In this month’s Aircraft Comparative Analysis, Mike Chase provides information on four popular pre-owned business jets for the purpose of valuing the Cessna Citation CJ2/CJ2+.
Over the following paragraphs, we’ll consider productivity parameters (payload/range, speed and cabin size) and cover current and future market values for the Citation CJ2 and Citation CJ2+. The field in this comparative study is the Beechcraft Premier I/Premier IA.
The CitationJet is a low-wing aircraft with a T-tail, pressurized cabin and two turbofan engines pylon-mounted on the rear fuselage. The Model 525 CitationJet family encompasses the CJ1, CJ1+, CJ2, CJ2+, CJ3 and the CJ4 models.
The CJ2 (Model 525A) light jet was produced between 2000 and 2005. In addition to a five-foot stretch of the Cessna Citation CJ1 fuselage, the CJ2 is powered by two Williams International FJ44-2C turbofans delivering up to 2,400 lbst each. The CJ2 can be RVSM certified when Service Bulletin SB-525A-34-01 is implemented.
Delivering from 2006 through 2014, the CJ2+ brought updated avionics, increased performance and FADEC controls to the CJ2 design. In fact the CJ2+ comes standard-equipped with 17 of the CJ2’s most popular equipment options.
Today, there are 433 wholly-owned CJ2 (225) and CJ2+ (208) aircraft in operation worldwide. An additional 19 are in shared ownership and 10 are in fractional ownership, giving a total global fleet of 462. Of the in-operation aircraft, 33 (7.1%) of the CJ2/CJ2+ fleet are leased, according to JETNET.
By continent, North America has the largest fleet percentage (61%), followed by Asia (24%) and Europe (10%), for a combined total of 95%.
Payload & Range
The data contained in Table A are published in the B&CA, May 2015 issue, but also sourced from Conklin & de Decker. As we have mentioned in past articles, a potential operator should focus on payload capability as a key factor. The CJ2 and CJ2+ ‘Available payload with Maximum Fuel’ at 668 and 715 lbs respectively are greater than the Premier I/IA at 414 and 320 lbs respectively.
In addition, Table B shows the fuel usage by each aircraft in this field of study. The Citation CJ2 is the more frugal at 127 GPH, which is 12.6% less compared to the other three business jets each burning 143 GPH according to data sourced from Aircraft Cost Calculator.
According to Conklin & de Decker, the CJ2/CJ2+ cabin volume is 248 cubic feet and its cabin length is 13.58 ft. With a cabin length of 13.6 ft., the Premier I/IA offers a larger cabin volume (285 cu. ft.), thanks to its greater width and height (see Chart A cross-section comparison). Overall, the Premier I/IA cabin volume is 14.9% greater than that of the CJ2/CJ2+.
As depicted by Chart B and using Witchita, Kansas as the origin point, the CJ2 and CJ2+ show greater range coverage compared to the Premier I/IA, as sourced from Aircraft Cost Calculator (ACC).
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. The lines depicted do not include winds aloft or any other weather-related obstacles.
As mentioned previously, the CJ2 is powered by two Williams FJ44-2C engines with a thrust rating of 2,400 lbs. The CJ2+ utilizes two FJ44-3A-24 powerplants with slightly more power (2,490 lbst). The Premier I/IA business jets also are powered by two Williams FJ44 engines – in this case the -2A types, each with a rating of 2,300 lbst.
Cost Per Mile
Using data supplied directly from ARGUS as of March 2016, we will compare our aircraft. The nationwide average Jet-A fuel cost used from the August 2015 edition was $5.25 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 C details ‘Cost per Mile’ and compares the CJ2 and CJ2+ to its competition, factoring direct costs with each aircraft flying a 1,000nm mission with an 800 lb (four pax) payload. The CJ2 shows the highest cost per nautical mile at $2.92, whereas the CJ2+ is the most frugal at $2.34.
Total Variable Cost
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 CJ2 computes at $1,097 per hour, the highest cost of our field, while the CJ2+ has the lowest ($963) variable cost.
Aircraft Comparison Table
Table C contains the pre-owned prices from Vref Pricing Guide for each aircraft in the year 2012. The average speed, cabin volume and maximum payload values are from Conklin & de Decker and Aircraft Cost Calculator, while the number of aircraft in-operation and percentage ‘For Sale’ are as reported by JETNET.
The Citation CJ2 has 8.4% of its fleet currently ‘For Sale’ (the lowest of the field), while the CJ2+ has 11.6% for sale (the highest of the field). The CJ2 is recording the highest average number of pre-owned transactions (sold) per month, as shown in the last column.
Aircraft that are owned and operated by businesses are often depreciable for income tax purposes under the Modified Accelerated Cost Recovery System (MACRS). Under MACRS, taxpayers are allowed to accelerate the depreciation of assets by taking a greater percentage of the deductions during the first few years of the applicable recovery period (see Table D).
In certain cases, aircraft may not qualify under the MACRS system and must be depreciated under the less favorable Alternative Depreciation System (ADS) where depreciation is based on a straight-line method, meaning that equal deductions are taken during each year of the applicable recovery period. In most cases, recovery periods under ADS are longer than recovery periods available under MACRS.
There are a variety of factors that taxpayers must consider in determining if an aircraft may be depreciated, and if so, the correct depreciation method and recovery period that should be utilized. For example, aircraft used in charter service (i.e. Part 135) are normally depreciated under MACRS over a seven year recovery period or under ADS using a twelve year recovery period.
Aircraft used for qualified business purposes, such as Part 91 business use flights, are generally depreciated under MACRS over a period of five years or by using ADS with a six year recovery period. There are certain uses of the aircraft, such as non-business flights, that may have an impact on the allowable depreciation deduction available in a given year.
Table E depicts an example of using the MACRS schedule for a 2014 Citation CJ2+ aircraft in private (Part 91) and charter (Part 135) operations over five and seven-year periods, assuming a used retail value of $5.6m, per Vref Pricing guide.
Asking Prices vs Age, Airframe Total Time & Quantity
Chart E, sourced from the Multi-dimensional Economic Evaluators Inc. (www.meevaluators.com), shows a Value and Demand chart for the pre-owned CJ2/CJ2+. The current pre-owned market for the CJ2/CJ2+ aircraft shows a total of 46 aircraft ‘For Sale’ with 22 displaying an asking price, thus we have plotted them. We also added the Premier I/IA business jets in our study group.
Asking prices range from $1.6-5.6m - the equation that we derived from these and other criteria used should enable sellers and buyers to compare, and perhaps adjust their offerings, if necessary. While each serial number is unique, the Airframe hours (AFTT) and age/condition will cause great variations in price.
The objective of Chart E is to determine how to use the demand curve to establish a value when no asking prices are provided. For example, we have called-out three aircraft, two (CJ2+ and Premier IA) that have asking prices which are potentially too high, and one CJ2 for which the asking price is potentially too low. (Of course, the final negotiated price remains to be decided between the seller and buyer before the sale is completed.)
Demand and Value are on opposite sides of the same Price axis. Thus, the market for used CJ2/CJ2+ jets responds to at least four features: Years, Range (nm), Quantity, and Asking Prices.
The points in Chart F are centered on the same aircraft. Pricing used in the vertical axis is as published in the Vref Pricing Guide. 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.
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 Citation CJ2 and CJ2+ display a high level of productivity, especially the CJ2+.
Popular attributes of the CJ2 and CJ2+ is that they offer greater available payload and range. The CJ2+ also has the lowest variable cost per hour and per mile. However, the CJ2/CJ2+ cabin volumes are slightly smaller than the Premier I and IA.
Operators should weigh their mission requirements precisely when picking the aircraft that is the best for them.
Within the preceding paragraphs we’ve touched upon several of the attributes that business aircraft operators value.
There are other qualities such as airport performance, terminal area performance, and time to climb that might factor in a buying decision, however.
The Citation CJ2 and CJ2+ continue to be very popular today. Those operators in the market should find the preceding comparison useful. Our expectations are that the Citation CJ2/CJ2+ will continue to do very well in the pre-owned markets for the foreseeable future.