How did the Beechcraft King Air 350 (Post-2000) models do?
Average Ask Prices for Asset Insight’s tracked fleet increased somewhat in July but values are still below the 12-month average. Asset availability rose to the highest year-to-date figure. Tony Kioussis explores which models were impacted the most…
Asset Insight’s monthly market analysis covering 96 fixed-wing models and 1,693 aircraft listed for sale was most recently conducted on July 31st, 2019 and marked the fourth consecutive month of asset quality deterioration for the inventory fleet (in this case -0.6%) to post a 12-month worst Quality Rating figure.
However, the figure did remain within the ‘Very Good’ range even after decreasing from 5.196 to 5.165 on a scale of -2.5 to 10.
Asset Insight’s tracked fleet’s Maintenance Exposure figure (an aircraft’s accumulated/embedded maintenance expense) followed suit, rising (worsening) 3.9% to an amount only marginally better than the 12-month high (worst) figure.
July’s Aircraft Value Trends
The average Ask Price for Asset Insight’s tracked fleet increased 0.9% in July, but only Large Jets were responsible for the Ask Price increase as, following classical supply dynamics, the three groups experiencing an inventory increase registered an Ask Price decrease:
- Large Jet values posted a 7.3% increase;
- Medium Jets lost 2.1% in July;
- Small Jet values decreased 4.2% to post a 12-month low figure; and
- Turboprops posted a record-low figure for the group by decreasing 0.9%.
July’s Fleet for Sale Trends
The total number of used aircraft listed for sale within Asset Insight’s tracked fleet posted another increase in July, 0.8% (13 units), on top of June’s 27 aircraft increase, raising inventory availability to the highest year-to-date figure.
- Large Jet inventory, the only one to decrease, fell 1.3% (five units);
- Medium Jet inventory increased 1.2% (six units) for the second consecutive month;
- Small Jets posted a 0.4% increase (two units); and
- Turboprops inventory increased 3.8% (10 units).
July’s Maintenance Exposure Trends
Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) due to July’s inventory fleet mix rose (worsened) 3.9% to a value only marginally better than the 12-month high (worst) figure, increasing to nearly $1.5m from last month’s $1.4m. Results for each of the four groups were as follows:
- Large Jet maintenance exposure rose (worsened) 4.0% to a figure marginally better than the group’s 12-month average;
- Medium Jet exposure rose (worsened) 0.8% to a figure slightly worse than the 12-month average;
- Small Jets rose (worsened) 0.4% to virtually equal the group’s 12-month average;
- Turboprops posted the only maintenance exposure decrease (improvement) of 2.1%, but that was only slightly better than last month’s 12-month worst figure.
July’s ETP Ratio Trend
As a result of all these changes, the average ETP Ratio figure increased (worsened) to 68.3% from June’s 65.4%, with all four groups contributing to the degradation.
Why is this information important? 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%.
How did each group fare during the month of July?
- Turboprops regained their leadership position by posting the lowest (best) ETP Ratio at 56.9% although, for the second consecutive month, the figure represented this group’s highest (worst) Ratio;
- Large Jets were next at 58.5%, a substantive worsening over last month’s 52.5%;
- Small Jets followed at 71.5%, higher than June’s 68.8%;
- Medium Jets posted 77.3%, equating to the group’s average figure over the past twelve months.
Excluding models whose ETP Ratio has remained over 200% during the previous two months (considered outliers), following is a breakdown of which individual business jet and turboprop models fared the best and worst during July 2019.
Most Improved Models
All ‘Most Improved’ models posted a Maintenance Exposure decrease (improvement). Although the Bombardier Challenger 601-3R and Global Express did not experience an Ask Price change the Cessna Citation V 560 had an Ask Price decrease of $24,519. The remaining three models posted the following price increases:
- Hawker 800A +$29,558
- King Air 350 (Post-2000 Models) +$23,143
- Beechcraft Premier 1A +$18,686
After appearing on the ‘Most Deteriorated’ list in June, the model captured top spot on the ‘Most Improved’ list in July through an ETP Ratio improvement exceeding 21%, thanks to a Maintenance Exposure reduction exceeding $114k and a substantial Ask Price increase.
Three units transacted in July, one was added, and three were withdrawn, leaving 36 listed for sale. Regrettably, nearly 26% of the active fleet remains on the market, and an ETP Ratio approaching 167% is not making the 800A a highly marketable model.
Still, this aircraft has quite a following and, if a unit’s maintenance status is in better-than-average condition, and if the asset’s engines are enrolled on HCMP, the seller should be able to generate some genuine interest in their aircraft.
Bombardier Challenger 601-3R
While this model experienced no sales in July, and no change to posted ask prices, one higher quality aircraft joined the fleet for sale, thereby reducing (improving) Maintenance Exposure by over $445k to earn the model second position on the ‘Most Improved’ list.
Alas, that’s where the good news ends because, even though only 6.9% of the active fleet is on the market, the model’s average ETP Ratio, at nearly 134%, is unlikely to make acceptable offers magically materialize.
Cessna Citation V 560
This model moved from the middle of the ‘Most Deteriorated’ group for June to this position in July. One aircraft transacted during the month, but two were added to the fleet for sale, increasing the inventory total to 28 (11% of the active fleet).
The Citation V 560 gained its spot on this list by virtue of a Maintenance Exposure decrease approaching $15k, and a respectable Ask Price increase.
Not surprisingly, its average ETP Ratio will prove troublesome for most sellers. However, owners whose aircraft is enrolled on engine HCMP coverage may fare better relative to offer price, assuming they’re able to identify a willing buyer.
Beechcraft King Air 350 (Post-2000 Models)
Generating four transactions in July, and with an ETP Ratio of only 22.6%, most sellers of this model should have little difficulty generating acceptable offers, even though current inventory represents 22.6% of the active fleet.
This aircraft has a well-deserved following, and its place on this list was caused by a Maintenance Exposure decrease exceeding $213k, along with an Ask Price increase that may, or may not be achievable.
Bombardier Global Express
The 18 aircraft listed for sale represent 12.3% of the active fleet, and demand for this model is low at present, with no units transacting in July.
The aircraft’s appearance on the ‘Most Improved’ list is due a Maintenance Exposure decrease for the listed fleet approaching $417k. But there were no notable price changes and the ETP Ratio is still hovering near 77% placing some sellers on the edge of the 40% Excessive Exposure demarcation point. The opportunity to generate good offers is not stellar for most owners.
Beechcraft Premier 1A
Closing out July’s ‘Most Improved’ list is the Premier 1A, which earned its place on this list through a $73k Maintenance Exposure Improvement and an Ask Price Increase. With an ETP Ratio of 44.5% - and considering that most of these aircraft have engine HCMP coverage – the news should be good for most sellers.
Unfortunately, no units transacted in July and, by virtue of four additions to the fleet during the month, total availability presently stands at 22 units, equating to 14.3% of the active fleet. That much selection and very low demand are not transaction-conducive elements.
Why was the Gulfstream GV on the 'Most Deteriorated' list for July 2019?
Most Deteriorated Models
All models on July’s ‘Most Deteriorated’ list experienced a Maintenance Exposure increase (deterioration). Two assets experienced no price change, the Gulfstream G100 and GV, while the remaining four posted an Ask Price decrease, as follows:
- Gulfstream GIV -$67,500
- Bombardier Learjet 55 -$32,153
- Dassault Falcon 900B -$1,122,500
- Beechcraft Premier 1 -$71,950
The model’s inventory was cut in half when two of the four aircraft listed for sale transacted in July. Demand is below average for the G100, so the change in inventory was surprising.
What was not surprising was the model’s place on our ‘Most Deteriorated’ list, as it was well-earned, thanks to a Maintenance Exposure increase approaching $533k for the two remaining listings. Even without an Ask Price change, there was little chance for the G100 to miss this list.
The Gulfstream GIV found its way to the position occupied by its younger GIV-SP (MSG) cousin in June. One aircraft transacted in July and two entered inventory to increase Maintenance Exposure by nearly $458k, while the average Ask Price dropped $67.5k.
The 14 units listed for sale equate to only 8% of the active fleet. However, with an ETP Ratio of 143%, sellers are likely to find it challenging to negotiate acceptable transaction values, even though these older aircraft continue to have a reasonable following.
Bombardier Learjet 55
We registered no trades for this model in July, but one was withdrawn from inventory leaving 14 listings that equate to approximately 13.5% of the active fleet. With an ETP Ratio approaching a figure that only astronomers can interpret, the model is on this list due to a near $75k Maintenance Exposure increase and an Ask Price decrease exceeding $32k.
None of this is surprising, considering these aircraft are between 32 and 38 years old. What we do find surprising is the aircraft’s ongoing buyer following, considering its age and technology.
Dassault Falcon 900B
No trades took place for this model during the month of July, but one aircraft was withdrawn from inventory leaving nine listed for sale, or about 6% of the active fleet.
The Falcon 900B earned a place on this list for ‘technical reasons’, as an Ask Price decrease exceeding $1.1m is unlikely to keep any asset off the ‘Most Deteriorated’ list. However, this represents another case where statistics do not tell the whole story.
Only two aircraft had a posted Ask Price in June, and one was withdrawn from the market, dramatically changing the model’s average Ask Price figure – in this case downward. The $12k change in Maintenance Exposure is fairly benign for the Falcon 900B’s size, and the model’s 52.7% ETP Ratio makes many of the available units quite marketable.
This is another case where statistics might point owners and buyers down a blind alley if they lack the supporting information.
Beechcraft Premier 1
Unlike the story for its younger brother, the Premier 1A (on July’s ‘Most Improved’ list), the Premier 1’s story is not as positive… but neither is it grim. One aircraft transacted in July, three were withdrawn from inventory, and two were added to the pool. When July ran out of days, we found 17 aircraft still listed for sale, or approximately 14.2% of the active fleet.
The changes to the fleet mix led to a Maintenance Exposure increase exceeding $114k and an Ask Price decrease approaching $72k, neither statistic aiding transaction-structuring opportunities.
However, considering these assets range in age between 14 and 18 years, and that the HCMP-adjusted ETP Ratio for many aircraft will be closer to the 40% excessive exposure demarcation point, many sellers have reason to be confident of achieving a reasonable transaction value. It should also be noted that this aircraft’s demand exceeds that of the Premier 1A. Not by much, but every little helps.
Rounding out our ‘Most Deteriorated’ list was an unexpected model, as the GV’s ETP Ratio has been tracking well within acceptable levels, and only 13 units are listed for sale, which equates to 6.8% of the active fleet.
Again, statistics have a way of skewing things. No aircraft traded in July, but two were withdrawn from inventory and two more joined the fleet for sale, and these changes increased Maintenance Exposure nearly $989k. Even without an Ask Price change, that level of maintenance expense variance is significant, even for this class of asset.
We believe most sellers have strong bargaining positions in the case of this model, and buyers have a sufficient pool of assets to choose from to facilitate transactions. In fact, we wouldn’t be surprised if the GV appears on our ‘Most Improved’ list for August.
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 an HCMP.
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: