In this month’s Aircraft Comparative Analysis- we’ll provide information on a selection of 2005 pre-owned business jets in the $3.5-6.8 million range for the purpose of valuing the pre-owned Cessna Citation Sovereign.Back to Articles
In this month’s Aircraft Comparative Analysis- we’ll provide information on a selection of 2005 pre-owned business jets in the $3.5-6.8 million range for the purpose of valuing the pre-owned Cessna Citation Sovereign.
We’ll consider the productivity parameters - payload/range- speed and cabin size- and cover current and future market values. The field in this study includes the Hawker Beechcraft 800XP/800XPi.
The Cessna Citation Sovereign was first unveiled in 1998 at the NBAA Annual convention in Las Vegas- Nevada- as a high-performance jet to plug the gap between the Excel/XLS and Citation X. The first flight of the Sovereign took place in February 2002 with FAA certification awarded in June 2004. Customer deliveries began later that same year.
The Citation Sovereign is RVSM certified from the factory and is powered by two Pratt & Whitney PW306C engines with FADEC controls.
The Sovereign seats eight passengers in a typical cabin configuration- with a maximum high-density capacity of 12- in addition to the crew of two. It uses the Honeywell Primus Epic glass cockpit avionics suite- coupled with dual Honeywell FMZ2000 FMS units- and its claim to fame is that it can take-off and land at short distances thanks to a moderately swept high-aspect ratio wing- and (when light) 92 knot Vref speed.
There are 48 Sovereign aircraft in fractional service out of the 350 currently in service. The Sovereign+ started deliveries in 2013 and the original Sovereign ended production in 2013.
Chart A represents the in-operation aircraft ‘Market Share’ as of February 2014 for the Sovereign (43%) and the Hawker 800XPi/XP (57%) There are currently 823 total aircraft in operation for these two models.
Payload and Range
The data contained in Table A is published in the B&CA- May 2012 issue and is also sourced from Conklin & de Decker and Aircraft Cost Calculator (ACC). As we have mentioned in past articles- a potential operator should focus on payload capability. The Sovereign’s ‘Available payload with Maximum Fuel’ (1-177 pounds) is less than the Hawker 800XP/XPi (1-750 pounds). Also depicted in Table A- however- the Sovereign burns 240 gallons of fuel per hour (GPH) which is 21 gallons (or 8%) less than the Hawker 800XP/XPi (261 GPH) according to ACC.
According to Conklin & de Decker- the cabin volume of the Sovereign- at 620 cubic feet- is marginally larger (by 2.6%) than the Hawker 800XP/XPi aircraft at 604 cubic feet. While Chart B depicts the Sovereign as having smaller cross-section dimensions than the Hawker 800XP/XPi- it gains its volume advantage through offering more length than the Hawker model.
As mentioned previously- the Citation Sovereign is powered by two Pratt & Whitney Canada PW306C engines each offering 5-770 pounds of thrust. The Hawker 800XP- by comparison- is powered by a pair of Honeywell TFE 731-5BR engines- each offering less overall thrust at 4-660 pounds.
Take-Off Field Length
The Sovereign aircraft has a considerably lower Take-Off Field Length at 3-640 feet compared to the Hawker 800XP at 5-032 feet. The shorter balance field length of the Sovereign provides greater access to airports with shorter runways than the other competitors in this field.
Using data published in the May 2013 B&CA Planning and Purchasing Handbook and the August 2013 B&CA Operations Planning Guide we will compare our aircraft. The nationwide average Jet A fuel cost in the August 2013 edition was $6.08 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.
Cost Per Mile Comparisons
Chart C- which details ‘Cost per Mile’- compares the Sovereign to its competition factoring direct costs and with both aircraft flying a 1-000nm mission with an 800 pound (four passengers) payload. The Sovereign at $5.32 has a lower cost per mile by 5.3% compared to the Hawker 800XP at $5.62 cost per mile.
Total Variable Cost Comparisons
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 Sovereign at $2-312 is nearly the same variable cost to operate as the Hawker 800XP at $2-323.
The points in Chart E center on the two aircraft in this field of study. Pricing used in the vertical axis is as published in Vref. 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.
1. Range with full payload and available fuel;
2. The long range cruise speed flown to achieve that range;
3. The cabin volume available for passengers and amenities.
The result is a very large number so for the purpose of charting- each result is divided by one billion. A computed curve fit on this plot would not be very tight- but when all business jet aircraft are considered the “r” squared factor would equal a number above 0.9. 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 Sovereign is highly productive compared to the Hawker 800XP (as shown in the productivity index). In a direct comparison to the Hawker 800XP the Sovereign:
• Has the largest cabin volume
• Offers less Available Payload w/Max Fuel
• Costs about 5.3% less to operate per mile
• Offers less speed (TAS) than the Hawker 800XP (388 vs. 402 kts)
• Burns fewer gallons per hour
• Has a longer range
• Accesses more runways with shorter take-off/landing distances
• Is acquired at a significantly higher price.
Table B contains the relative retail prices from Vref for each aircraft. The number of aircraft in-operation- percentage “For Sale”- and the number “Sold” over the past 12 months are from JETNET. As shown in the table- the Sovereign has sold 39 pre-owned aircraft in the past 12 months.
Asking Prices VS AFTT and Age
Chart F- sourced from the Multidimensional Economic Evaluators (MEE) Inc.- (www.meevaluators.com)- shows a 4D chart of Value and Demand for the Citation Sovereign. The current pre-owned market for the Sovereign shows 27 aircraft ‘For Sale’. Sixteen of the 27 have an asking price with 11 inviting offers.
Observation: Adjusted R2 of 67% is not Stellar. For the Sovereign:
• Asking Price = $12.9 m – 700- Total Time - $407k
• Age in years adjusted R2 = 67.0%
• Standard Error = $885-000.
The Value (Green) side are the asking prices- AFTT (hours)- and Age (years) and the green plane displays the value equation above. The Demand (Red) side is the demand curve revealed when we separate the data into three bins. In the lowest bin- we have a total quantity (10) and average price ($7.66m) of Sovereigns priced less than or equal to $9m. For the middle bin- there is a quantity of four and average price ($9.48m) for Sovereigns priced more than $9m but less than- or equal to $10m. In the uppermost bin we have Sovereigns priced more than $10m (two aircraft with an average price of $11.4m).
Within our analysis of Chart F- the 16 asking price observations are incorporated into the chart. We have plotted those 16 asking prices and the demand line. Interestingly- we found within this 16 data set four asking prices that are +/-$1.0 million away from the calculated demand line. They are relatively new to the market – three are less than 50 days.
The pre-owned market for the Sovereign in 2013 was very active with four ‘new’ and 40 ‘pre-owned’ sales- suggesting ample buyers. However- many factors are to be considered in addition to the asking prices - such as optional equipment- fresh paint and interior- the maintenance performed- etc.
Depreciation Schedule for Business Aircraft
Aircraft that are used in a trade- business- or for the production of income that are primarily operated domestically- and not used in common or contract carriage may be depreciated over a five-year Modified Accelerated Cost Recovery System (MACRS) schedule. Aircraft used in common or contract carriage (e.g.- Part 135) are depreciable under seven-year MACRS- see Table C.
Table D shows an example of using the MACRS schedule for a 2005 Cessna Citation Sovereign in private (Part 91) and charter (Part 135) operations over five- and seven-year periods assuming a Vref retail value of $6.8 million.
Location By Contient
The major based-at locations for the Sovereign- per information compiled by JETNET in its STAR reporting system- are in Europe (13%) and the United States (64%) – an aggregate of 77% of the fleet.
Chart G shows the circle ranges from Kansas- USA- for both the Sovereign and Hawker 800XP- as sourced from Aircraft Cost Calculator. The Sovereign shows greater range coverage than the Hawker 800XP.
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 200 nautical mile alternate. The lines depicted do not include winds aloft or any other weather-related obstacles.
Within the preceding paragraphs we have touched upon several of the attributes that a business aircraft operator values. There are other qualities such as airport performance- terminal area performance- and time to climb performance that might factor in a buying decision- too- however.
The Cessna Citation Sovereign fares well against its competition- so those operators in the market should find the preceding comparison of value. Our expectations are that the Sovereign will continue to do very well in the pre-owned market.
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