Used Aircraft Maintenance & Marketability Analysis – August 2022

Asset Insight’s tracked 134-model fleet posted its largest increase this year during August, as availability rose 5.6% (46 units) with all three jet groups benefiting. Year-to-Date (YTD) listings are now 2.6% lower (-23 units) than they were on December 31, 2021, but remains 48.8% lower than the June 2020 peak.

At 5.250, the listed fleet’s Quality Rating was virtually unchanged from July’s 5.251, on Asset Insight’s scale of -2.5 (low) to 10 (high). That value just managed to keep the fleet within the ‘Excellent’ range, and was also 0.2% better/higher, YoY.

August’s Pre-Owned Aircraft Value Trends

Excepting April, average Ask Price has escalated each month this year. In August, the tracked fleet figure increased 3.3% to post the fourth consecutive 12-month high value. The latest rise equated to a 64% increase Year-over-Year (YoY), and nearly 77% YTD.

As has been the case throughout this year, values for young, low-time units are still strong. However, as we reported in our analysis of July activity, more listings are beginning to demonstrate signs of value stabilization. By category, the Ask Price changes for tracked models were as follows…

• Large Jets: Following July’s 2.6% decrease, Ask Price rose 0.5% to remain above the 12-month average. The figure was also 25.8% higher YTD, as well as 64.3% higher YoY.
• Mid-Size Jets: Ask Price rose for the fourth consecutive month in August, and the 14.3% increase set a second consecutive monthly all-time high value. The Mid-Size Jet Ask Price has now increased 125.3% YoY, and 169.5% YTD.
• Light Jets: Ask Price increased for two consecutive months, recording a second straight all-time high figure through a 1.4% increase that was also 54.2% higher YoY, and 81.7% higher YTD.
• Turboprops: Following a dip in January, Turboprops’ Ask Price has risen every month since, with August’s 2.3% increase equating to a second consecutive monthly all-time high figure. It also contributed to an increase of 27.6% YoY, and 31.2% YTD.

August’s Fleet for Sale Trends

While many sellers are hoping to capitalize on rising prices, owners of aging aircraft may not be as fortunate, based on the steadily increasing ‘Days on Market’ for older assets.

As was the case in July, three of the four groups set new all-time high Ask Prices. And yet, some sellers appear to be struggling, going by the ‘motivated seller’ and ‘next to sell’ advertisements that continue to appear.

Experienced buyers are continuing to exercise caution and restraint. However, any prospective purchaser wishing to secure the enhanced bonus depreciation available under US tax law should already be actively exploring available opportunities, as supply chain issues (including maintenance facility capacity), is once again likely to increase the time required to close a deal, come the industry’s traditional Q4 transaction frenzy.

• Large Jets: Inventory increased 7.4% (13 units) for Asset Insight’s 43-model tracked fleet, and availability is now up 12.5% YTD. But only half as many aircraft are listed for sale compared to the June 2020 peak.
• The fleet mix change lowered the Quality Rating by 0.4%, but the figure was nearly 2% better/higher YoY. August’s 5.587 Rating was equal to the 12-month average, and kept the group within ‘Outstanding’ territory.
• Mid-Size Jets: The group recorded an impressive 11.1% availability increase for the 45-model tracked fleet in August, equating to two-dozen units. Inventory is up 3.9% YTD, but is 52% lower than the June 2020 peak. The Quality Rating also rose 1.8% to 5.158 during August (2.2% worse YoY), keeping Mid-Size Jets within the ‘Very Good’ range.
• Light Jets: Listed assets for the 29-model tracked fleet increased 3.5% in August (nine units), bringing the YTD figure just 0.7% below the number available on December 31. While that was still 51.2% below the June 2020 peak, the increase is encouraging.
• What is not encouraging is the Quality Rating for the latest fleet mix, which dropped 1.4% - although at 5.195 the figure is better than the 12-month average, and reflects a 1.1% YoY improvement. Regrettably, it also drops the group into ‘Very Good’ range, from July’s ‘Excellent’ territory.
• Turboprops: The number of assets listed for sale did not change in August (the fleet was still down 36.3% from the June 2020 peak). The inventory mix change resulting from sales left the Quality Rating virtually unchanged at 5.058 (compared to July’s 5.055), maintaining the group’s ‘Very Good’ status.

August’s Maintenance Exposure Trends

Maintenance Exposure, the cost of embedded/accrued maintenance, increased 3.1% in August, and 7.8% YoY, clearly highlighting that upcoming maintenance events for the listed fleet will cost more to complete. By group, the Maintenance Exposure figures were as follows…

• Large Jets: Worsened, increasing 3.1% for the month, and 1% YoY.
• Mid-Size Jets: Decreased/improved 1%, including a substantive 14.3% YoY.
• Light Jets: Increased 8.4% during August (and 5.2% YoY), to post a 12-month high/worst figure.
• Turboprops: Worsened for the second consecutive month, this time through a 4.1% increase that was also 1.9% worse/higher YoY.

August’s ETP Ratio Trend

For a third consecutive month, the ETP Ratio set a 12-month best/low figure (54.6%), compared to July’s 54.9%. The decrease/improvement was fueled by the ongoing increase to the average Ask Price, which overcame a worsening Maintenance Exposure figure.

The ETP Ratio is a useful indicator of an aircraft’s marketability, computed by dividing the asset's Maintenance Exposure (the financial liability accrued with respect to future scheduled maintenance events) by its Ask Price. ‘Days on Market’ (DoM) analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s time on the market increases, usually by more than 30%.

During Q2, assets whose ETP Ratio was 40% or higher were listed for sale nearly 156% longer (on average) than aircraft whose Ratio was below 40% (183 versus versus 469 Days on Market). During August, 38% of Asset Insight’s tracked models, and nearly 42% of the listed fleet, posted an ETP Ratio above the 40% excessive mark. Each group fared as follows…

• Turboprops: An Ask Price increase was insufficient to overcome a Maintenance Exposure increase, raising the group’s ETP Ratio to 37.6%. The figure was better than average, and represented the group’s fourth month below the 40% ‘excessive’ demarcation point.
• Large Jets: The increase in Maintenance Exposure negatively impacted the ETP Ratio, increasing it, for a second consecutive month, to 37.9%. That compares to July’s 35.5%, and June’s 34.1% 12-month low. It should be noted that the group’s Ratio has now been below 40% for six months.
• Mid-Size Jets: With both Maintenance Exposure and Ask Price moving in the right direction, the effect on the ETP Ratio was a reduction to 51%. August brought the group’s fourth consecutive monthly improvement, and the third consecutive 12-month low/best figure.
• Light Jets: The group’s Ask Price increase was sufficient to push the ETP Ratio lower, to a second consecutive 12-month low figure of 79.8% for August.

Excluding models whose ETP Ratio was over 200% during one of the previous two months (considered outliers), following is a breakdown of the pre-owned business jet and turboprop models that fared the best and worst during August 2022…

Most Improved Models

Five of the six ‘Most Improved’ models recorded a Maintenance Exposure decrease, while the Citation X (operated under MSG3 Maintenance guidelines) experienced a $36,922 Maintenance Exposure increase. All six models registered Ask Price increases, including:

• Bombardier Challenger 601-3A: +$247,500
• Cessna Citation X (MSG3): +$1,147,500
• Cessna Citation ISP: +$2,769
• Bombardier Learjet 60XR: +$1,425,000
• Bombardier Learjet 31A: +$71,715
• Hawker 400XP: +$817,500

Bombardier Challenger 601-3A

After capturing second place on July’s ‘Most Improved’ list, the Bombardier Challenger 601-3A earned August’s top spot following one sale, one withdrawal from the listed fleet, and two additions. The model has been on these reports twelve times, with nine occurring over the past ten months!

Maintenance Exposure for the four listed units (3.6% of the active fleet) decreased more than $322k and the Ask Price increased $247.5k to earn the model its current visibility. However, an ETP Ratio of 103.1%, signaling that the average aircraft’s embedded maintenance is roughly equal to the average Ask Price, is going to be a challenge for sellers.

Incidentally, the Ask Price increase resulted from the addition of a unit priced 16.5% higher than the one withdrawn unit. Whether such a transaction value can be realized is questionable.

Cessna Citation X (MSG3)

The Cessna Citation X, operated under MSG3 maintenance guidelines, captured second place. The model has appeared on our report only four times, all on this side of the ledger, but has not made an appearance since February 2020.

Only two assets were listed for sale as August closed (4.4% of the active fleet), and the model had recorded no sales, additions, or withdrawals. It’s fairly dramatic ETP Ratio decrease to 62.2%, from July’s 81.5%, was orchestrated by an Ask Price increase exceeding $1.1m that overtook a Maintenance Exposure increase of nearly $37k.

This represents yet another case in which limited listings can skew figures, creating visibility for assets on ‘technical grounds’. Essentially, the seller of the unpriced unit elected to post an Ask Price in August that’s approximately two-thirds higher than the other listing. Again, whether that figure is attainable, the market will judge…

Cessna Citation ISP

Capturing the slot held by the Citation III in July is the Cessna Citation ISP. This model has taken part in half of all our reports, with 10 of its 22 appearances on this side of the ledger.

We recorded one sale in August, but three additions to inventory raised availability to 30 assets, representing 11.4% of the active fleet. As if that statistic did not create a sufficiently challenging environment for sellers, the Maintenance Exposure decrease exceeding $100k, and the nominal $2.8k Ask Price increase, only reduced the ETP Ratio to 121.8% – not exactly an inspirational figure.

Given the model’s year of manufacture can be traced back to 1977, none of this is surprising, except for the fact that 45-year-old assets continue to trade.

Bombardier Learjet 60XR

Three of the Bombardier Learjet 60XR’s five appearances on one of these reports were achieved during the past twelve months. The model earned its place on August’s ‘Most Improved’ list through one sale, and three additions to the listed fleet, leaving nine aircraft on the market (8.1% of the active fleet).

Maintenance Exposure decreased over $130.5k and Ask Price increased $1.425m, helping reduce the ETP Ratio to 26.1%. Under normal circumstances, that would prove to be extremely positive for sellers. But again, we need to point out a technicality that could make the average aircraft a bit less marketable.

The single listed unit’s Ask Price is more than 36% higher than July’s. Such dramatic increases in Ask Price do not often translate into an actual transaction value, but in the current market, anything is possible…

Bombardier Learjet 31A

Next on the list is an asset whose previous appearance on a report was at this time last year: The Bombardier Learjet 31A earned its place through a $49k decrease to Maintenance Exposure, and a near $72k increase in Ask Price.

No transactions were recorded for August, but two assets joined the inventory to create a pool of 14 aircraft, equating to 7.6% of the active fleet.

The model’s ETP Ratio, which now stands at 86.9%, will definitely pose challenges for sellers, but is unsurprising, considering some of these assets are over 30 years old.

Hawker 400XP

The Hawker 400XP occupied fourth place on July’s ‘Most Deteriorated’ list (the one and only time it’s found itself on that side of the ledger). For August, it moved across to the ‘Most Improved’ grouping.

One August sale and four additions to the listings substantively changed the model’s mix. The eight units listed for sale (3.7% of the active fleet) average a very respectable 24.7% ETP Ratio.

That Ratio was achieved through a nominal $6.5k Maintenance Exposure decrease, along with an average Ask Price increase of $817.5k. Again, whether or not the value increase is achievable is subject to market forces, but sellers of Hawker 400XPs have been doing well lately.

Most Deteriorated Models

Five of August’s six ‘Most Deteriorated’ models experienced a Maintenance Exposure increase, while the Hawker Beechjet 400 posted a Maintenance Exposure decrease of $8,494. Curiously, only two models posted Ask Price decreases, including:

• Beechcraft King Air C90: -$72,778
• Hawker Beechjet 400: -$305,000

The Ask Price for the Cessna Citation CJ2 remained unchanged, while the remaining three models experienced the following increases:

• Cessna Citation Excel: +$197,000
• Bombardier Learjet 55: +$90,833
• Cessna Citation Bravo: +$266,667

Cessna Citation CJ2

The Cessna Citation CJ2, a model that has attended these reports five times, with four of them on this side of the ledger, found itself on August’s ‘Most Deteriorated’ list after four aircraft transactions and one addition to the listings, creating an available pool of eight assets (3.4% of the active fleet).

Maintenance Exposure increased over $279k to earn the model its place. With listed Ask Prices unchanged, the model’s ETP Ratio slipped to 26.5% - though we believe sellers hold the upper hand still.

Cessna Citation Excel

The second of three Cessna Citations on August’s ‘Most Deteriorated’ list is the Cessna Citation Excel. The model, having placed sixth on July’s ‘Most Improved’ list, found itself here due to a Maintenance Exposure increase exceeding $538k, which overwhelmed an Ask Price increase of $197k.

Two aircraft were sold in August, and three joined the available assets to create a pool of eight aircraft (2.3% of the active fleet).

Considering the latest fleet mix only increased the ETP Ratio to 37.1%, most sellers should not have difficulty obtaining a value-based transaction price, especially if their aircraft is enrolled on an engine Hourly Cost Maintenance Program (HCMP).

Bombardier Learjet 55

The Bombardier Learjet 55 has been on one of our reports 15 times, with nearly half of them during the past 12 month, as it has bounced back and forth between groupings. For August, the model earned its spot through a Maintenance Exposure increase approaching $260k that trounced an Ask Price increase of just under $91k.

No aircraft sales were recorded by the time August closed, but four additional assets entered the ‘for sale’ pool to create nine total listings equating to 9.9% of the active fleet. With an ETP Ratio approaching 182%, buyers can set the negotiating tone, with most sellers having few cards to play.

Beechcraft King Air C90

Another frequent attendee to these reports, the Beechcraft King Air C90 has now logged nine appearances on the ‘Most Deteriorated’ grouping out of 17. While two sales were posted in August, two more assets entered inventory to leave availability at 14 units (4.1% of the active fleet).

The latest available fleet mix raised Maintenance Exposure by more than $17k while lowering the Ask Price by nearly $73k. The combination raised the ETP Ratio to nearly 140% and, even though there is ongoing market interest in this model, sellers are unlikely to be in the driving seat when it comes to transaction pricing.

Hawker Beechjet 400

The Hawker Beechjet 400 has featured in 15 previous reports, with one-third of them ranking among the ‘Most Deteriorated’.

It made August’s list after one seller reduced their Ask Price, while another seller posted an Ask Price nearly 74% below the average of the two other priced listings. The resulting $305k Ask Price decrease completely overshadowed a Maintenance Exposure increase approaching $8.5k, and raised the ETP Ratio to nearly 110%.

There were no August trades or any other changes to the four aircraft fleet mix (16.7% of an elderly active fleet), but July’s 75% ETP Ratio was also unlikely to help most sellers, except (possibly) those whose aircraft spec includes engine HCMP coverage.

Cessna Citation Bravo

It takes some serious inventory fleet changes to earn the ‘Most Deteriorated’ spot after occupying the ‘Most Improved’ position the previous month. However, when a model’s 12 listings (3.9% of the active fleet) result from four sales and four additions within the same month, the Cessna Citation Bravo is proof that such a dramatic reversal of fortune is possible.

While an Ask Price increase approaching $267k was nearly 10% of the model’s Ask Price average, the lower quality assets entering inventory increased Maintenance Exposure by more than $1.4m in August to seal the fate of the third Cessna Citation on August’s ‘Most Deteriorated’ list.

Averaging more than 139%, the ETP Ratio clearly indicates the current group of sellers may face some challenging (low) offers for their aircraft. While the value might be difficult to swallow, computing their aircraft’s Maintenance Exposure might help them understand the buyer’s reasoning, or help them justify why a higher price is warranted.

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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