Used Aircraft Maintenance Analysis – March 2020

During March, Asset Insight’s tracked fleet of 134 fixed-wing models and 2,218 aircraft listed for sale identified a 1.2% inventory fleet increase over February’s figure, for a year-to-date (YTD) increase of 1.6%.

Concurrently, the available inventory’s maintenance status posted a 12-month best (highest) Quality Rating, keeping the fleet within the ‘Excellent’ range, virtually unchanged (at 5.297) compared with February’s 5.295, on a scale of -2.500 to 10.000.

March’s Aircraft Value Trends

While the average Ask Price for aircraft in the tracked fleet decreased a bit, the posted figure was only $20k below the 12-month high figure achieved in February, and only one group experienced a decrease.

• Large Jets: Ask Prices remained virtually unchanged, increasing a nominal 0.1%.
• Medium Jets: The only group to post a value loss, Medium Jets decreased 6.7%.
• Small Jets: Increased 3.0%.
• Turboprops: Rose 1.7%.

March’s Fleet for Sale Trends

The total number of used aircraft listed for sale increased 1.2% in March, and 1.6% for Q1 2020. That translated into a tracked inventory increase of 26 units in March and 36 units for all of Q1. Individual group figures broke down as follows.

• Large Jet Inventory: Increased 1.3% in March (+6 units) and 7.9% during Q1 (+34 units)
• Medium Jet Inventory: Rose 1.8% (+11 units) for the month, but down 4.9% for Q1 (-32 units)
• Small Jet Inventory: Increased 0.4% (+3 units) in March and 7.5% (+48 units) YTD
• Turboprop Inventory: Increased 1.4% (+6 units) for the month, but down 3.1% for Q1 (-14 units).

March’s Maintenance Exposure Trends

Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) increased (worsened) 5.5% for the month and 4.0% during Q1. Individual results were as follows:

• Large Jets: Worsened (increased) by 5.9% for the month and 6.3% during Q1.
• Medium Jets: Improved (decreased) 0.6% in March and 4.1% for Q1.
• Small Jets: Worsened (increased) 14.5% to post the group’s worst (highest) 12-month figure, while also increasing 22.3% during Q1.
• Turboprops: Worsened (increased) by 1.3% in March, but improved by 11.7% YTD.

March’s ETP Ratio Trend

The fleet’s ETP Ratio worsened (increased) in pretty dramatic fashion in March, virtually erasing any previous improvement to post a figure of 71.1% (versus February’s 65.4% and the 64.8% it registered at Year-End 2019).

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 Q1 2020, aircraft whose ETP Ratio was 40% or greater were listed for sale nearly 68% longer than assets with an ETP Ratio below 40% (245 days versus 413 days). How did each group fare during March?

• Turboprops: Continued to hold the top (best) spot by a wide margin posting the lowest ETP Ratio of 42.1% (the group’s third consecutive 12-month low/best figure).
• Large Jets: Held on to second place at 64.7%.
• Medium Jets: Kept their third position at 74.6%.
• Small Jets: Posted the group’s 12-month worst (highest) figure of 90.2%.

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 March 2020.

Most Improved Models

All of the ‘Most Improved’ models posted a Maintenance Exposure decrease (improvement). While the Hawker 800A experienced an Ask Price decrease of $29,622 and the Dassault Falcon 900 saw no change in Ask Price, the remaining four models experienced price increases, as follows:

• King Air B200 – Pre-2001 +$74,913
• Gulfstream GV +$228,194
• Hawker 800XP +$77,760
• Hawker Beechjet 400A +$27,969

Hawker 800A

Since appearing at the bottom of January’s ‘Most Deteriorated’ list, the Hawker 800A claimed third place on February’s ‘Most Improved’ list, and leads the ‘Most Improved’ list for March.

Two aircraft traded last month, and the 31 currently listed for sale equate to 13.7% of the active fleet. The latest fleet mix helped the model achieve its standing through a Maintenance Exposure decrease exceeding $243k (which overcame an Ask Price drop approaching $30k).

The model’s 152.5% ETP Ratio is not going to magically spark additional buyer interest, but its improvement is notable, as is its ongoing market following.

Dassault Falcon 900

Second place goes to a model whose appearance was created through a 50% increase in available units for sale in March. That difference resulted in a decreased Maintenance Exposure of nearly $369k. With no change in the average Ask Price, the Falcon 900 earned its position on this list.

Translation: Three aircraft are now listed for sale (as opposed to the two listed last month) and the recently-listed unit did not show an Ask Price. This should serve as proof that statistics can be misleading!

The Falcon 900 has a strong following, though, and with an ETP Ratio below 45%, sellers should be able to locate interested buyers, even though the listed units represent 13% of the active fleet.

King Air B200 (Pre-2001 Models)

Third place goes to a model that recorded three transactions, one withdrawal, and four additions to the fleet for sale in March, lowering the Maintenance Exposure by nearly $48k and increasing the Ask Price by nearly $75k.

The 43 units listed for sale offer a good selection for buyers while still representing only 5.5% of the active fleet, creating ample opportunities for sellers. Moreover, the model’s near 46% ETP Ratio is a testament to the following this >20 year-old aircraft continues to enjoy.

Gulfstream GV

Next on the ‘Most Improved’ list is an aircraft whose 19 sellers should have little problem locating interested buyers, considering listings represent 10% of the active fleet, and the Gulfstream GV’s ETP Ratio is below 30%. (Admittedly, the current pandemic may delay deal-making a bit.)

One aircraft transaction was registered as we closed March, leading to a Maintenance Exposure decrease exceeding $556k that, along with an Ask Price increase of more than $228k, earned the model its ‘Most Improved’ ranking.

Hawker 800XP

Following the behavior of the Hawker 800A, the Hawker 800XP made the ‘Most Improved’ list thanks to a Maintenance Exposure decrease approaching $24k and an Ask Price increase nearing $78k. Four aircraft transactions were posted in March that, following some additions, a withdrawal and some other changes, meant 13.3% of the active fleet is currently listed for sale.

The 800XP is sporting an ETP Ratio nearly half that of the 800A. Assuming an asset’s engines are enrolled on an Hourly Cost Maintenance Program, the model has sufficient following in the market for sellers to structure sensibly-priced transactions.

Hawker Beechjet 400A

Rounding out March’s ‘Most Improved’ list is the Beechjet 400A, an aircraft that occupied a place in the ‘Most Deteriorated’ rankings last month, and whose sellers may have a hard time convincing a limited pool of buyers that their aircraft is worthy of the price they seek.

With 61 units, 22.6% of the active fleet, listed for sale, and aircraft age ranging from 17 to 30 years, differentiation is likely to focus heavily on price. The model’s 78.6% ETP Ratio was created through three sales last month, as well as one withdrawal from, plus six additions to the ‘for sale’ fleet.

The revised inventory mix lowered Maintenance Exposure by over $20k while boosting Ask Price nearly $28k. Regrettably, with the current ETP Ratio most sellers are likely to find pricing discussions challenging.

Most Deteriorated Models

All six models on March’s ‘Most Deteriorated’ list registered a Maintenance Exposure increase. The Bombardier Learjet 31A posted an Ask Price increase of $17,731, the Learjet 35A experienced no Ask Price change, and the remaining models underwent the following decreases:

• Cessna Citation II -$4,444
• Cessna Citation ISP -$20,015
• Hawker Premier 1 -$13,183
• Gulfstream GIV -$25,556

Cessna Citation II

March’s ‘Most Deteriorated’ model registered five transactions, but the 89 units currently listed for sale account for 17.5% of the active fleet, creating serious pricing challenges for sellers.

The aircraft’s $241k Maintenance Exposure increase and Ask Price decrease are both symptomatic of the model’s 147.4% ETP Ratio. With aircraft age ranging from 25 to 42 years, sellers must rely on buyers seeking low pricing that addresses the very real probability they would become the aircraft’s final owner.

Cessna Citation ISP

The second ‘Most Deteriorated’ model this month is another member of the Citation family, except this one is older, since Citation ISPs range from 35 to 43 years of age. No transactions were noted in March, but three withdrawals from inventory left 17% of the active fleet (47 units) available for buyers focused on still-operable ‘antiques’.

Surprisingly, the Citation ISP sports a lower ETP Ratio than the younger Citation II fleet. Nevertheless, the 126.1% Ratio (courtesy of a Maintenance Exposure increase approaching $176k and an Ask Price decrease exceeding $20k) offers buyers the opportunity to earn ‘final owner’ status with this model.

Bombardier Learjet 31A

The first of two Learjets on the ‘Most Deteriorated’ list this month posted no transactions in March, although one aircraft was withdrawn from inventory. At the last count, 38 Learjet 31As were listed for sale, representing 19.5% of the active fleet.

These aircraft are now between 17 and 29 years of age, and while they are still quite productive assets, their 128.1% ETP Ratio is a testament to their challenging marketability.

The Learjet 31A essentially earned its spot on this list through a Maintenance Exposure increase exceeding $246k, even though the aircraft actually posted an Ask Price increase. Whether or not the higher Ask Pricing can be achieved, especially at this challenging time, remains to be seen…

Bombardier Learjet 36A

The second Learjet on this list is a 27-44-year old model that also recorded no transactions during March, and no Ask Price change. (While statistically correct, this fact is also somewhat misleading as only one of the four listed units displays an Ask Price.)

The aircraft earned its spot on this list thanks to a Maintenance Exposure figure approaching $210k. With its ETP Ratio exceeding 151%, this model is not readily marketable, although its operating capabilities are still quite impressive, by any standard.

Beechcraft Premier 1

No transactions were identified for the month of March, but the two inventory withdrawals and four additions created an availability of two dozen units, 20.2% of the active fleet. These assets are only aged between 15 and 19 years, but their ETP Ratio, which stood at nearly 90% during this latest analysis, negatively impacts their marketability.

Maintenance Exposure approached $308k in March, while Ask Price dropped over $13k. Enrollment on an engine Hourly Cost Maintenance Program would lower the HCMP-Adjusted ETP Ratio, but that is not an effective differentiator for sellers, as most of these assets are enrolled on a program.

Gulfstream GIV

Rounding out our ‘Most Deteriorated’ list this month is a model whose ETP Ratio, quite frankly, surprised us. The GIV continues to have a respectable following. However, its ongoing Ask Price decreases (nearly $26k last month) and high Maintenance Exposure figure (over $563k in March) are clearly reflecting the aircraft’s 27-34 years of age.

Two units transacted in March, one was withdrawn from inventory, and another was added to total 20 available units, equivalent to 11.6% of the active fleet.

Here again, sellers whose aircraft engines are enrolled on an Hourly Cost Maintenance Program will see a lower HCMP-Adjusted ETP Ratio, but the figure will still be such that price is likely to be the transaction’s primary driver.

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.

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