In this month’s Aircraft Comparative Analysis, Mike Chase provides information on a selection of newer and older pre-owned business jets for the purpose of valuing the Gulfstream GV.
Within the following review, we’ll consider the productivity parameters (payload/range, speed and cabin size) of three competitive business aircraft and cover current and future market values. The field in this study includes Dassault’s Falcon 7X and Bombardier’s Global 5000.
The Gulfstream GV, initially delivered in 1995, was the first purpose-built, ultra-long-range, large cabin business jet. Its 6,500nm range—sufficient to fly non-stop between New York and Tokyo—is made possible (in part) by the aircraft’s two Rolls-Royce BR710-A1-10 engines.
Production of the GV marked the first time that Gulfstream decided to build more than one aircraft while another model was being manufactured. Previously, Gulfstream had always ended production of one model (GI to GIV) before delivering a new aircraft.
Features on the GV include enhanced weather radar, head-up display for the pilot, and Enhanced Vision System (EVS) allowing increased visibility for approach and landing in adverse weather. The aircraft is also available with commercial and military communications equipment to provide secure voice and data capability. The GV is the only ultra long-range aircraft that provides a forward and/or an aft galley as an option.
Two new aircraft followed the GV; the Gulfstream G550 in 2003 with greater range, and the G500 in 2004.
There are 183 wholly owned GV models in operation worldwide, plus six in shared-ownership and four in fractional ownership, according to JETNET. By continent, North America has the largest percentage of the fleet (80%), followed by Asia (11%) for a combined total of 91%. Leased GVs account for 14.8% of the worldwide fleet.
Payload & Range
The data contained in Table A are sourced from Conklin & de Decker and B&CA’s May 2015 issue. The ‘Available Payload with Maximum Fuel’ for the GV is 1,500 lbs, which is less than the Falcon 7X (1,660 pounds), and significantly less than the Bombardier Global 5000 (2,930 pounds).
Additionally, Table A shows the fuel usage of each aircraft in this field of study, as stated by Aircraft Cost Calculator. The GV at 453 gallons per hour (GPH) and the Global 5000 at 455 GPH are nearly the same. The Falcon 7X is the most frugal of the field at 347 GPH.
According to Conklin & de Decker, the GV cabin volume is 1,595 cubic feet and cabin length is 50.1ft, the longest in this field of study. The Falcon 7X has the smallest cabin volume (1,506 cubic ft.) and the shortest cabin length (39.1ft), and the Global 5000 has the largest cabin volume at 1,889ft (18.4% greater than GV) although the cabin length is 42.47ft (15.2% less than the GV). The respective cabin cross-sections are represented, courtesy of UPCAST JETBOOK in Chart A.
As depicted by Chart B, using Teterboro Airport, New Jersey as a starting point, according to Aircraft Cost Calculator (ACC), the GV shows more range coverage than the Global 5000 and the Falcon 7X.
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.
The Gulfstream GV is powered by two Rolls-Royce BR710-A1-10 engines, each offering 14,750 pounds of thrust (lbst). The Global 5000 also uses two Rolls-Royce BR710-A2-20 engines, each offering the exact same thrust at 14,750 as that of the GV. Meanwhile, the Falcon 7X is powered by three Pratt & Whitney Canada PW307A engines, each offering 6,402 lbst.
Cost Per Mile
Using data published in the May 2015 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 Gulfstream GV to its competition, factoring direct costs and with all aircraft flying a 1,000nm mission with 1,600 pound (eight passengers) payload. The Gulfstream GV shows the highest cost per nautical mile at $7.96 compared to the Global 5000 at $7.68 and the Falcon 7X at $5.60.
Total Variable Cost
The ‘Total Variable Cost’ illustrated in Chart D is defined as the Cost of Fuel, Maintenance Labor, Scheduled Parts and Miscellaneous Trip Expenses. The Total Variable Cost for the Gulfstream GV equates to $3,602, which is higher than the Global 5000 at $3,466 and the Falcon 7X at $2,452.
Aircraft Comparison Table
Table B contains the used retail prices from Vref 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 Falcon 7X and Global 5000 have less than 10 percent of their respective fleets currently ‘For Sale’ – the Falcon 7X selling approximately 3.0 units per month, and the Global 5000 selling at a rate of 3.1 per month. However, the Gulfstream GV currently sees a slightly higher 12% of the fleet for sale, although over the past 12 months, an average 1.67 units have sold monthly.
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 business aircraft 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 2002 model Gulfstream GV aircraft in private (Part 91) and charter (Part 135) operations over five and seven-year periods, assuming a used retail value of $16.5m as sourced from Vref Pricing guide.
Asking Prices vs Age, Quantity and Engines
Chart E, sourced from the Multi-dimensional Economic Evaluators Inc. (www.meevaluators.com), shows a Value and Demand chart for the pre-owned Gulfstream GV and includes the Falcon 7X and Global 5000. The current pre-owned market for Gulfstream GV aircraft shows a total of 23 aircraft ‘For Sale’ with nine displaying an asking price, thus we have plotted those nine. We also added to the mix other ultra-long-range pre-owned business jets of similar ilk with asking prices ranging from $17m-$25m.
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. Thus, the market for used Gulfstream GV responds to at least four features: Years, Engines, Quantity and Price.
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 since 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 Gulfstream GV is highly productive.
Operators should weigh their mission requirements precisely when picking which option is the best for them, however.
Finally, exclusive to our online content, Chart G displays the Gulfstream GV, depicting the Maximum Maintenance Equity available, based on aircraft age (source - Asset Insight Inc.).
• 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: a) average annual utilization is 380 Flight Hours; and b) all maintenance is completed when due.
Within the preceding paragraphs we have touched upon several of the attributes that business aircraft operators find valuable. There are other qualities such as airport performance, terminal area performance, and time-to-climb performance that might factor in a buying decision, however.
The Gulfstream GV continues to be very popular in the pre-owned market today. We anticipate that the Gulfstream GV aircraft, which started delivering 20 years ago, will continue to do very well in the pre-owned market for the foreseeable future.