Used Aircraft Maintenance & Marketability Analysis – January 2021

Asset Insight’s January 29, 2021 market analysis covering 134 fixed-wing models, and 1,746 aircraft listed for sale exposed the seventh consecutive monthly contraction (8.7%) of Asset Insight’s tracked inventory fleet.

At the same time, the high transaction level led to a significant inventory mix change, but the Quality Rating changed very little, improving from December’s 5.348 to 5.351, thereby remaining within the ‘Excellent’ range (per Asset Insight’s scale of -2.5 to 10). It has been in the ‘Excellent’ range since January 2020.

January’s Aircraft Value Trends

The tracked fleet’s average Ask Price decreased for the third consecutive month, and January’s 2.1% reduction created a 12-month low figure, with all four groups losing ground. Specifically:

• Large Jet average Ask Prices fell 2.0% to a 12-month low after increasing 0.8% in December.
• Mid-Size Jet prices lost 1.8% to post a 12-month low, in addition to their 8.4% drop in December.
• Light Jet ask prices decreased 2.4% to a 12-month low, after falling 1.5% in December.
• Turboprop ask prices dropped 1.1%, after losing 0.7% in December.

January’s Fleet for Sale Trends

Asset Insight’s tracked fleet has now posted seven consecutive monthly availability decreases, and inventory was down by 8.7% (166 units) during the month of January.

• Large Jets: Inventory decreased 8.1% (35 units), and 6.9% of the active fleet is listed for sale.
• Mid-Size Jets: Recorded a 9.2% decrease (48 units), with inventory at 10.1% of the active fleet.
• Light Jets: Inventory decreased 8.1% (45 units), the group’s seventh consecutive monthly decline, and active fleet availability now stands at 8.9%.
• Turboprop: The group’s sixth consecutive monthly decrease, this time 9.3% (38 units), resulted in just 6.3% of the active fleet seeking buyers.

January’s Maintenance Exposure Trends

Similar to the Quality Rating, Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) saw surprisingly little change considering the high number of January transactions, worsening only 0.3%. By group, the figures were as follows…

• Large Jets: Worsened/increased another 1.6%, following December’s 1.2% rise.
• Mid-Size Jets: Rose a nominal 0.2% thereby adding to December’s 0.5% increase (deterioration).
• Light Jets: Improved/decreased 3.9%, after worsening/increasing 2.5% in December to post the group’s 12-month worst/highest value.
• Turboprops: Decreased/improved another 0.7% to post the group’s fourth consecutive 12-month low/best figure.

January’s ETP Ratio Trend

The overall tracked inventory’s ETP Ratio improved/decreased to 71.6%, but remains between the 12-month high/worst and average figures. 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) increases, in many cases by more than 30%.

During Q4 2020, aircraft whose ETP Ratio was 40% or greater were listed for sale 64% longer than assets with an ETP Ratio below 40% (277 days versus 454 days). How did each group fare during January?

• Turboprops: For the fourteenth consecutive month, Turboprops registered the best/lowest ETP Ratio. January’s 39.8% was only marginally higher/worse than December’s 39.5%, and represented the group’s second consecutive month below the 40% excessive Maintenance Exposure point.
• Large Jets: At 59.7%, the group maintained second position, and the figure was only 0.3% higher/worse than the 12-month low figure.
• Mid-Size Jets: While better-than-average, and an improvement from December’s 71.8%, the group’s 70.9% ETP Ratio will create challenges for many sellers.
• Light Jets: By posting a Ratio of 104.3% the group improved over December’s 106.8% record high figure. But that will not help most sellers.

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 January 2021.

Most Improved Models

All six ‘Most Improved’ models for January posted Maintenance Exposure decreases (improvements). The Bombardier Learjet 55 and Daher Socata TBM 700A registered a price decrease of $2,857 and $55,000, respectively. The remaining four models experienced the following price increases:

• Gulfstream GIV: +$354,250
• Cessna Citation ISP: +$16,046
• Bombardier Challenger 601-3R: +$25,000
• Bombardier Learjet 40XR: +$20,000

Gulfstream GIV

Securing top honors in January was a model that also held this position in November. The Gulfstream GIV regained this spot through a Maintenance Exposure decrease exceeding $42k, along with an Ask Price increase exceeding $354k.

Two transactions, one withdrawal from the ‘for sale’ fleet, and one addition created a 14-unit availability level (10% of the active fleet) as January closed. While the revised fleet mix helped decrease the ETP Ratio, the 136.4% figure is far from stellar.

As we have pointed out in previous market reports, this model continues to have a strong industry following, and we believe many sellers will be able to structure reasonable transactions at reasonable prices. The definition of ‘reasonable’ is, of course, somewhat subjective.

Cessna Citation ISP

In second place is a model whose availability statistics (48 units, equating to 17.7% of the active fleet) create a great selection for buyers, and great pricing challenges for sellers.

One January Cessna Citation ISP transaction was recorded along with two additions to the fleet, and the result was a Maintenance Exposure decrease exceeding $103k and an Ask Price increase exceeding $16k.

While its position on the Most Improved list is impressive, the model’s marketability is less so, thanks to its 127.9% ETP Ratio. Considering the fleet’s 36 to 42 years of age, sellers should be looking for end-of-life aircraft buyers.

Bombardier Learjet 55

Third on our list is another well-aged (35 to 40 years) charter workhorse, whose operational and financial statistics may be approaching their limit. Partly proving that viewpoint is the Bombardier Learjet 55’s ETP Ratio that, at 159.4%, creates many challenges for sellers, and is perhaps the reason no transactions were recorded during January.

The model made its way onto this list through one withdrawal from the inventory pool, along with a December transaction that closed too late for us to capture as part of the December report.

The revised fleet mix decreased Maintenance Exposure by over $148k and dropped the average Ask Price by about $3k. While only 12 aircraft are listed for sale, that still constitutes 12.6% of the active fleet, adding to sellers’ roadblocks.

Bombardier Challenger 601-3R

One Bombardier Challenger 601-3R transacted in January, leaving five inventory assets, or 8.9% of the active fleet for sale. The model’s ETP Ratio dropped to 129.2%, earning it a place on this list, with Maintenance Exposure decreasing nearly $288k and Ask Price increasing $25k.

While that all might sound positive, buyer preference can be harsh – even for an aircraft providing a roomy cabin at prices in the low single-digit millions range.

Daher Socata TBM 700A

The lone turboprop making January’s ‘Most Improved’ list earned its position through a Maintenance Exposure decrease approaching $134k, and an Ask Price decrease of $55k. The value changes were due to a single Daher TBM 700A unit being added to the ‘for sale’ fleet, while no transactions were recorded during the month.

While the model’s 66.6% ETP Ratio is above the 40% mark, the five listed units represent only 4.9% of the active fleet, and this aircraft has a strong following. We expect sellers to be on an equal footing with potential buyers when it comes to price discussions.

Bombardier Learjet 40XR

The final model on January’s ‘Most Improved’ list is the Bombardier Learjet 40XR, which was in the middle of the ‘Most Deteriorated’ pack in December – after holding third position on November’s ‘Most Improved’ list.

One aircraft transacted in December, one joined the inventory, and the reconstituted fleet of nine listings equates to 9.8% of the active fleet. Neither buyer nor seller holds the upper negotiating hand, even with an ETP Ratio approaching 60%, thanks to a Maintenance Exposure decrease approaching $185k and an Ask Price increase of $20k.

The buyer holding the best hand will be the one that has carefully examined the asset they are purchasing to ensure that any price they negotiate will actually equate to a good value.

Most Deteriorated Models

Five of the six models on January’s ‘Most Deteriorated’ list posted a Maintenance Exposure increase. The Gulfstream G100 registered a $50,000 Ask Price increase, while the remaining five models experienced the following price decreases…

• Gulfstream G200: -$462,454
• Cessna Citation V Ultra: -$81,332
• Bombardier Learjet 45: -$166,667
• Piaggio P.180: -$191833
• Hawker Beechjet 400: -$125,000

Gulfstream G200

The Gulfstream G200 experienced an active month, with two transactions, two inventory additions, and two withdrawals. The new 18-unit fleet mix (7.6% of the active fleet) recorded a Maintenance Exposure increase exceeding $83k, and an Ask Price decrease approaching $463k, easily earning the G200 a place on January’s ‘Most Deteriorated’ list.

The news is not tragic, however, as the model’s 57.0% ETP Ratio, combined with the relatively narrow selection, should create good options for buyers and decent pricing opportunities for sellers.

Gulfstream G100

The second Gulfstream on this list posted figures that make sellers less fortunate. One Gulfstream G100 transacted in January, but another joined the ‘for sale’ fleet. Although that only amounts to six units, it also equates to 28.6% of the active fleet.

The other problem bound to vex sellers is an ETP Ratio exceeding 141%, thanks to a Maintenance Exposure increase exceeding $254k. So, while the model’s average Ask Price actually increased by $50k, the likelihood of higher values being realized by sellers is not strong.

Cessna Citation V Ultra

No transactions had been recorded for the Cessna Citation V Ultra as we closed out January, but three units joined inventory raising availability to 23 assets (8.7% of the active fleet). The fleet changes raised the Ultra’s ETP Ratio to 58.6%, owing to a near $114k increase in Maintenance Exposure and an $81k drop in Ask Price, but this 22-27-year-old aircraft still has a sizeable following.

We believe that if buyers and sellers are realistic, relative to their value expectations, the opportunity to structure mutually-beneficial transactions will be readily available.

Bombardier Learjet 45

The Bombardier Learjet 45 dropped to this spot after occupying the last position on December’s ‘Most Improved’ list, and it didn’t have a single transaction to blame for its sudden loss of marketability potential.

The change of fortune came from one inventory addition and one withdrawal, leaving the 15 listed assets (10.1% of the active fleet) with an average ETP Ratio approaching 95%. Maintenance Exposure only increased $7k. However, Ask Price decreased by nearly $167k to generate the ETP Ratio increase.

Owners whose engines are enrolled on an Hourly Cost Maintenance Program will most likely be the ones to receive acceptable offers from savvy buyers.

Piaggio P-180

The only turboprop on the ‘Most Deteriorated’ list got here through a single Piaggio P-180 Avanti sale that created an increase in average Maintenance Exposure approaching $88k, along with an Ask Price decrease nearing $192k.

Regrettably, that’s not the only bad news. The model’s ETP Ratio rose to 132.4% in January, and while only eight units were listed for sale (9.6% of the active fleet), this sleek, spacious and speedy aircraft does not have the industry following that an asset sporting its operating capabilities deserves.

Hawker Beechjet 400

When 33% of the listed fleet is withdrawn, a model’s values can incur wild swings. That is exactly what happened to the Hawker Beechjet 400 in January, when one of the three inventory aircraft was withdrawn by the seller.

No sales were recorded during the month, and the remaining two assets (6.9% of the active fleet) boosted the ETP Ratio to 141.4% through a Maintenance Exposure increase approaching $9k and a substantial Ask Price reduction.

Keeping in mind these assets are anywhere from 32 to 35 years of age, the figures should not be surprising, nor should the model’s average remarketing period that presently exceeds 18 months.

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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