In this month’s Aircraft Comparative Analysis, we provide information on a selection of new and preowned business jets in the $31.1-$42.2m range for the purpose of valuing the new and pre-owned Gulfstream G450 for sale.
We’ll consider the productivity parameters - payload/range, speed and cabin size, and cover current and future market values. The field in this study also includes the Dassault Falcon 900LX and the Bombardier Challenger 605.
The Gulfstream GIV was upgraded to the GIV-SP, and later re-designated the G400. A short-ranged variant was created based on the original GIV and designated the G300. With the introduction of the G500/G550 (an upgrade to the GV model), the GIV received an upgrade based on the newly created G550. This created the G450 and its short-ranged variant the G350. G450 flight-testing started in April 2003 and FAA certification was completed in August 2004.
The Gulfstream G450 is a cross between the G400 and the G550, designed using the G400 airframe with the G550 nose section grafted on. It has a Honeywell Primus Epic PlaneView avionics suit and next generation Rolls-Royce Tay 611-8C engines.
There are 291 Gulfstream G450 large-cabin aircraft in operation today, a total that is nearing the total number of GIV-SP units built. 829 large-cabin Gulfstream series aircraft are currently in operation.
Chart A represents the in-operation aircraft Market Share (as of June 2014) for the Gulfstream G450 (51%), Bombardier Challenger 605 (43%), and Dassault Falcon 900LX (6%). There are currently 572 total aircraft in operation for these three models.
Payload and Range
The data contained in Table B is sourced from Conklin & de Decker and also published in the B&CA May 2014 issue. As we have mentioned in past articles, a potential operator should focus on payload capability as a key factor. The Gulfstream G450 ‘Available Payload with Maximum Fuel’ at 2,519 pounds is significantly greater than that offered by the Falcon 900LX (1,800 lbs) and Challenger 605 (1,298 lbs).
However, according to Aircraft Cost Calculator (also represented in Table B), the G450 burns just 465 gallons of fuel per hour (GPH), which is 41% more than the Falcon 900LX (274 GPH), and 36% more than the Challenger 605 (296 GPH).
According to Conklin & de Decker, the cabin volume of the G450 is 1,658 cubic feet. This is 36% greater than the Falcon 900LX (1,218 cubic feet) and 45% greater than the Challenger 605 (1,146 cubic feet). The G450 cabin is 11.9 feet longer than the Falcon 900LX and 16.7 feet longer than the CL605. The Challenger 605 interior dimensions are wider than the G450 and the Falcon 900LX, however all three aircraft offer approximately the same cabin height (as shown in our Chart B Cabin Cross-Sections, illustrated by UPCAST JETBOOK).
Chart C shows the ranges from New York City, USA, for the business jets in our field of study, as sourced from Aircraft Cost Calculator (ACC). The Falcon 900LX shows more range coverage than either the G450 or the Challenger 605. 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 200nm alternate (100nm for turboprops). The lines depicted do not include winds aloft or any other weather-related obstacles.
Each of the Gulfstream G450’s Rolls-Royce TAY 611-8C engines offers a thrust rating of 13,850 pounds. The Bombardier Challenger 605 is powered by a pair of General Electric CF34-3B engines, each with a thrust rating of 8,729 pounds, while the Dassault Falcon 900LX is powered by three Honeywell TFE 731-60 powerplants, each with a thrust rating of 5,000 pounds.
Cost Per Mile Comparisons
Using data published in the May 2014 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. Chart D details ‘Cost per Mile’, and compares the G450 to the Challenger 605 and Falcon 900LX factoring direct costs, and with each aircraft flying a 1,000nm mission with 800 pounds (four passengers) payload.
The Falcon 900LX cost at $5.35 per nautical mile is significantly lower compared to both the G450 at $7.00 and the Challenger 605 at $6.27 on a cost per mile basis.
Total Variable Cost Comparisons
The ‘Total Variable Cost’, illustrated in Chart E, is defined as the cost of Fuel Expense, Maintenance Labor Expense, Scheduled Parts Expense and Miscellaneous Trip Expense. The total variable cost for the Gulfstream G450 at $3,042 is considerably greater than the Challenger 605 ($2,765) and the Falcon 900LX ($2,294).
Aircraft Comparison Table
Table C includes the average pre-owned retail price from B&CA for each aircraft. The last two columns of information show the number of each aircraft in-operation, and the percentage ‘For Sale’ (per JETNET). It is interesting to note that of the 291 G450s in operation today (79% new and 21% pre-owned), only 7.2% of the fleet is ‘For Sale’ (traditionally a seller’s market).
Considering the wholly-owned G450 aircraft fleet only, according to JETNET North America is home to the majority with 148 (56%), followed by Asia (73 units, or 28%). Currently, six G450 aircraft are in shared ownership, and there are 14 in fractional ownership arrangements.
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 (e.g. Part 91) 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 D).
Table E, meanwhile, depicts an example of using the MACRS schedule for a 2014 model Gulfstream G450 in private (Part 91) and charter (Part 135) operations over five and seven-year periods assuming a Vref retail value of $42.2 million.
Asking Prices VS AFTT, Age & Engine Thrust
Chart F, sourced from the Multi-dimensional Economic Evaluators Inc., (www.meevaluators.com), shows a Value and Demand chart for the pre-owned G450 (and GIV-SP), Falcon 900LX (and Falcon 900EX EASy), and Challenger 605 (and Challenger 604) business jets. The current pre-owned market for these aircraft shows a total of 98 aircraft ‘For Sale’.
Thirty-four of the 98 have an asking price - thus, we have plotted the 34 in this chart. The equation that we derived from these asking prices and other criteria used should enable sellers and buyers to compare, and perhaps adjust their offerings if necessary. Demand and Value are on opposite sides of the same Price axis. The market treats the G450, Falcon 900LX and Challenger 605 in much the same way.
The Demand Equation for these vehicles is Price $m = 135 Quantity-1.073. The slightly steep slope (exponent < -1.0) indicates that there is slightly more revenue in the two uppermost bins ($230.4m) than there is in the two lowermost bins ($225.9m). This equation is very well correlated, with an adjusted R2 of 92.8%, a Pearson’s2, a P-Value of 0.55% and a Standard Error of $3.51 Million.
The Value Equation for these vehicles is Price = -993,450 *Years + 16,025 *Max Range (nm) + 51,375,217 *Max Mach, – 84,352,600. We find that the Value Equation for these vehicles is very well correlated too, with an Adjusted R2 of 94.4%, a Pearson’s2 of 94.9% and a Standard Error of $2.086m (with P-Values of 2.11E-13, 1.89E-07 and 0.59% for Years, Max Range and Max Mach, respectively). This equation means that the market subtracts $993,450 for every added year the aircraft has aged, but adds $16,025 for each added nautical mile of range and $5.14m for every added tenth (1/10th) of a Mach Number.
In this market, unlike others we have witnessed, aircraft age and the Total Time on the Airframe (TTAF) are too highly correlated with one another to use them at the same time. However, with the addition of Range and Max Mach, we can include other important influencing features.
Thus, the market for used G450, GIV-SP, Falcon 900LX, Falcon 900EX EASy, Challenger 605, and Challenger 604 aircraft statistically responds to at least the five features depicted: Years, Max Mach, Range, Price and Quantity.
The points in Chart G center on the Gulfstream G450, Falcon 900LX and Bombardier Challenger 605 aircraft. Pricing used in the vertical axis is as published in the B&CA 2014 Purchase Planning Handbook and 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. The examples plotted are confined to the aircraft in this study. A computed curve fit on this plot would not be very tight, but when all business jets are considered the “r” squared factor would equal a number above 0.9. Others may choose different parameters, but serious business jet buyers are usually impressed with price, range, speed and cabin size.
After consideration of the value and fuel savings, we can conclude that the Gulfstream G450, as shown in the productivity index is productive and has been popular with a high market share having started deliveries two years earlier than the Challenger 605. For Available Payload (full fuel)-to- Cabin Capacity-ratio, the G450 offers a highly competitive value to a prospective owner. Overall, the greater speed and cabin capacity will weigh in favour of the G450 for many operators – although operating costs are proportionally higher for this aircraft.
So, ten years after first delivery, what will the future hold for the G450? History tends to show that after an aircraft model has been in production for ten years – especially one that sells as well as the G450 - an upgraded successor will eventually be introduced by the OEM to maintain that success in the face of the ever increasing sophistication of Business Aviation technology.
Could Gulfstream be ready to announce an upgrade on the G450 any time soon to keep the model attractive to the market, and retain its leading market share for unit deliveries within the large cabin segment? Of course, other competitors are on the horizon, too: The Falcon 900LX is priced at the same price as the current G450, for example, and offers significant operating cost saving with a greater range.
Within the preceding paragraphs we have touched upon several of the key attributes that business jet operators value. However, there are often other qualities such as service and support that factor in a buying decision, but which are beyond the scope of this article.
The Gulfstream G450 business jet has its advantages at its price-point - so those operators in the market should find the preceding comparison of value. Our expectations are that the G450 will continue to do very well in the pre-owned market for the foreseeable future, but it’s worth keeping a watch for how the new aircraft market develops. The entire story of the large cabin market has been remarkable.