In February, Asset Insight’s tracked fleet of 134 fixed-wing models and 2,192 aircraft listed for sale uncovered a 2.1% inventory fleet increase over January’s figure, with all four groups contributing.
Asset quality improved 0.4% during the month to 5.295, from January’s 5.272, representing the second consecutive twelve-month best figure within the ‘Excellent’ range on the scale of -2.5 to 10. And at $1.326m, Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) posted the lowest (best) 12-month figure for the third consecutive month.
February’s Aircraft Value Trends
During February, the average Ask Price for aircraft in our tracked fleet increased another 0.9% to post a 12-month high figure. However, not all groups experienced an increase.
- Medium Jets led the way (second consecutive month) through a 4.4% increase
- Small Jets increased 1.9%
- Turboprops rose 0.3%
- Large Jets – the one exception – lost 2.6% compared to January.
February’s Fleet for Sale Trends
The total number of used aircraft listed for sale increased 2.1%, with all four groups contributing. Total tracked inventory increased by 45 units, compared to last month’s 35-unit decrease. Individual group figures broke down as follows.
- Large Jet inventory: Increased 5.5% (+24 units since January)
- Medium Jet inventory: Rose 0.5% (+3 units)
- Small Jet Inventory: Increased 1.0% (+7 units)
- Turboprop inventory: Added 2.6% (+11 units).
February’s Maintenance Exposure Trends
Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) decreased another 0.4% to post the third consecutive fleet improvement, and the second consecutive 12-month best (low) figure during February. Individual results were as follows:
- Large Jets: Decreased (improved) by 1.5%
- Medium Jets: Improved (decreased) 1.9%
- Small Jets: Worsened (increased) marginally 0.2%
- Turboprops: Improved by 2.7% to post the group’s 12-month best (lowest) figure.
February’s ETP Ratio Trend
The fleet posted a healthy ETP Ratio improvement (decrease) to 65.4%, from January’s 72%. The ETP Ratio calculates an aircraft's Maintenance Exposure as it relates to the Ask Price. This is achieved by dividing an aircraft's Maintenance Exposure (the financial liability accrued with respect to future scheduled maintenance events) by the aircraft's Ask Price.
As the ETP Ratio decreases, the asset's value increases (in relation to the aircraft's price). ‘Days on Market’ analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s Days on the Market (DoM) increase, in many cases by more than 30%.
During Q4 2019, aircraft whose ETP Ratio was 40% or greater were listed for sale nearly 84% longer than assets with an ETP Ratio below 40% (215 versus 395 DoM). How did each group fare during February?
- Turboprops continued to hold the top (best) spot by a wide margin posting the lowest ETP Ratio, 42.3% (the group’s second consecutive 12-month low/best figure).
- Large Jets held on to second place at 62.3%, following January’s 12-month worst (highest) ETP Ratio for the group.
- Medium Jets moved up to third position, with a 12-month best (lowest) figure of 72.8%.
- Small Jets took last place at 74.7%, although the figure represented an improvement over January’s 76.8%.
Excluding models whose ETP Ratio was over 200% during one of the previous two months (considered outliers), following is a breakdown of the business jet and turboprop models that fared the best and worst during February 2020.
Most Improved Models
Five of the ‘Most Improved’ models posted a Maintenance Exposure decrease (improvement), while the Hawker 800A experienced a Maintenance Exposure increase. Two models, the Cessna Citation X and Piaggio P-180 had no Ask Price change, while the remaining four models experienced price increases as follows:
- Hawker 800A $77,267
- Bombardier Learjet 60 $56,386
- Dassault Falcon 900B $149,167
- Cessna Citation V Ultra $69,959.
Cessna Citation X (MSG3)
The Citation X, maintained under MSG3 rules, was the ‘Most Improved’ model in February after one-third of the listed fleet transacted. (That might sound impressive, but statistics can also be misleading: One-third of the fleet equated to one aircraft.)
The remaining two assets (4.4% of the active fleet) created a Maintenance Exposure improvement exceeding $480k that, even without an Ask Price change in the one aircraft posting a value, led to the aircraft’s position on this list.
At 70.5%, the average ETP Ratio may not be encouraging, but the low number of listed units and the opportunity to improve the aircraft’s marketability through enrollment on an engine Hourly Cost Maintenance Program, could make this model more interesting to buyers seeking its operating capabilities.
It is rare to have a model that’s had no transactions, additions to the fleet, or change in Ask Price move from the ‘Most Deteriorated’ list to the ‘Most improved’ list in one month. But that’s exactly what the Piaggio P-180 accomplished by virtue of a Maintenance Exposure decrease exceeding $183k.
However, the model’s ETP Ratio of 100.8%, the 14 units listed for sale (17.1% of the active fleet), and the Airframer’s search for a buyer doesn’t help sellers. Anyone seeking speed and cabin volume in a turboprop may be able to secure good value by acquiring one of these aircraft.
Buyer Advice:Uncertainty prevails with respect to this model’s future value. Accordingly, buyers are advised to consider the asset’s depreciation down to salvage value, should a worst-case scenario become reality during their planned ownership term.
The Hawker 800A topped the ‘Most Deteriorated’ model list during the month of January. However, three transactions and several other fleet changes resulted in an Ask Price increase that led to its presence on February’s ‘Most Improved’ list, even with a Maintenance Exposure increase exceeding $27k.
An ETP Ratio of 176.4%, and a selection of 25 listed assets (13.4% of the active fleet) places buyers squarely in the driver’s seat here. But the model has enough of a following to generate sales, providing the aircraft’s engines are enrolled on an Hourly Cost Maintenance Program (which most of the active fleet is).
Bombardier Learjet 60
The 41 units listed for sale equate to 14.2% of the active fleet, and while the model posted an 11.5% improvement to its ETP Ratio to secure its position on this list, a 90.3% Ratio, and the large number of available units pose serious challenges for sellers.
On the positive side, average Maintenance Exposure improved nearly $143k, and Ask Price increased over $56k. The first figure is based on hard facts. The second figure on mostly hope.
Dassault Falcon 900B
This model was fifth from the bottom on January’s ‘Most Deteriorated’ list and climbed to fifth from the top on February’s ‘Most Improved’ list, due to a Maintenance Exposure improvement approaching $264k and an Ask Price increase exceeding $149k.
Two units transacted in February, and with 12 aircraft listed for sale (8% of the active fleet), sellers are in a good position while buyers have sufficient assets to choose from. With an ETP Ratio of 35.8%, these are highly marketable assets irrespective of which list they inhabit.
Citation V Ultra
A Maintenance Exposure decrease approaching $70k, along with an Ask Price increase exceeding $47k allowed this model to win the final slot on February’s ‘Most Improved’ list. One asset transacted to create the statistical changes, while the 23 aircraft presently listed for sale as we closed out February equated to 8.5% of the active fleet.
The model’s 61.5% ETP Ratio will challenge most sellers. However, owners whose asset is enrolled on an engine HCMP will find their aircraft generating a Ratio below 40%, probably resulting in more acceptable offers.
Most Deteriorated Models
All six models on February’s ‘Most Deteriorated’ list registered a Maintenance Exposure increase along with the following Ask Price decreases:
- Hawker Beechcraft 400A -$132,088
- Cessna Citation VII -$51,825
- Dassault Falcon 900 -$1,427,500
- Bombardier Global Express -$648,750
- Bombardier Learjet 45 -$93,250
- Bombardier Learjet 35A -$11,698
Hawker Beechcraft 400A
February’s ‘Most Deteriorated’ model posted no transactions during the month. But the three withdrawals from inventory, along with five additions to the for-sale fleet, increased availability to 57 units (21.1% of the active fleet), leading to a Maintenance Exposure increase approaching $85k.
Combined with an Ask Price reduction exceeding $132k, the statistics earned the 400A its position on this list. With all those challenges facing the model, you would think its ETP Ratio would be higher than 83.7%.
While not a small problem for sellers, their greater challenge is the available fleet which will make it difficult for any seller to differentiate their asset on anything other than price without some detailed knowledge of where their unit sits within the passel of aircraft.
Cessna Citation VII
The Citation VII found its way to second-worst place through a Maintenance Exposure increase exceeding $229k and an Ask Price decrease approaching $52k. No aircraft traded in February, but the fleet mix changed through the withdrawal of one unit and the addition of four, creating an inventory fleet of 19 (16.5% of the active fleet).
Along with an ETP Ratio exceeding 79% the statistics will present challenges for sellers of these aircraft aged between 20 and 28 years.
Dassault Falcon 900
Unlike its brethren Falcon 900B that occupies a position among February’s ‘Most Improved’ models, the Falcon 900 placed third from the bottom on the ‘Most Deteriorated’ list - mostly for technical reasons (the Falcon 900 featured on January’s ‘Most Improved’ list).
No aircraft trades had been recorded in February, and the two assets listed for sale equate to 10% of the active fleet. Nevertheless, the two aircraft comprising the inventory fleet did change during the month via one withdrawal and one addition, leading to a Maintenance Exposure increase approaching $55k.
Where the statistics become a bit misleading is in the Ask Price change, which decreased over $1.4m due to the addition of a less expensive asset, and a near 26% reduction in the Ask Price of the other listing.
There’s no doubt that an ETP Ratio of 56.6% is excessive but, in this instance, HCMP-enrollment can probably alleviate the problem, while the asset’s loyal following and low inventory are likely to assist sellers.
Bombardier Global Express
The Global Express improved its position on the ‘Most Deteriorated’ list since January, thanks to a Maintenance Exposure increase exceeding $863k, along with an Ask Price drop approaching $649k, that hiked (worsened) the model’s ETP Ratio to 83.1%.
One aircraft transacted in February, but five assets joined the inventory, raising availability to 17 units (11.7% of the active fleet). While neither figure is exorbitant, together they are bound to present challenges to any seller whose engines are not enrolled on HCMP.
Still, as we have previously mentioned, the Bombardier Global Express continues to have plenty of financial and operating life remaining, along with a strong following.
Bombardier Learjet 45
Four units joined the Learjet 45 inventory in February. This, along with no trades, raised availability to 17 aircraft (11.2% of the active fleet). A Maintenance Exposure increase exceeding $100k, along with an Ask Price decrease above $93k, worsened the model’s ETP Ratio to 86.9%.
Buyers interested in this model’s capabilities have a decent number to choose from, while sellers are strongly encouraged to understand where their asset sits in the market so as not to discard an offer that may be more realistic than it first appears.
Bombardier Learjet 35A
Completing our ‘Most Deteriorated’ list for February is another Learjet model, achieving its position through a Maintenance Exposure increase approaching $34k, while also posting an Ask Price decrease nearing $12k.
One aircraft trade was noted during the month, one aircraft was withdrawn from inventory, but two others joined the fleet to maintain the 39 listings. While this equates to only 9.2% of the active fleet, these aging assets are now sporting an ETP Ratio of 197.2%.
If you are a buyer, you have your pick of the litter, and probably at whatever rational price you choose to offer. If you’re a seller, it’s important to realize that a low price may be the only way to move your aircraft. To some, that may mean continuing to operate their jet is the better option.
The Seller’s Challenge
It is important to understand that the ETP Ratio has more to do with buyer and seller dynamics than it does with either the asset’s accrued maintenance or its price. For any aircraft, maintenance can accrue only so far before work must be completed.
But as an aircraft’s value decreases, there will come a point when the accrued maintenance figure equates to more than 40% of the aircraft’s ask price. When a prospective buyer adjusts their offer to address this accrued maintenance, the figure is all-too-often considered unacceptable to the seller and a deal is not reached.
It is not until an aircraft undergoes some major maintenance that a seller is sufficiently motivated to accept a lower figure, or a buyer is willing to pay a higher price and the aircraft transacts, ultimately.
A wise seller needs to consider the potential marketability impact early maintenance might have on their aircraft, as well as its enrollment on an Hourly Cost Maintenance Program where more than half of their model’s in-service fleet is enrolled on one.
Sellers also need to carefully weigh any offer from a prospective buyer against the loss in value of their aircraft for sale as the asset spends more days on the market awaiting a better offer while simultaneously accruing a higher maintenance figure.
More information from www.assetinsight.com
Read More About:
Business Aircraft Values |
Residual Value |
Cessna Citation X