Used Aircraft Maintenance & Marketability Analysis – February 2022

Asset Insight’s 134-model tracked fleet ended February with only 703 assets listed for sale, having decreased by 5.3% in February (39 aircraft). Younger, lower-time unlisted aircraft continue to transact at a pace we’ve never seen before, and listings are now down more than 58% since the June 2020 peak.

As proof that an aircraft’s maintenance condition and its age have no direct correlation, the listed fleet’s Quality Rating improved an additional 0.8% to 5.216 (indicating fewer upcoming maintenance events), following January’s 0.6% rise. Available inventory remained within ‘Very Good’ territory, but the latest Rating was 2.6% lower, Year-over-Year (YoY).

February’s Pre-Owned Aircraft Value Trends

Ask Prices for the listed fleet have increased 13.7% during the first two months of 2022, and February saw a 7.5% rise. Prices are still down 7.1% YoY, Large Jets being the only group in positive territory.

We believe actual transaction values to be higher, as the listed fleet is comprised of mostly picked-over assets, while many younger, low-time aircraft are trading without ever being listed for sale. Nevertheless, by category the Ask Price changes were as follows…

• Large Jets: Ask Price rose 7% in February to post a 12-month high for the second consecutive month, bringing the average Ask Price up 23.1% since December.
• Mid-Size Jets: While the average Ask Price rose 5.7% for the month (24.5% Year-to-Date), the figure was still below the group’s 12-month average, and 13.3% lower YoY.
• Light Jets: The average Ask Price aided the group’s statistics, rising 5.3% (a total increase of 5.6% since December). That value is still 16.2% lower YoY, and the group’s average Price remains lower than that posted by Turboprops.
• Turboprops: Buyers appeared to focus on lower quality, and lower-priced assets during February, with the net impact of increasing the average Ask Price by 2.9%. Nevertheless, that value is still 5.9% below December’s figure, and 6.6% lower YoY.

February’s Fleet for Sale Trends

Our tracked fleet’s inventory decreased to 3.4% of the active fleet, from January’s 3.5%. In February 2021 the listed inventory was 8.3% of the active fleet – a figure that raised concerns about transaction opportunities for the calendar year.

We expect demand to remain strong in 2022. However, with availability shrinking to an average of 5.25 assets per tracked model (a figure that certainly includes listings being operated by their final owner), it will be difficult for 2022 pre-owned aircraft transactions to exceed last year’s figure.

Increased aircraft production may help, but the OEMs will undoubtedly be cautious with their production figures, and first-time buyers of new production aircraft will not have assets to remarket, thus increasing the pre-owned inventory.

• Large Jets: Asset Insight’s tracked 43-model fleet’s availability is down to just 2.6%, equating to just over three aircraft per model. By comparison, listings stood at 7.1% of the active fleet at the end of February 2021. The latest listed fleet reflected a 10.2% decrease for February (-15 units), 21.4% since December (-36 units), and is now nearly 65% below its June 2020 peak. The group’s Quality Rating rose 0.5% to just below the 12-month average and, at 5.519, moved Large Jets back into ‘Outstanding’ territory. However, Quality remained 2.4% lower (worse) YoY. As mentioned earlier, maintenance status is not directly related to aircraft age, nor does it account for the asset’s specification. So, while an asset’s Quality may be high, the aircraft may not necessarily appeal to buyers.
• Mid-Size Jets: Asset Insight’s 45-model tracked Mid-Size Jet fleet decreased another 3.4% in February (-6 units), which brought the Year-to-Date reduction to 25.1% (-58 units). Availability stood at only 4% of the active fleet, compared to 10% last year. The Quality Rating dropped a nominal 0.2% to 5.109, a figure that was just above the 12-month low, but the fleet still retained ‘Very Good’ status.
• Light Jets: While more Light Jets are listed for sale compared to Large and Mid-Size Jets, that only equated to 3.3% of the active Light Jet fleet. That compares to 8.7% in February 2021. Availability decreased another 4.2% during February (-10 units), equating to a 13.9% drop YTD (-37 units), and nearly 58% since the June 2020 peak. The Light Jets’ Quality Rating improved another 1.6% and, at 5.134, kept it within the ‘Very Good’ range, although the figure is 0.6% worse, YoY. Maintenance Exposure improved too, decreasing 2.4%, and is approaching the 12-month low (best) figure. Indeed, Maintenance Exposure is 3.5% lower (better) YoY.
• Turboprops: More Turboprops are available (on a per model basis) than for any Jet group, but the total Turboprop listings equated to only 3.1% of the active fleet for Asset Insight’s 17 tracked models, compared to 6.3% one year ago. Unit availability decreased by eight aircraft (-4.5%) in February, 50 units during the first two months of the year (-22.9%), and nearly 36% since the June 2020 peak. The latest fleet mix improved the Quality Rating by 1.2%. Although nearly 2% worse YoY, the latest figure kept Turboprops within ‘Very Good’ range.

February’s Maintenance Exposure Trends

After posting a 12-month high (worst) figure in January, Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) decreased/improved a substantive 8% during February, and is virtually the same as that posted in February 2021.

In addition to the higher Quality Rating signifying fewer maintenance events for the listed fleet, the lower Maintenance Exposure figure indicates those events will cost less to complete. By group, the Maintenance Exposure figures were as follows…

• Large Jets: Maintenance Exposure improved (decreased) nearly 15% in February, and also improved over 4.5% YoY.
• Mid-Size Jets: The group’s Maintenance Exposure worsened, climbing 2.8% for the month to post a second consecutive 12-month high (worst) figure, which was also 9.3% worse YoY.
• Light Jets: Maintenance Exposure improved, decreasing 2.4% to approach the 12-month low (best) figure, and that value was 3.5% lower (better) YoY.
• Turboprops: Maintenance Exposure improved, decreasing 0.8% to a figure half-way between the group’s average and 12-month high.

February’s ETP Ratio Trend

Following two consecutive months setting all-time high (worst) figures, the ETP Ratio improved to 77.3%, a substantial decrease from January’s 82.1%. The change shouldn’t be surprising, given the increase in Ask Price and the significant decrease in Maintenance Exposure, but it should be noted that the key drivers were the Maintenance Exposure and Ask Price values posted by Large Jets.

Based on recent figures, we predict ongoing challenges for most sellers of Mid-Size and Light Jets who expect to generate value-based prices.

For anyone not familiar with the ETP Ratio, the statistic is a useful indicator of an aircraft’s marketability. It is computed by dividing the asset's Maintenance Exposure (the financial liability accrued with respect to future scheduled maintenance events) by its Ask Price.

As the ETP Ratio decreases, the asset's value increases in relation to its 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 Q4 2021, assets whose ETP Ratio was 40% or higher were listed for sale more than 59% longer (on average) than aircraft whose Ratio was below 40% (340, versus 541 DoM). Nearly 51% of our tracked models and 61% of all listed aircraft posted an ETP Ratio above the 40% excessive mark, with each group faring as follows:

• Large Jets: With the Ask Price up 23.1% since December, the group was able to capture the top spot in February as the ETP Ratio dropped to 40.8% (a 12-month low figure for the group).
• Turboprops: After occupying the top spot for more than two years, Turboprops dropped into second place, even though the group’s ETP Ratio decreased (improved) to 47.7% from January’s 12-month high/worst of 49.1%.
• Mid-Size Jets: At 83.3%, the Mid-Size Jets’ ETP Ratio increased from January’s 82%, a figure just under the 12-month high/worst value.
• Light Jets: With Maintenance Exposure decreasing and Ask Price increasing, the group’s ETP Ratio decreased to 110.1% (the 12-month average). While an aircraft’s maintenance status may be classified as ‘Very Good’, when Maintenance Exposure doubles the total cost for acquiring the aircraft, most savvy buyers tend to focus on other assets.

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 February 2022.

Most Improved Models

Five of February’s ‘Most Improved’ models experienced a Maintenance Exposure decrease (improvement), while the figure increased for the Piaggio Avanti P-180. The Bombardier Global 5000 posted no Ask Price change, but the remaining five models registered the following Ask Price increases:

• Gulfstream GIV: +$950,000
• Piaggio Avanti P-180: +$381,667
• Hawker 800A: +$152,500
• Dassault Falcon 50: +$162,500
• Beechcraft Premier 1: +$12,104

Gulfstream GIV

Featuring in these reports more than any other model, the Gulfstream GIV made its 24th appearance in February 2022, this time leading the ‘Most Improved’ group. Given the model was in second position on the ‘Most Deteriorated’ list last month, the change is impressive.

It accomplished this feat thanks to one withdrawn listing, one addition to the inventory, and no sales transactions. As a result, Maintenance Exposure decreased nearly $50k, while Ask Price increased $950k. Nevertheless, that could only improve the ETP Ratio to 92.7%.

With the available inventory down to four units (only 2.6% of the active fleet), we believe owners whose aircraft are enrolled on an engine Hourly Cost Maintenance Program (HCMP) have decent opportunities to generate respectable sale prices.

Piaggio Avanti P-180

Making its sixth-ever appearance on the ‘Most Improved’ list, and its 11th on either report, is the Piaggio Avanti P-180. It earned its spot through an Ask Price increase approaching $382k, which considerably overshadowed a Maintenance Exposure increase nearing $5k.

One aircraft transacted in February, but two joined the inventory, raising availability to five units (6.3% of the active fleet). This model has a spacious cabin and impressive speed for a Turboprop, but it has limited market following. An ETP Ratio exceeding 82% will likely cause some pricing challenges for sellers.

Hawker 800A

Next is a model making its 20th appearance on one of these reports, and its 11th on the ‘Most Improved’ list. The Hawker 800A’s Maintenance Exposure decreased more than $142k, and an Ask Price increased nearly $153k.

These changes were able to lower the ETP Ratio by more than 25%, but the resulting 95.3% figure is unlikely to help most sellers. Neither can HCMP coverage be used as a distinguisher in most cases – more than 80% of the fleet is enrolled on a Program.

Nevertheless, the model continues to have great industry following, as evidenced by there being only five Hawker 800A listings (3% of the active fleet) at the end of February – a month that recorded one completed transaction.

Dassault Falcon 50

The Dassault Falcon 50 earned its fourth-ever appearance on the ‘Most Improved’ list through a Maintenance Exposure decrease exceeding $92k and an Ask Price increase approaching $163k. Two aircraft transacted in February, and another joined the inventory, leaving nine assets listed for sale – 5% of the active fleet.

Based on statistical data, an ETP Ratio of 86.6% would imply sellers are facing serious marketing challenges. However, if a buyer’s operational environment is sufficiently challenging to require this model’s capabilities, and if the aircraft in enrolled on engine HCMP, we believe the seller is not at a negotiating disadvantage.

Beechcraft Premier 1

The Beechcraft Premier 1 experienced an active February, with three aircraft transacting, two inventory withdrawals, and one addition. The net effect of these changes was a Maintenance Exposure reduction of more than $178k, and an Ask Price increase of over $12k. The ETP Ratio improved to 77.8%.

As most of these aircraft are enrolled on the engine OEM’s Hourly Cost Maintenance Program, sellers of the six listed assets (5.1% of the active fleet) are likely to be in a decent position when it comes to price negotiations, given the current marketplace.

Bombardier Global 5000

The Bombardier Global 5000 is not a frequent fixture on these reports, and this is the first time it occupies a slot on the ‘Most Improved’ grouping.

It captured its place on February’s report despite no change in Ask Price. Two sales and one inventory withdrawal lowered the listed fleet’s Maintenance Exposure by more than $1.486m to improve (lower) the ETP Ratio by nearly 11%.

With only four listings (1.7% of the active fleet), a strong industry following, and an ETP Ratio of 30.3%, sellers clearly hold the better hand when it comes to price negotiations.

Most Deteriorated Models

For the first time since we’ve been publishing these reports, four models on the ‘Most Deteriorated’ list posted a Maintenance Exposure decrease: These included the Hawker 1000A, Bombardier Learjet 60, Cessna Citation Ultra, and the Dassault Falcon 20-5.

One model, the Gulfstream GIV-SP posted no Ask Price change, while the remaining five models experienced the following decreases:

• Socata TBM 700A: -$61,750
• Hawker 1000A: -$143,000
• Bombardier Learjet 60: -$421,839
• Citation Ultra: -$277,500
• Dassault Falcon 20-5: -$175,333

Socata TBM 700A

No sales were identified by the time February closed, but one Socata TBM 700 transacted in January, after we closed out that month, leaving six inventory assets (5.9% of the active fleet). That one change raised Maintenance Exposure by nearly $43k, and lowered the group’s Ask Price by nearly $62k to place it on February’s ‘Most Deteriorated’ list.

Based on the model’s historically strong following, an ETP Ratio of 68.4% may not challenge sellers too much, but it does give leverage to buyers for negotiations.

Gulfstream GIV-SP

Unlike its older GIV sibling, the Gulfstream GIV-SP has found its way onto one of our reports only ten times, but 60% of those have been on the ‘Most Deteriorated’ list. After occupying second from the top position on January’s ‘Most Improved’ list, it arrived here thanks to a Maintenance Exposure increase nearing $431k. The Ask Price was unchanged.

The model’s ETP Ratio climb to 77.8% came when one asset transacted in February, but the remaining six inventory aircraft only equate to 2.9% of the active fleet. We don’t see any great challenges for sellers based on these statistics, especially if their aircraft is enrolled on engine HCMP.

Hawker 1000A

Marketing a Hawker 1000A is a daunting task for any seller, even in today’s record-low inventory environment. Five aircraft remained listed for sale following the withdrawal of two assets from inventory, and, with no aircraft trading in February, the listed units represent 15.2% of this limited production fleet.

The inventory withdrawals actually lowered Maintenance Exposure by more than $22k, but also decreased Ask Price by $143k to increase the ETP Ratio to 109.2% - a figure that even HCMP coverage is unlikely to dramatically improve marketability prospects.

Bombardier Learjet 60

The Bombardier Learjet 60 is another model that has appeared in one of our reports ten times, but only 40% of the time on the ‘Most Deteriorated’ list.

No aircraft transactions were recorded in February, but one aircraft was withdrawn from inventory while another two joined the listed fleet. The changes left 16 assets listed for sale – or 5.7% of the active fleet.

Here, too, Maintenance Exposure actually decreased nearly $137k. But the average Ask Price fell nearly $422k. For any seller whose aircraft is not enrolled on HCMP, the fleet’s resulting ETP Ratio of 86.1% will prove very challenging when it comes to pricing.

Cessna Citation Ultra

The Cessna Citation Ultra has sufficient market following for sellers to overcome many challenges, including an ETP Ratio averaging 56.4%, complements of an Ask Price decrease nearing $278k, which overshadowed a Maintenance Exposure decrease exceeding $12k.

Two aircraft sales were recorded in February, along with two inventory withdrawals, and three additions. The seven available aircraft only account for 2.7% of the active fleet. With these statistics, sellers whose aircraft are enrolled on HCMP likely hold an equal, if not stronger, negotiating position than buyers.

Dassault Falcon 20-5

This is the model’s second consecutive month on the ‘Most Deteriorated’ list. Only four aircraft are listed for sale, but that equates to 4.9% of the active fleet.

No February sales were identified for the Dassault Falcon 20-5, but one unit was added to the inventory mix, creating the $175k Ask Price decrease that overwhelmed the $24k Maintenance Exposure decrease.

Operationally, the Falcon 20-5 is a very capable aircraft. However, an average embedded maintenance cost in excess of $1.7m becomes difficult to justify when considering the purchase of a 31- to 53- year-old asset.

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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