Used Aircraft Maintenance & Marketability Analysis – January 2022

The 134-model fleet tracked by Asset Insight experienced the 19th consecutive monthly inventory decrease in January, this time dropping 16.1% (142 units), leaving only 742 units listed for sale. The latest decrease has led to a 55.8% inventory reduction since June 2020.

The listed fleet’s Quality Rating improved 0.6% in January to 5.177, following three consecutive 12-month low figures, keeping available assets within ‘Very Good’ territory. However, January’s Quality Rating equated to a 3.3% reduction Year-over-Year (YoY).

January’s Pre-Owned Aircraft Value Trends

Ask Prices for the listed fleet increased 5.8% in January, and yet the average is still down 12.3% YoY, which is not surprising if you keep in mind that availability currently consists of a heavily picked-over fleet.

For information, younger, lower-time aircraft (when they are actually listed for sale – many are selling without a formal listing) are recording high transaction values, thanks to numerous buyers competing for very limited availability.

By category, the Ask Price changes were as follows…

• Large Jets:After climbing 14.5% during Q4 2021, Ask Price climbed another 15% in January 2022 to a 12-month high that was also 30.9% higher, YoY.
• Mid-Size Jets:Following December 2021’s record-low Ask Price, the Mid-Size Jet category’s figure improved 17.8% in January. But that was still 16.5% lower YoY, and remained below the group’s 12-month average.
• Light Jets: Ask Prices rose a mere 0.3% after December’s 12-month low figure, leaving the average 22.2% lower, YoY.
• Turboprops:With higher quality assets leaving the inventory during January, the average Ask Price for the remaining listings decreased 8.6%, to a 12-month low equating to a 7.9% drop, YoY.

January’s Fleet for Sale Trends

Asset Insight’s tracked fleet ended January posting a new record-low inventory figure of 3.5% - undoubtedly exacerbating for buyers. Since the June 2020 peak, inventory has now decreased for nineteen consecutive months, and by nearly 56%.

As we noted last month, overall demand ended 2021 at a record-high 4.40, on our scale of 0.00 (lowest) to 5.00 (highest). Airframe OEMs have announced their intent to increase production, but increases will be ‘cautious’ without truly impacting total deliveries until 2023.

We expect demand to remain strong for the foreseeable future, keeping pre-owned availability low and pricing higher, especially for younger, lower-time models.

• Large Jets: Only 2.9% of the tracked 43-model fleet of Large Jets were listed for sale (an average of 2.21 aircraft per tracked model) at the end of January. That compares with 6.9% in January 2021. The figures reveal a 12.5% inventory decrease for the month (-21 units), and a 60.8% decrease from the June 2020 peak. As with all groups, the Quality Rating for Large Jets improved in January 2022, but the 1.2% increase was still below the 12-month average, and 2.7% lower YoY. The group’s Quality Rating (5.491) remained within ‘Excellent’ range.
• Mid-Size Jets: Availability for the 45-model tracked fleet of Mid-Size Jets decreased 22.5% (-52 units) during January, and has now receded more than 64% since the group’s 2020 peak figure. Inventory rested at 4.4% of the active fleet (3.13 aircraft per tracked model) compared to January 2021’s 10.1%. Demand has been very strong for this group, and the inventory mix as January ended raised the Quality Rating 2.1%, although that was still 4.5% lower, YoY. Scoring 5.117, the Quality Rating kept the group squarely in ‘Very Good’ territory.
• Light Jets: On average, approximately eight aircraft units were available for each of Asset Insight’s 29 tracked models as January closed, and the listed assets amounted to only 3.4% of the active fleet (less than half of the 8.9% availability in January 2021). January 2022 saw total availability drop 10.1% (-27 units) bringing the figure nearly 56% below the June 2020 peak. The group’s Quality Rating improved a nominal 0.6% but, at 5.052, remained just within ‘Very Good’ range (and was 3.1% worse YoY).
• Turboprops: Offering an average of more than 9.7 aircraft for each of the 17 tracked models, availability might appear to be good within the Turboprop category. However, the figure equates to only 3.1% of the active fleet (compared to 6.3% in January 2021). January 2022 saw listed assets decrease 19.3% (-42 units), equating to a 32.8% drop from the June 2020 peak. Sales of higher quality units were evidenced by the Quality Rating decrease of 1.5% (3.3%, YoY). Below the 12-month average, at 5.046 the Quality Rating nevertheless remained within ‘Very Good’ range.

January’s Maintenance Exposure Trends

While the Quality Rating improvement signifies the listed fleet has fewer upcoming maintenance events, they will be more expensive to complete, as Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) increased (worsened) 10.2% during the previous two months, including 3% in January (8.8% YoY), to post a 12-month high (worst) figure.

By individual group, the Maintenance Exposure figures were as follows…

• Large Jets: Maintenance Exposure increased 3.6% to a figure worse (higher) than the 12-month average, and also 10.8% higher (worse) YoY.
• Mid-Size Jets: With buyers opting for assets sporting lower Maintenance Exposure, January’s figure climbed (worsened) 2.2% to post a 12-month high number that was also 5.1% worse YoY.
• Light Jets: Maintenance Exposure increased/worsened 2.2% to equal the group’s 12-month average, but the good news was a YoY improvement (decrease) of 1.9%.
• Turboprops: The group’s Maintenance Exposure increased (worsened) 2.9% for the month, and 11.7% YoY, to a value near the 12-month high/worst figure.

January’s ETP Ratio Trend

In January 2022, the ETP Ratio posted a second consecutive all-time high (worst) figure, at 82.1%. Keeping in mind the 12-month high Maintenance Exposure, that result is not surprising. Not all groups were negatively affected, but the figure statistically explains why the inventory fleet’s average Days on the Market rose 11% during Q4 2021, to a record-high 452 days.

For nyone 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 52% of Asset Insight’s tracked models, and 64% of all aircraft posted an ETP Ratio above the 40% excessive mark in January 2022, with each group faring as follows:

• Turboprops: The previously mentioned changes to Maintenance Exposure and Ask Price negatively impacted an ETP Ratio that had, for months, barely exceeded the 40% excessive demarcation point. January’s 49.1% Ratio was the group’s 12-month high (worst) figure, and considerably worse than December 2021’s 42.7%.
• Large Jets: An Ask Price increase was insufficient to overcome the Maintenance Exposure degradation, thereby raising the ETP Ratio to 67.4% from December’s 65.7%. That Ratio continues to be about half-way between the group’s 12-month average and high figures.
• Mid-Size Jets: The group’s ETP Ratio for January improved to 82%, meaning the majority of currently-listed assets are far from sellable for a ‘value-based’ price.
• Light Jets: At 111.6%, the figure equates to $1.5m of embedded maintenance (Maintenance Exposure) per aircraft, based on the group’s $1.34m average Ask Price. Such figures are unlikely to generate enthusiasm among savvy buyers.

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 January 2022.

Most Improved Models

All of January’s ‘Most Improved’ models experienced a Maintenance Exposure decrease (improvement). While the Cessna Citation III posted no change, each of the remaining five models registered an Ask Price increase as follows:

• Cessna Citation V 560: +$131,000
• Gulfstream GIV-SP: +$345,833
• Cessna Citation CJ2: +$705,000
• Gulfstream G200: +$1,087,750
• Bombardier Challenger 601-3A: +$162,500

Cessna Citation V

The Cessna Citation V earned the top spot on January’s ‘Most Improved’ list through a Maintenance Exposure decrease that neared $21k, along with an Ask Price increase of $131k. It is the model’s fifth appearance on this list, and an amazing improvement after capturing the ‘Most Deteriorated’ position in the December 2021 report.

Eleven aircraft were listed for sale at the end of January, equating to 4.4% of the active fleet, following four sales and an equal number of additions to the inventory.

With the ETP Ratio at 101% buyers must carefully asses the Maintenance Exposure associated with the specific serial number they are considering, since embedded maintenance could literally double the total cost of purchase.

Gulfstream GIV-SP

This is the Gulfstream GIV-SP’s fourth-ever appearance on the ‘Most Improved’ list, due, this time to a Maintenance Exposure decrease that exceed $731k, and an Ask Price increase approaching $346k.

The changes came after one aircraft transacted in January, another was withdrawn, and three were added to the list of assets ‘for sale’, leaving seven aircraft listed, or 3.4% of the active fleet.

The Gulfstream GIV-SP’s 69.2% ETP Ratio could hinder value-based transactions from a seller’s perspective, if their aircraft is not enrolled on an engine Hourly Cost Maintenance Program. Nevertheless, the model’s ongoing demand is likely to overcome most embedded maintenance expense issues.

Cessna Citation III

Following the sale of one unit, and the addition of another to the inventory fleet last month, the eleven available Cessna Citation IIIs equate to 6.7% of the active fleet. There was no Ask Price change as a result of the fleet mix change, but Maintenance Exposure decreased over $132k to earn the model its place on this list.

While the improvement was statistically able to pull the model up from second place on December’s ‘Most Deteriorated’ list, the change is unlikely to improve sellers’ fortunes, with an ETP Ratio of 162%.

Cessna Citation CJ2

Making its first-ever appearance on the ‘Most Improved’ list, the Cessna Citation CJ2 arrived here complements of a Maintenance Exposure decrease approaching $254k and an Ask Price increase of $705k, which collaboratively lowered the ETP Ratio from 44% to 26.9%.

The improvement came following the sale of one unit and the addition to inventory of two others, resulting in seven units listed for sale, which equate to only 3% of the active fleet. Considering the level of market demand, and the model’s minimal inventory, sellers are definitely in the driver’s seat for this model.

Gulfstream G200

Through three January transactions, and four new inventory units, the Gulfstream G200 has eight aircraft for sale (3.4% of the active fleet). The changes lowered Maintenance Exposure by more than $198k, and increased the average Ask Price by nearly $1.1m, enabling the jet to make its third appearance on the ‘Most Improved’ list.

The current 40.7% ETP Ratio represents a 17% improvement for the model. Whether the posted Ask Price for two of the new entrants (which is nearly 58% higher than the model’s overall Ask Price for December) is achievable remains to be seen. There is no denying the model is in high demand, currently, though.

Bombardier Challenger 601-3A

Making its sixth appearance on either list (four of which have been on the ‘Most Improved’ list), is the Bombardier Challenger 601-3A, having occupied fourth place on December’s ‘Most Deteriorated’ list.

It moved to the ‘upper crust’ this month through a Maintenance Exposure decrease exceeding $129k, along with an Ask Price increase approaching $163k.

One sale and one addition kept inventory level at eight units (7% of the active fleet), and the only thing that surprised us was the continued market interest in aircraft of such advanced age. Considering the current ETP Ratio actually improved to 122.1%, we salute both buyer and seller for reaching a mutually acceptable price.

Most Deteriorated Models

All six models on January’s ‘Most Deteriorated’ list posted a Maintenance Exposure increase. Three models (the Dassault Falcon 20-5, Gulfstream GIV, and Hawker Beechjet 400) posted no change to their Ask Price. The remaining three models experienced the following decreases:

• Beechcraft King Air C90: -$17,847
• Bombardier Learjet 55: -$77,050
• Cessna Citation VII: -$311,250

Dassault Falcon 20-5

No sales were noted as January closed, but one of the four listed Dassault Falcon 20-5s was withdrawn from inventory, thereby increasing the Maintenance Exposure of the remaining assets by nearly $148k, earning the jet its spot on this list, even without an Ask Price change.

This is only the second time the Falcon 20-5 has appeared on this list. It occupied second worst position in December, so January’s change actually represents an improvement, and the three inventory units currently for sale represent only 3.7% of the active fleet.

With an ETP Ratio approaching 120%, though, sellers are likely to find value-based transactions challenging to obtain.

Gulfstream GIV

The Gulfstream GIV has found its way onto one of our reports more than any other model (23 out of 37 reports) and achieved its spot on this month’s ‘Most Deteriorated’ list after zero January sales, two inventory withdrawals, and one addition.

Subsequently, although the four available units amount to only 2.6% of the active fleet, Maintenance Exposure increased by more than $357k. Even without an Ask Price change, that was enough to raise the asset’s ETP Ratio to nearly 120%.

While the model’s industry following is well-deserved, the current ETP Ratio will undoubtedly create pricing issues for sellers.

Beechcraft King Air C90

Despite capturing second position on December’s ‘Most Improved’ list, the Beechcraft King Air C90 endured a tailspin into this position after one sale, three inventory withdrawals and three additions.

The inventory changes increased Maintenance Exposure by more than $57k, lowered the average Ask Price by nearly $18k, and forced the ETP Ratio up by more than 13%. While the 27 assets listed for sale represent only 7.6% of the active fleet, an ETP Ratio approaching 107% represents pricing challenges for many sellers.

Bombardier Learjet 55

The Bombardier Learjet 55 is no stranger to this list, having occupied a slot on six previous occasions. It reappeared here in January after a single aircraft was withdrawn from inventory. The ten remaining listed assets equate to 10.9% of the active fleet at a time when most models are registering availability percentages in the low single digits.

A Maintenance Exposure increase approaching $43k, and an Ask Price decrease exceeding $77k combined to increase the model’s ETP Ratio to 185% from 158% last month, heaping an even stiffer challenge upon sellers.

Cessna Citation VII

The month-to-month change to a model’s position on one of these two lists can, sometimes, be spectacular. Such was the case for the Cessna Citation VII in January, which slipped from first place on December’s ‘Most Improved’ list, to penultimate position on January’s ‘Most Deteriorated’ list.

The model accomplished this statistical ‘feat’ courtesy of one sale in January, and two sales that closed in December, but had not yet been posted when we reviewed December’s figures.

An ETP Ratio of 97.4% is not something that most sellers will be thrilled to see, but that’s what a Maintenance Exposure increase of $134k, along with an Ask Price decrease exceeding $311k, will create.

Hawker Beechjet 400

The Hawker Beechjet 400 accomplished something we had never previously seen: It earned the worst position on the ‘Most Deteriorated’ list without any sales or any other inventory changes.

So how did it happen? While the model’s limited production run means that only three listed assets represent 12% of the active fleet for sale, the more interesting issue is the way in which the listed fleet’s maintenance events conspired to hike the model’s Maintenance Exposure by nearly $207k in January, earning it its dubious distinction.

Clearly the near 35% increase in the model’s ETP Ratio that resulted will be challenging for all three sellers. But, those whose aircraft engines are enrolled on an Hourly Cost Maintenance Program are bound to have the better opportunities, all other things being equal (though they rarely are).

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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