In this month's Aircraft Comparative Analysis, Mike Chase provides information on a selection of new and pre-owned business jets for the purpose of valuing the Embraer Phenom 300.
A new 2014 Embraer Phenom 300 has a list price of $9.315m with the Garmin G3000 Avionics system while the cost of a used Phenom 300 ranges between $6.8m (2010 year model) through $8.2m (2013 year model). The current new/used split for the Phenom 300 business jet fleet is currently 91% and 9% respectively.
Here, we’ll consider the productivity parameters (payload/range, speed and cabin size) and cover current and future market values. Exclusive to our online content at www.avbuyer.com we’ll also review the Maintenance Equity, as provided by Asset Insight, Inc. for the Phenom 300. The field in this month’s study includes the Cessna Citation CJ4.
Embraer’s Phenom 300 has a capacity for six passengers in its normal configuration with a single pilot. Interior configurations also offer options of a side-facing seat and belted toilet. Powered by two Pratt & Whitney PW535E engines, the Phenom 300 first flew in May 2008. It earned FAA Certification in December 2009 and first delivery to a private customer took place that same month.
An early indicator of the future success of the Phenom 300 was its selection by fractional provider Flight Options (with a 10-year order for 300-aircraft with 50 options) and NetJets (up to 125 Platinum Edition Phenom 300s).
The Phenom 300 boasts the largest space in the light jet class, and offers a large rear baggage compartment of 85 cu ft (19 cu ft internal and 66 cu ft external), that can accommodate luggage including golf bags or skis. The Phenom 300 utilizes either the Garmin G1000 or G3000 Avionics system.
Today, there are 229 Phenom 300 business jets in operation worldwide with 64 (or 28%) in fractional ownership, three in shared ownership, and 162 wholly-owned. Additionally, 3% of the Phenom 300 jets are leased according to JETNET. North America is home to the largest percentage of the fleet (46%), followed by South America (30%), and Europe (16%) accounting for a combined total of 92%.
Payload & Range
The data contained in Table A is sourced from Conklin & de Decker and B&CA’s May 2014 issue. A potential operator should focus on payload capability. The ‘Available payload with Maximum Fuel’ for the Phenom 300 is 942 lbs, which is less than the Citation CJ4 (1,052 pounds).
Also shown is the fuel usage by each aircraft model in this field of study (as provided by Aircraft Cost Calculator). The Phenom 300 at 158 gallons per hour (GPH) leads the Citation CJ4 as the most frugal - the Phenom 300 average fuel usage shows 30 GPH (16%) less fuel burn than the Citation CJ4.
According to Conklin & de Decker, the cabin volume of the Phenom 300 (324 cubic feet) is greater than the Citation CJ4 (293 cubic feet), as depicted in Chart A.
As depicted by Chart B, using Wichita as a starting destination, according to Aircraft Cost Calculator (ACC) the Citation CJ4 shows slightly less range coverage than the Phenom 300 but both offer non-stop operations throughout North America (including Canada, Mexico and USA).
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.
Cost Per Mile
The Phenom 300 is powered by two Pratt & Whitney Canada PW535E engines, each offering 3,360 pounds of thrust (lbst). The Citation CJ4 offers a pair of Williams FJ44-4A engines with 3,621 lbst each.
Using data published in the May 2014 B&CA Planning and Purchasing Handbook and the August 2014 B&CA Operations Planning Guide we will compare our aircraft. The nationwide average Jet-A fuel cost used from the August 2014 edition was $6.18 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 Phenom 300 to its competition factoring direct costs and with all aircraft flying a 1,000nm mission with an 800 pound (four passengers) payload. The Phenom 300 shows a cost per mile of $2.78, which is less than the Citation CJ4 ($3.28).
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 Phenom 300 shows a lower cost at $1,281 compared to the Citation CJ4 ($1,467).
Aircraft Comparison Table
Table B contains the new retail prices from Aircraft Bluebook for each aircraft. The average speed, cabin volume and maximum payload values are from Conklin & de Decker, while the number of aircraft in-operation and percentage ‘For Sale’ are as reported by JETNET.
The Phenom 300 and Citation CJ4 both have less than 10 percent of their respective fleets currently ‘For Sale’, traditionally representing a buyer’s market. Evidently Phenom 300s make an attractive proposition with a total of 75 units (new and used) sold over the past 12 months (an average of 6.25 units monthly) compared to the Citation CJ4 with 36 units - three units per month (or approximately half the number of sales of the Phenom 300).
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 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 commercial 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 D depicts an example of using the MACRS schedule for a 2014 model Embraer Phenom 300 aircraft in private (Part 91) and charter (Part 135) operations over five- and seven-year periods respectively, assuming an Aircraft Bluebook New retail value of $9.315 million sourced from Aircraft Bluebook.
Asking Prices vs AFTT, Age & Engine Thrust
Chart E, sourced from the Multi-dimensional Economic Evaluators Inc. (www.meevaluators.com), show a Value and Demand chart for the pre-owned Phenom 300 and Citation CJ4.
The current pre-owned market for these aircraft shows a total of 15 aircraft ‘For Sale’ with seven displaying an asking price, thus we have plotted those seven jets. We also added to the mix other pre-owned light business jets and other business jets with asking prices ranging from $6.8m-$9.315m. 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 Demand Equation for these business jets is Price $M = 11.8*Qty-0.136. This power equation is very well correlated, with an adjusted R2 of 99.4%, and a P-Value of 2.16 E-04.
The Power Equation describing the Value Equation is Asking Price = 183.4 * Years-0.300 * Passenger Capacity 1.17 * Range 0.648 * Cabin Height 2.29. We find that the Value Equation for these aircraft is only fairly well correlated, with an Adjusted R2 of 74.2%. However, each of the contributing variables is highly influential, with P-Values of 2.50 E-09, 6.09 E-04, 3.03 E-04 and 4.66 E-04 and for Years, Passenger Capacity, Range and Cabin Height, respectively.
Thus, the market for used Phenom 300s responds to at least six features: Years, Passenger Capacity, Range, Cabin Height, Price and Quantity.
The points in Chart F are centered on the same group of aircraft.
Pricing used in the vertical axis is as published in the Aircraft Bluebook. 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 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 Phenom 300, as shown in the productivity index Chart F, is productive compared with its competitor - largely due to the fact that the Phenom 300 offers a larger cabin and lower operating costs including a 30 GPH (16%) average fuel burn savings nudges the Citation CJ4. Although the Phenom 300 ‘Available Payload with Maximum Fuel’ - at 942 lbs - is lower compared to the Citation CJ4, the purchase price is lower than that of the CJ4 aircraft.
Ultimately, operators should weigh up their mission requirements precisely when picking which option is the best for them.
Maximum Scheduled Maintenance Equity
Exclusive to our online content, Chart G displays the Phenom 300 and depicts the Maximum Maintenance Equity has available based on its age.
Note: 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.
Note: The percent of the Maximum Maintenance Equity that an average aircraft will have available based on its age, assumes:
- Average annual utilization: 230 Flight Hours.
- All maintenance is completed when due.
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 performance that might factor in a buying decision, too, however.
The Embraer Phenom 300 continues to be very popular in the new and pre-owned market today. Those operators in the market should find the preceding comparison of value. Our expectations are that the Embraer Phenom 300 aircraft, which started delivering at the end of 2009, will continue to do very well in the new and pre-owned markets for the foreseeable future.
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