for June, but was 0.9% higher in Q2, improved 3.9% YoY, and kept the group within the ‘Excellent’ range.
  
  
• Turboprops: Demand remained at 4.75 for Turboprops. Availability decreased 3.6% (six units) in June leaving listings at 162 (3% of the active fleet), a figure 25.7% lower YTD, 3.2% higher for the quarter, 50.3% lower YoY, and 38.2% lower since the June 2020 peak.
  
  At 95 units, sales for the quarter were below the 102 transacting during Q2 2021. Meanwhile, Quality Rating set a 12-month best figure in June that, at 5.222, kept the group in ‘Very Good’ territory through a 1.9% increase for the month, 3.3% for Q2, and 0.7% YoY.

June’s Maintenance Exposure Trends

The cost of embedded/accrued maintenance, what Asset Insight refers to as Maintenance Exposure, worsened/increased 1.6% in June to a figure that was also 3.7% higher YoY. The increase signifies that upcoming maintenance events will be more expensive to complete. By group, the Maintenance Exposure figures were as follows…

• Large Jets: Buyer preference for assets with higher maintenance status forced the figure to take an unhealthy turn for the remaining listings, rising/worsening 3.5% for June, and 2.7% YoY. But the change reflected a slight improvement/decrease from Q1.
• Mid-Size Jets: Improved/decreased 6.5% for June, and 6% for Q2, but Maintenance Exposure was nearly 7% higher YoY.
• Light Jets: Rose 8.5% to post the group’s 12-month worst figure, which was also 13.1% higher than Q1 and 2.3% worse YoY.
• Turboprops: Decreased 0.8% during June, 5.6% during Q2, and 3.4% YoY.

June’s ETP Ratio Trend

After posting an all-time high/worst 82.1% value to start off the year, increasing Ask Price figures helped the ETP Ratio post a 12-month best/low figure in June, and all but Light Jets experienced an improvement.

For those new to our market overview, the ETP Ratio is a useful indicator of an aircraft’s marketability. It is calculated by dividing the asset's Maintenance Exposure (the financial liability accrued with respect to future scheduled maintenance events) by its Ask 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 Q2, assets whose ETP Ratio was 40% or higher were listed for sale nearly 156% longer (on average) than aircraft whose Ratio was below 40% (183 versus 469 Days on Market).

In June, more than 39% of the tracked models, and over 42% of all listed aircraft, posted an ETP Ratio above the 40% excessive mark, with each group faring as follows…

• Large Jets: Scored the lowest ETP Ratio, and the figure remained unchanged from May at 34.1% (the group’s 12-month low/best figure), representing an 11% improvement/decrease for the quarter, 44.2% YoY, and 48.1% YTD. The Ratio also represented the fourth consecutive month the group has been below the 40% ‘excessive exposure’ point.
• Turboprops: The group’s Maintenance Exposure decrease and Ask Price increase combined to lower the ETP Ratio to a 12-month best 36.4% (the group’s second consecutive month below the 40% level). That also equated to a 17.9% improvement for the quarter, 13.8% YoY, and 14.6% YTD.
• Mid-Size Jets: Favorable Ask Price and Maintenance Exposure figures led to the ETP Ratio improving to 56%, a 12-month low/best figure that was also 19% lower than last quarter, 18.6% lower YoY, and 33% lower YTD.
• Light Jets: The group’s ETP Ratio rose to 88.5% from May’s 88%, but the figure reflected a 2.2% improvement for Q2, 22% YoY, and 25% YTD.

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 June 2022…

Most Improved Models

Only half of June’s six ‘Most Improved’ models experienced a Maintenance Exposure decrease, with the Cessna Citation I, Hawker Beechjet 400, and Piaggio P-180 each posting an increase.

The Gulfstream GIV-SP (operated under MSG-3 maintenance guidelines) and the Bombardier Challenger 601-3A posted no Ask Price change. The remaining four models registered the following price increases:

• Cessna Citation I: +$150,000
• Bombardier Global Express XRS: +$3,502,500
• Hawker Beechjet 400: +$142,500
• Piaggio P-180: +$242,083

Cessna Citation I

For its first appearance on one of these reports, the Cessna Citation I captured first place on June’s ‘Most Improved’ list, following a 50% increase in the number of listings during the month.

The model registered no sales in June, but the addition of a second unit to the listed fleet raised the average Ask Price by $150k, overshadowing a Maintenance Exposure increase exceeding $16k.

Unfortunately for the two sellers, the addition of a second unit priced two-thirds higher than the one aircraft listed in May does not suddenly make the model more desirable, especially when the ETP Ratio stands at 119.4% (meaning that embedded maintenance is more than the average unit’s Ask Price). However, the fact that only two aircraft are listed gives sellers a fighting chance, even though the pair represent 10% of the model’s limited-production active fleet.

Gulfstream GIV-SP (MSG3)

It has been a while since we last saw the Gulfstream GIV-SP (operated under MSG3 maintenance guidelines) on one of these reports, but the model is no stranger to these lists, making its sixteenth appearance in June.

It captured this position without a single aircraft transacting in June, but two unpriced additions to the listed fleet lowered Maintenance Exposure nearly $685k to earn the industry workhorse second position on June’s ‘Most Improved’ grouping.

Only three assets are listed, representing only 3.3% of the active fleet, and with an ETP Ratio just under 70%, any seller whose aircraft’s engines are enrolled on an Hourly Cost Maintenance Program (HCMP) should have a decent opportunity to structure a value-based transaction in the current environment.

Bombardier Challenger 601-3A

During the past twelve months, the Bombardier Challenger 601-3A has appeared on these reports seven times, see-sawing between the two groups during each of the last four months.

It captured third spot on the ‘Most Improved’ list in June after placing dead-last among the ‘Most Deteriorated’ assets in May. This came about after a single sale and one addition to the listed fleet. The model’s average Ask Price was unchanged, but Maintenance Exposure was lowered by nearly $291k.

Sporting an ETP Ratio greater than 151% may not provide much marketing support to the two owners selling their aircraft, though. With that said, in the current environment, you never know how badly someone wishes to own a large cabin aircraft…

Bombardier Global Express XRS

With its first appearance on one of these reports, the Bombardier Global Express XRS earned fourth place on June’s ‘Most Improved’ list after one of the two aircraft posting an Ask Price (which was one-third lower than the other aircraft’s Price) was withdrawn (along with a second unit), the Ask Price for the remaining priced unit increased by $1 million, and one unpriced unit transacted.

All that might be confusing, so let’s simplify:

June’s changes to the listed fleet decreased Maintenance Exposure by more than $822k, increased the model’s Ask Price over $3.5m, and the four units now listed for sale amount to only 1.8% of the active fleet. Tag on to that an ETP Ratio of 27%, and sellers hold pretty much all of the cards for this model.

Hawker Beechjet 400

No aircraft changed owners in June, but the Hawker Beechjet 400 took fifth position on the ‘Most Improved’ list following one withdrawal from, and one addition to, the listed fleet.

The change in inventory mix actually increased Maintenance Exposure by nearly $28k, but an Ask Price improvement of $142.5k overcame that issue.

Only four jets were listed for sale when June ended, but that represented 16.4% of the active fleet, making life challenging for many sellers – especially when their aircraft model’s ETP Ratio averages 74%.

Piaggio Avanti P-180

The final ‘Most Improved’ slot was captured by a model that registered no sales, inventory withdrawals, or additions during June. In fact, maintenance event changes increased Maintenance Exposure for the Piaggio Avanti P-180. However, the seller of a previously unpriced listing posted an Ask Price that was substantially higher than that of the other three priced units, thereby increasing the average Ask Price by $242k.

While that was sufficient to earn the model its twelfth appearance on one of our reports, the ETP Ratio for the six listed units (7.5% of the active fleet) averaged nearly 69%.

Most Deteriorated Models

Of the six ‘Most Deteriorated’ models, the Cessna Citation ISP posted a Maintenance Exposure decrease. The Gulfstream GIV-SP experienced no change in Ask Price, while the Cessna Citation Bravo posted an Ask Price increase. The remaining four models averaged the following Ask Price decreases:

• Socata TBM 700A: -$52,917
• Cessna Citation ISP: -$82,063
• Cessna Citation V Ultra: -$297,500
• Bombardier Learjet 55: -$24,167

Gulfstream GIV-SP

Leading off our ‘Most Deteriorated’ list for June is a model that’s participated in our reports a dozen times – two-thirds of those being appearances on this side of the ledger. The Gulfstream GIV-SP arrived on the Most Deteriorated grouping thanks to a Maintenance Exposure increase approaching $459k, and no change to the model’s single posted Ask Price.

Whether or not those limited facts make the model’s ETP Ratio (which stood at nearly 94% in June) truly indicative of its marketability is questionable. However, there are only three units listed for sale (1.5% of the active fleet) and, considering the model’s strong industry following, sellers whose asset is enrolled on HCMP should have a distinct advantage over unenrolled units.

Socata TBM 700A

Three Socata TBM 700A aircraft offering higher maintenance quality were sold in June, raising the model’s Maintenance Exposure for the remaining inventory by more than $76k and lowering the average Ask Price by nearly $53k. That was more than enough impetus to earn the model its spot on this list.

Six units were listed for sale (6.3% of the active fleet) when June ended, and the model’s ETP Ratio stood at 60.3%. That’s not exactly stellar, and is a very good reason why the Socata TBM 700A fell to this position after placing third on May’s ‘Most Improved’ grouping.

Cessna Citation ISP

Two aircraft trades were posted in June, one Cessna Citation ISP was withdrawn from inventory, and four more units were added to leave a pool of 30 assets listed for sale (11.4% of an aging fleet).

The model’s 138.7% ETP Ratio leaves the pricing advantage completely up to buyers, and was perhaps a major reason why Ask Price decreased by more than $82k during the month. The surprising figure was the Maintenance Exposure, which decreased more than $42k – but that did little to help the model’s overall marketability.

Cessna Citation V Ultra

Even though it placed lower on this list than its older family member, the news is not nearly as bad for the Cessna Citation V Ultra. Sporting an ETP Ratio of only 31.6%, thanks to a Maintenance Exposure increase exceeding $228k, and an Ask Price decrease of $297.5k, the 12 listed units equate to just 4.6% of the active fleet.

One unit transacted in June, while four were added to the inventory to create these statistics, but sellers are truly not disadvantaged by these facts.

Bombardier Learjet 55

This model has featured in 14 of our reports, with half occurring during the past 12 months. The Bombardier Learjet 55 tumbled into this spot, after occupying the fourth position on May’s ‘Most Improved’ list, following an Ask Price drop exceeding $24k. This was compounded by a Maintenance Exposure increase nearing $76k.

Interestingly, the model’s decrease in marketability was created by a sale occurring in May, after Asset Insight closed out that month. There were no trades in June or any other changes to the available inventory, and the five listed aircraft equated to only 5.5% of the active fleet.

On the other hand, the model’s 168.7% ETP Ratio equates to a huge pricing hurdle for sellers.

Cessna Citation Bravo

The last time this model worked its way onto one of our reports was in November of 2019. However, finding June’s ‘Most Deteriorated’ cellar with aplomb was the Cessna Citation Bravo through a Maintenance Exposure increase approaching – wait for it – $1.3m that ran roughshod over a $304k Ask Price increase.

Two aircraft traded in June, two were withdrawn from inventory, two were added to the ‘for sale’ pool and, when the statistics were analyzed, the eleven listed units (3.5% of the active fleet) averaged an ETP Ratio of 154.4%.

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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