Used Aircraft Maintenance & Marketability Analysis – May 2021

Asset Insight’s tracked inventory fleet contracted by another 4.6% last month, while the May 28, 2021 market analysis covering 134 fixed-wing models revealed 1,546 aircraft listed for sale, equating to a year-to-date (YTD) decrease of 19.1% for the tracked fleet.

The latest inventory’s Quality Rating decreased another 0.5% to 5.271, keeping the fleet within the ‘Excellent’ range, on Asset Insight’s scale of -2.5 to 10. Nevertheless, the lower number signifies the assets available will have to complete more near-term maintenance events.

May’s Aircraft Value Trends

Average Ask Price for Asset Insight’s tracked fleet increased 4.1% during May, equating to a 2.5% rise YTD, and a 4.2% gain year-over-year (YoY).

• Large Jets registered a 12-month high Ask Price with a 5.2% increase. The group’s average price ended May 5.4% higher YTD, and 5.8% higher YoY.
• Mid-Size Jet pricing increased 4.6%, but the figure was still 5.0% lower YTD, and 9.6% lower YoY.
• Light Jet average Ask Price rose 6.4% for the month, but was 8.3% lower YTD, and 11.8% lower YoY.
• Turboprop Ask Prices fell an insignificant 0.1%, leaving the group’s figure unchanged YTD and 2.0% higher YoY.

May’s Fleet for Sale Trends

Asset Insight’s tracked fleet posted an inventory decrease for the eleventh consecutive month, with May’s reduction equating to 87 aircraft. The tracked fleet has now contracted by 366 units YTD, equating to a 34.5% contraction since the June 2020 peak inventory month. Group inventory decreased as follows:

• Large Jets: Inventory decreased 5.9% (-23 units) and is down 14.6% YTD (-63 aircraft).
• Mid-Size Jets: Posted a decrease of 6.9% (-36 units), and YTD availability has fallen by 23.0% (-120 aircraft).
• Light Jets: Availability decreased an additional 1.8% (-10 units), reducing inventory by 21.5% YTD (-119 aircraft).
• Turboprops: The ‘for sale’ fleet decreased by 4.4% (-18 units), with 64 fewer aircraft available YTD (a 15.7% reduction).

May’s Maintenance Exposure Trends

Defined as the aircraft’s accumulated/embedded maintenance expense, Maintenance Exposure worsened (increased) by 2.0% to $1.515m for the month, setting a 12-month high (worst) figure.

What does this mean for inventory aircraft? As mentioned earlier, while available assets will, on average, experience more near-term maintenance events by virtue of the lower Quality Rating, the overall cost to complete those events is predicted to be higher. By individual group, Maintenance Exposure results varied.

• Large Jets: Worsened/Increased 2.2% to post the group’s 12-month worst (highest) figure that was also 4.9% higher/worse YoY.
• Mid-Size Jets: Decreased 1.0% to post the group’s second consecutive 12-month low/best value, while also improving/decreasing 2.6% YoY.
• Light Jets: Increased/Worsened a substantive 7.8% for the month, a figure that was 22.4% higher/worse YoY.
• Turboprops: Increased/worsened by 0.5% to post the group’s 12-month high/worst value, and that figure was 1.8% worse/higher YoY.

May’s ETP Ratio Trend

Asset Insight’s inventory fleet’s ETP Ratio, which has been rising steadily this year, rose/worsened to another all-time high 76.3%, compared to April’s 75%.

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 its price. ‘Days on Market’ analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s Days on the Market increases, in many cases by more than 30%.

During Q1 2021, aircraft whose ETP Ratio was 40% or greater were listed for sale 69% longer than assets with an ETP Ratio below 40% (285 days versus 482 days). In May, each group fared as follows…

• Turboprops: Continuing their performance for the eighteenth consecutive month, Turboprops earned top honors by posting the lowest/best ETP Ratio, 43.9%, representing an improvement over April’s 44.4% as well as a figure half-way between the group’s average and 12-month high.
• Large Jets: Only slightly worse/higher than its 12-month average, the group once again snagged second position with an ETP Ratio of 63.6% (up from 61.1% in April).
• Mid-Size Jets: Improved, through an ETP Ratio drop to a 12-month low 68.6% following April’s 72.2%.
• Light Jets: Continued to astound and amaze – and not in a good way – by posting their fourth consecutive record-high (worst ever) figure, at 118.4% compared to April’s 113.8%.

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 May 2021.

Most Improved Models

All six ‘Most Improved’ models for May posted Maintenance Exposure decreases (improvements). The Bombardier Learjet 45 (with APU) recorded an Ask Price decrease of $85,025, while the Cessna Caravan 208 saw no change.

The other four models posted the following price increases:

• Dassault Falcon 20-5: +$214,167
• Bombardier Learjet 45: +$181,667
• Hawker 400XP: +$433
• Beechcraft King Air C90: +$44793

Dassault Falcon 20-5

Although the Falcon 20 first came off the production line 55 years ago, the re-engined Dassault Falcon 20-5 version of this model managed to capture top honors on May’s ‘Most Improved’ group through the sale of one aircraft.

The four assets still listed for sale represent only 4.9% of the active fleet, while the model’s 134.7% ETP Ratio represents a substantial hurdle for sellers.

Still, the Ratio’s 58.4% decrease following a Maintenance Exposure reduction exceeding $107k, along with an Ask Price increase exceeding $234k, is noteworthy, as is continued operator interest in these assets.

Bombardier Learjet 45 w/APU

Two Bombardier Learjet 45 (with APU) transactions occurred in May, resulting in a Maintenance Exposure decreasing of over $343k, thereby earning the model second position on this ‘Most Improved’ list, even with an Ask Price decrease exceeding $85k.

There were five aircraft listed for sale as May ended, representing 5.7% of the active fleet, and with an ETP Ratio at 51.8% any seller whose engines are enrolled on an Hourly Cost Maintenance Program (HCMP) should have ample opportunities to structure a value-based transaction.

Bombardier Learjet 45

Continuing the family theme, the Bombardier Learjet 45 not sporting an APU earned third place on May’s ‘Most Improved’ list, a vast improvement from the ‘Most Deteriorated’ position held during April’s market review.

While no transactions were recorded, three aircraft were withdrawn from inventory, and one entered the available pool, offering a selection of 12 assets (8.1% of the active fleet) for prospective buyers to consider.

Unlike its APU-equipped equivalent, the non-APU Learjet 45 had an ETP Ratio of 90.7%, thanks to a Maintenance Exposure decrease exceeding $33k and an Ask Price rise approaching $182k. This will make life a bit more challenging for sellers, but perhaps a little less so for those whose aircraft are covered by engine HCMPs.

Hawker 400XP

One sale, one inventory fleet withdrawal, and one addition created the 15.2% change in the Hawker 400XP’s ETP Ratio, thereby earning it a spot on May’s ‘Most Improved’ list.

The 18-aircraft inventory pool represents 8.2% of the active fleet, meaning that sellers are likely to have the upper hand. And, at 48.9%, the model’s ETP Ratio – through a $196k Maintenance Exposure reduction and a nominal Ask Price increase – should provide ample opportunity for both parties to conduct value-based sales.

Cessna Caravan 208

The Cessna Caravan 208 earned fifth position on this list without registering a price increase. The single transaction recorded during May decreased the inventory fleet’s Maintenance Exposure by more than $170k.

There were five aircraft listed for sale by the end of May, representing just 2.1% of the active fleet. Clearly, existing owners will have little trouble remarketing their aircraft, especially with the ETP Ratio averaging 33.5%.

Beechcraft King Air C90

One Beechcraft King Air C90 found a new owner, while another took its place in the ‘for sale’ fleet. The change resulted in a Maintenance Exposure decrease approaching $17k, along with an Ask Price increase nearing $45k. These changes allowed the King Air C90 to occupy the final slot on May’s ‘Most Improved’ list.

The 35 aircraft available at the end of the month represented 9.6% of the active fleet, but the advantage is probably with the buyer, as the model’s 104% ETP Ratio is likely to decrease offer prices from shoppers seeking to address upcoming maintenance costs.

Keeping in mind that only a small number of turboprops have engine Hourly Cost Maintenance Program coverage, any seller whose asset is enrolled needs to identify – and thoroughly understand – the financial value their enrollment decision is likely to provide a prospective buyer.

There is more to HCMP than any value increase to the asset, and buyers (particularly first-time aircraft prospects) may not realize all the advantages such programs offer.

Most Deteriorated Models

All six ‘Most Deteriorated’ models posted a Maintenance Exposure increase in May. The Bombardier Learjet 31A posted an Ask Price increase of $39,606, while the Gulfstream GIV registered no price change. The remaining four models experienced the following price decreases:

• Piaggio P-180 II: -$69,792
• Cessna Citation CJ2: -$64,000
• Hawker 800XP: -$182,222
• Bombardier Learjet 40XR: -$160,750

Piaggio P-180 II

Starting off our list of May’s ‘Most Deteriorated’ models is the Piaggio P-180 II, which posted no transactions in May. But three additions to inventory created a pool of 16 assets (12.9% of the active fleet). The availability expansion worsened/raised Maintenance Exposure by nearly $171k, while the average Ask Price decreased close to $70k, solidifying the model’s place on this list.

Fortunately for sellers, the ETP Ratio stands at 43.3%, and is likely to provide opportunities for many of the sellers, while a reasonable selection is available for buyers.

Gulfstream GIV

The Gulfstream GIV’s continued market following is evidenced by the availability of only nine aircraft (5.6% of the active fleet). While that might not magically address an ETP Ratio of 132%, enrollment on engine HCMP coverage should result in more reasonable offers for existing owners.

The model’s Ask Price did not change in May, but Maintenance Exposure did increase by more than $244k (after one sale and one addition to the ‘for sale’ pool). Considering the model’s age – the first aircraft rolled off the production line 35 years ago – we cannot help but be impressed by the GIV’s resilience.

Cessna Citation CJ2

During May, two Cessna Citation CJ2’s each were sold, added and withdrawn to create a listed pool of 13 aircraft; 5.5% of the active fleet. The model earned its spot on the ‘Most Deteriorated’ list through a Maintenance Exposure increase exceeding $168k, while its average Ask Price decreased $64k.

With the ETP Ratio hovering around the 45% mark, we see great potential for buyers and sellers to agree on mutually acceptable prices, so long as both parties have realistic financial expectations.

Hawker 800XP

Another industry workhorse managed to find its way onto the ‘Most Deteriorated’ list, but there is no shortage of Hawker 800XP interest from prospective buyers. Seven transactions were identified for May, and, while 25 aircraft were listed for sale following one inventory withdrawal, only 6.4% of the active fleet was for sale at the end of May.

Inventory changes increased Maintenance Exposure by more than $24k, and the average Ask Price fell by over $182k, but the resulting ETP Ratio of 82.2% does not accurately reflect the opportunities available to sellers.

With the majority of the fleet enrolled on engine Program coverage, the HCMP-adjusted ETP Ratio for most listed assets, and the aircraft’s industry appeal, should make most Hawker 800XPs quite marketable.

Bombardier Learjet 40XR

Occupying the next-to-last position on the ‘Most Deteriorated’ list is the third of four Learjet models – the Bombardier Learjet 40XR – which arrived here due to a Maintenance Exposure increase approaching $100k, along with an Ask Price decrease nearing $161k that increased the model’s ETP Ratio to 64.3%.

The news is not all bad, though, as one aircraft transacted during May. The seven remaining inventory jets represent only 7.6% of the active fleet. Any seller whose aircraft is enrolled on engine HCMP should be able to recognize the value associated with their program’s coverage.

Bombardier Learjet 31A

The ‘Most Deteriorated’ model we identified this month is another Learjet, and most Bombardier Learjet 31A sellers are probably not enjoying the few offers they are receiving. One aircraft traded in May, but two were added to the inventory, and the 30 listed units equate to 15.8% of the active fleet.

Changes in the ‘for sale’ pool increased the average Ask Price by nearly $40k, but it is anyone’s guess if sellers’ desire to capitalize on the industry’s limited overall supply will allow them to realize the desired increase.

Lastly, Maintenance Exposure increased by almost $149k, and the resulting 120.8% ETP Ratio will make decent valuations for these aging aircraft difficult. Even engine HCMP coverage is likely to aid little when it comes to aging technology whose future maintenance costs are expected to increase.

The Seller’s Challenge

It is important to understand that an aircraft’s 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 HCMP 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.

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