In this month’s Aircraft Comparative Analysis, Mike Chase provides information on a selection of new and used business jets for the purpose of valuing the Cessna Citation CJ4.
We will consider the key productivity parameters (payload, range, speed and cabin size) and cover current market values. The field in this study includes the Embraer Phenom 300 and newly-introduced Phenom 300E.
It is hoped this comparison will also highlight the value proposition of the upgraded Embraer Phenom 300E in relation to the Citation CJ4 and original Phenom 300 model.
Citation CJ4 Background & Market Insight
The Cessna Citation CJ4 (Model 525C), like its predecessor the Citation CJ3, is a stretch extension of the previous CitationJet model. However, it differs significantly from the previous CitationJet models with its moderately-swept wing design which it borrows from the Citation Sovereign.
The first flight of the Citation CJ4 took place on May 5, 2008, and deliveries began in 2010. The total number of manufactured Citation CJ4s as of August 2018 was 277, with 266 remaining in operation globally. Of those in-operation aircraft, 257 are wholly-owned with nine in shared ownership. As of this writing, three had been retired and eight are at the factory awaiting delivery.
Of the Citation CJ4 aircraft in operation, North America has the largest fleet percentage (80%), followed by Europe (13%) accounting for a combined total of 93%. Eleven percent of the Citation CJ4s in operation today are in fleet ownership.
As of July 2018, the Citation CJ4 market was comprised of 72% new vs 28% used. Interestingly, 53% (or 141) of the Citation CJ4 business jet fleet are aged six-10 years old indicating a steady production spread since the jet was first introduced to the market. The percentage ‘For Sale’ is 3.8% and the average days on the market before a sale is completed is currently 117 days.
Status of ADS-B Out Equipage
Of the 266 Citation CJ4 business jets in operation worldwide, an excellent 249 (94%) have ADS-B Out installed, leaving only 6% of the fleet yet to comply. (The FAA mandates that all US-operated business jets must comply with this new requirement by January 1, 2020.)
Payload & Range
As we have mentioned in past articles, a potential operator should focus on payload capability as a key factor. As depicted in Table A, the Citation CJ4 ‘Available Payload with Maximum Fuel’ (1,052lbs) is greater than that offered by the Phenom 300/300E (942lbs).
Cabin Cross-Section Comparison
Chart A offers a cabin cross-section comparison with the Citation CJ4 offering less width (4.83ft) than the Phenom 300 (5.08ft). Also, the height of the Citation CJ4 (4.75ft) is less than the Phenom 300 (4.92ft).
However, the Citation CJ4 cabin length is slightly longer (17.3ft) compared to the Phenom 300 at (17.17ft). Overall, the Citation CJ4 has a smaller cabin volume (293 cubic feet) compared to the Phenom 300 (324 cubic feet), which is 10.6% more.
The Citation CJ4 has six cubic feet of internal and 71 cubic feet of external baggage space, while the Phenom 300/300E has 19 cubic feet of internal baggage space and 66 cubic feet of external baggage space. Meanwhile, the typical seating configuration for both business jets is for seven passenger seats and two crew members.
As depicted by Chart B using Wichita, Kansas as the origin point, the Phenom 300E (2,077nm) shows more range coverage than the Citation CJ4 (1,991nm). Nevertheless, each business jet’s range covers all the states of mainland USA, Canada, Mexico and most of Central America.
Note: For business jets, ‘four passengers with available fuel’ represents the maximum IFR range of the aircraft at Long-Range Cruise with four passenger seats occupied. NBAA IFR fuel reserve calculation for a 200nm alternate is assumed. The lines depicted do not include winds aloft or any other weather-related obstacles.
The Citation CJ4 is powered by two Williams International FJ44-4A engines each offering 3,420lbst. The Phenom 300, meanwhile, offers a pair of Pratt & Whitney Canada PW535E engines with 3,360lbst.
Total Variable Cost
The ‘Total Variable Cost’ illustrated in Chart C, sourced from Conklin & de Decker, is defined as the Cost of Fuel Expense, Maintenance Labor Expense, Scheduled Parts Expense and Miscellaneous Trip Expense. The Total Variable Cost for the Citation CJ4 computes at $1,656 per hour, which is more expensive by 8.6% than the Phenom 300 at $1,525 per hour.
Aircraft Comparison Table
Table B contains the New prices from Vref for the CJ4 and Phenom 300E. The average speeds and ranges are from Conklin & de Decker, while the number of aircraft in-operation, percentage ‘For Sale’, and average sold are as reported by JETNET.
The Citation CJ4 fleet has 3.8% of its fleet ‘For Sale’ as of the end of July 2018, whereas the Phenom 300/300E has 3.2% ‘For Sale’. The average number of new and used transactions (sold) per month shows the Citation CJ4 with five and the Phenom 300 with six over the past 12 months.
Maximum Scheduled Maintenance Equity
Courtesy of Asset Insight, Chart D depicts the ‘Maximum Maintenance Equity’ that the Citation CJ4 has available, based on its age. The Maximum Maintenance Equity figure was achieved the day the aircraft came off the production line – since it had not accumulated any utilization toward any maintenance events.
The percent of the Maximum Maintenance Equity that an average aircraft will have available, based on its age, assumes: Average annual utilization of 310 Flight Hours; and all maintenance is completed when due
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 use accelerated depreciation of assets by taking a greater percentage of the deductions during the first few years of the applicable recovery period (see Table C).
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 any given year.
The US enacted the 2017 Tax Cuts & Jobs Act into law on December 22, 2017. Under the new Act, taxpayers may be able to deduct up to 100 percent of the cost of a new or used aircraft purchased after September 27, 2017 and placed in service before January 1, 2023. This 100 percent expensing provision is a huge bonus for aircraft owners and operators. After December 31, 2022 the Act decreases the percentage available each year by 20 percent to depreciate qualified business jets until December 31, 2026.
Table D depicts an example of using the MACRS schedule for a 2018 model Citation CJ4 business jet in private (Part 91) and charter (Part 135) operations over five- and seven-year periods, assuming a 2018 list price at $9.195 million (per Vref).
Asking Prices & Quantity
The current used market for the Citation CJ4 aircraft shows a total of 11 jets ‘For Sale’ with five displaying asking prices ranging from $5.995m to $6.950m. For the Phenom 300, a total 11 aircraft are ‘For Sale’, four are displaying asking prices ranging from $6m to $8.25m.
While each serial number is unique, the Airframe (AFTT) hours and age/condition will cause great variations in price. Of course, the final negotiated price remains to be decided between the seller and buyer before the sale of an aircraft is completed.
The points in Chart D 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:
- Four/Eight Passenger Range (nm) with available fuel;
- The long-range cruise speed flown to achieve that range;
- The gross 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 CJ4 is a productive jet within its field.
The Citation CJ4 offers greater ‘Available Payload with Maximum Fuel’. However, the Citation CJ4 has higher variable cost per hour than the Phenom 300/300E, which has slightly more range and extra cabin volume. The New price of a Citation CJ4 at $9.195 million is lower than a Phenom 300E at $9.45m, a difference of $255k.
Operators should weigh up their mission requirements precisely when picking which option is the best for them.
Within the preceding paragraphs we have 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 CJ4 continues to be popular today. Our expectations are that Citation CJ4 will continue to do well in the new and used markets for the foreseeable future.
Of course, prospective buyers should be wary that an aircraft they are contemplating for purchase doesn’t fall into the 6% of the CJ4 fleet still needing an ADS-B upgrade without an upgrade already being booked for that aircraft over the next year or so. If the aircraft is not outfitted with ADS-B Out by the end of 2019, it cannot be placed in operation until it does comply.