Used Aircraft Maintenance & Marketability Analysis – July 2022

Inventory for Asset Insight’s tracked 134-model fleet has established an upward trend, increasing for the fourth consecutive month in July, with all four groups benefiting. Availability expanded by 3% (24 units) and, while still less than half the number of assets are listed for sale compared to the June 2020 peak, they are only 7.8% below the December 2021 figure.

The listed fleet’s Quality Rating decreased 1.1% for the month to 5.251 (following June’s 5.310 and April’s 12-month best of 5.347), on a scale of -2.5 (low) to 10 (high). The fleet just managed to remain within the ‘Excellent’ Rating range, while the decrease bore evidence of an increase to the number of upcoming maintenance events. The figure was also 0.3% worse/lower, YoY.

July’s Pre-Owned Aircraft Value Trends

Average Ask Price for Asset Insight’s tracked fleet increased 9% in July to register a 12-month high figure. The rise equated to a 39% increase Year-over-Year (YoY), and more than 71% Year-to-Date (YTD).

Values for young, low-time units are still demonstrating the average buyer’s preference, but Ask Prices being sought by ‘motivated’ sellers are beginning to reflect lower expectations and, quite possibly, the slow, steady pace toward market equilibrium. By category, the Ask Price changes for tracked models were as follows…

• Large Jets: Surprisingly, Ask Price decreased 2.6%. While still above the 12-month average, the figure was also 25.1% higher YTD, and 40.6% higher YoY.
• Mid-Size Jets: Ask Price figures continue to be impressive, with Mid-Size Jets posting a third consecutive monthly increase, this one equating to 4.2%, setting an all-time high value. YoY the group’s increase now totals 72.3%, and YTD an astounding 134.8%.
• Light Jets: The Light Jets set an all-time high figure through a 4.5% increase that was also 59.2% higher YoY, and 79.2% higher YTD.
• Turboprops: A rise of 7.6% to an all-time high figure also equated to an increase of 20.4% YoY, and 28.3% YTD for Turboprop ask prices.

July’s Fleet for Sale Trends

Even though availability increased for the fourth consecutive month, that doesn’t necessarily equate to desirable assets becoming available. In fact, the Quality Rating’s decrease suggests that lower-Quality assets entered the inventory pool in July.

While Ask Prices were higher during July, ‘priced to sell’ and ‘motivated seller’ advertisements also began to appear suggesting that some sellers have been unable to achieve their desired prices.

Numerous signs are pointing to a market moving toward supply and demand equilibrium. The one potential concern is whether the pendulum will shift from the current seller’s market back to what we experienced only two years ago – neither extreme being positive for the industry as a whole.

• Large Jets: Availability among Asset Insight’s 43-model tracked Large Jet fleet increased 2.9% (five units) and is now up 4.8% YTD. This remains 53.1% below the June 2020 peak, however.
  
  The group’s Quality Rating improved 1.2%, and was 1% better/higher YoY. July’s 5.612 was better than the 12-month average, and well within ‘Outstanding’ territory.
  
  
• Mid-Size Jets: Availability rose by 5.4% (11 units) for the 45-model tracked Mid-Size Jet fleet, placing inventory only 6.5% below the figure generated at the end of 2021. Although, statistically, this represented an improvement for buyers, there are still 56.8% fewer aircraft available compared to the June 2020 peak.
  
  At 5.067, the Quality Rating reflected a 2.7% decrease for the month and YoY, but kept the group within ‘Very Good’ territory.
  
  
• Light Jets: Inventory for the 29-model tracked Light Jet fleet increased 1.2% (three units), equating to a reduction of 4.1% YTD. By way of comparison, the number of assets listed for sale was 52.9% higher during the June 2020 peak.
  
  July’s Quality Rating saw only a nominal 0.1% improvement (to 5.269) from June’s 5.264 keeping the group within the ‘Excellent’ range and reflecting a 1.3% improvement YoY.
  
  

• Turboprops: Availability increased 3.1% (five units) in July bringing Turboprop inventory 23.4% lower YTD and 36.3% below the peak availability posted in June 2020.
  
  Changes to the for-sale mix were not positive, and the Quality Rating dropped 3.2% to a lower-than-average figure that, at 5.055, just managed to keep the group within ‘Very Good’ territory.
  
  

July’s Maintenance Exposure Trends

The cost of embedded/accrued maintenance, what we refer to as Maintenance Exposure, decreased/improved by 0.7%, although last July’s figure was 2.6% better. The reduction points to a decrease in the average cost of completing the events embedded in current inventory aircraft. By group, the Maintenance Exposure figures were as follows…

• Large Jets: Improved/decreased a very respectable 4%, which also bettered last July’s figure by 2.9%.
• Mid-Size Jets: Rose/worsened a substantive 8.8% in July; a figure that was also 13.1% worse YoY.
• Light Jets: Decreased 4.2% to near the 12-month average. The figure was slightly worse/higher (0.4%) YoY.
• Turboprops: Worsened through a 3.1% increase that was, surprisingly, 2.5% better YoY.

July’s ETP Ratio Trend

Higher Ask Prices and a reduction in Maintenance Exposure improved asset marketability, and the ETP Ratio reflected that fact by setting a 12-month best/low for the second consecutive month, this time at 54.9%.

As those who follow our reports know, the ETP Ratio 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. ‘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% (469 Days on Market versus 183). For July, nearly 39% of the tracked models posted an ETP Ratio above the 40% excessive mark, with each group faring as follows…

• Turboprops: The group’s ETP Ratio decreased, enabling it to achieve its second consecutive 12-month best figure at 35.2%. This was the group’s third consecutive month below the 40% ‘excessive’ ETP Ratio level, as well as July’s lowest ETP Ratio among the four groups.
• Large Jets: Fell to second place, as the group’s lower Ask Price negatively impacting the ETP Ratio, increasing it to 35.5%. That compares with June’s 12-month low of 34.1%. However, July’s Ratio kept the group below the 40% ‘excessive exposure’ point for the fifth consecutive month.
• Mid-Size Jets: The impressive Ask Price increase lowered the ETP Ratio to 54.4%, the group’s second consecutive 12-month low/best figure.
• Light Jets: The ETP Ratio took advantage of the group’s Maintenance Exposure decrease and Ask Price increase to post a 12-month low 83.1%.

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 July 2022…

Most Improved Models

All six of July’s ‘Most Improved’ models experienced a Maintenance Exposure decrease while registering the following price increases:

• Cessna Citation Bravo: +$241,167
• Bombardier Challenger 601-3A: +$275,000
• Cessna Citation III: +$112,500
• Socata TBM 700A: +$25,550
• Hawker 800A: +$119,000
• Cessna Citation Excel: +$270,000

Cessna Citation Bravo

After capturing the ‘Most Deteriorated’ slot in June, the Cessna Citation Bravo vaulted into July’s top spot among the ‘Most Improved’ models by virtue of two sales and an addition to the listed fleet.

Availability decreased to ten units (3.2% of the active fleet), and the new inventory mix lowered Maintenance Exposure by nearly $1.08 million, while concurrently increasing Ask Price more than $241k.

Whether or not sellers can achieve their pricing aspirations is debatable, especially when the model’s ETP Ratio equates to 96.7%, meaning the average aircraft’s current embedded maintenance is nearly equal to the average Ask Price. Still, there is no better time for sellers to seek a substantial price increase than during the current market.

Bombardier Challenger 601-3A

The Bombardier Challenger 601-3A has appeared on our reports eight of the last nine months, and it moved up one place since June. At 124.3% the ETP Ratio for the aircraft is unlikely to make a seller’s job easy, although only three units are listed for sale (2.7% of the active fleet) after one sale in July and one addition to inventory.

Changes to the listed fleet lowered Maintenance Exposure by more than $324k and increased the average Ask Price by $275k, the latter resulting from a second aircraft posting an Ask Price that is over 22% higher than the other priced listing. Whether or not the higher price is realistic, buyers will decide.

Cessna Citation III

Following one sale and one addition to inventory, Cessna Citation III listings remained at nine when July ended, remaining at 5.5% of the active fleet.

At 129.2%, the aircraft sported the highest/worst ETP Ratio among the six ‘Most Improved’ models. A Maintenance Exposure decrease exceeding $71k, along with an Ask Price increase of $112.5k helped decreased the model’s Ratio by 24.5%, but that doesn’t make a model instantly marketable.

Having said that, the listed fleet includes units carrying various Quality Rating figures and Ask Price differences, and this might generate above average buyer interest.

Socata TBM 700A

The Socata TBM 700A has found its way onto one of our reports half a dozen times, with four appearances during the past six months. In July, it moved into the ‘Most Improved’ grouping having occupied second place on June’s ‘Most Deteriorated’ list.

No transactions were recorded in July, but three aircraft joined the ‘for sale’ fleet to create the necessary dynamics. A Maintenance Exposure decrease exceeding $150k resulted, along with an Ask Price increase exceeding $25.5k. Combined, the figures lowered the ETP Ratio to 44.7%, while increasing availability to nine assets (9.4% of the active fleet).

All told, most sellers should have reasonable opportunities to structure value-based deals, especially with this aircraft possessing such a strong market following.

Hawker 800A

The Hawker 800A captured a position held by another family member last month (the Hawker Beechjet 400). This came about through a single sale and four inventory additions. The resulting available fleet totaled 14 units as July closed (8.9% of the active fleet).

The majority of these aircraft are enrolled on engine Hourly Cost Maintenance Programs (HCMPs), which often substantively lower the asset’s HCMP-Adjusted Maintenance Exposure figure, especially when major engine maintenance is approaching.

The model’s actual Maintenance Exposure decreased by more than $67k in July, while Ask Price climbed $119k to earn the model its place on this list.

The Hawker 800A has now appeared on these reports 23 times, with 24 being the highest number for any model. Its visibility has been partly fueled by the model’s industry following (due to its operating capabilities when compared to price). We believe the model still holds ample marketability potential, even though its 75.4% ETP Ratio may make it appear otherwise.

Cessna Citation Excel

Rounding out July’s ‘Most Improved’ list is the Cessna Citation Excel, a model that posted three sales during the month, saw one aircraft withdrawn from inventory, and had four others added.

The change in fleet mix lowered Maintenance exposure by nearly $237k while raising the average Ask Price by $270k. The aircraft’s marketability improved as a result, not that Citation Excel sellers truly needed help with the ETP Ratio decreasing to 24.8%.

With only seven assets (2.0% of the active fleet) listed for sale, interested buyers will have little, if any, negotiating power when it comes to this model.

Most Deteriorated Models

All six ‘Most Deteriorated’ models experienced a Maintenance Exposure increase in July. The Beechcraft King Air 300 and the Bombardier Learjet 60 posted no change in Ask Price, while the remaining four models averaged the following Ask Price decreases:

• Dassault Falcon 2000: -$1,150,000
• Piaggio P-180 II: -$128,333
• Hawker 400XP: -$352,500
• Dassault Falcon 20-5: -$105,000

Dassault Falcon 2000

Two Dassault Falcon models bookend July’s ‘Most Deteriorated’ list, with the Dassault Falcon 2000 taking the upper end of this group. It managed to do so without recording a single sale for the month.

One aircraft was withdrawn from the inventory pool, though, while an older, previously listed, unpriced asset posted an Ask Price nearly one-third lower than the only other priced unit, resulting in a $1.15m Ask Price drop. That, along with a Maintenance Exposure increase approaching $14k, was more than sufficient for the Dassault Falcon 2000 to earn its ninth appearance on either one of our lists.

Nevertheless, with the aircraft’s ETP Ratio averaging 35.2%, the seven sellers (3.3% of the active fleet) have little to worry about – especially those whose engines are enrolled on HCMP.

Piaggio P-180 Avanti II

Next is a model making only its second appearance on a report – both times on this side of the ledger. Where the Piaggio P-180 Avanti II is concerned, most sellers have little to worry about. The model’s 35.4% ETP Ratio makes most of these aircraft quite marketable. 

Two sales were recorded in July, two assets entered the inventory pool, and the eleven units presently listed equate to 8.9% of the active fleet, which is admittedly on the high side of the Turboprop average.

The inventory mix change increased Maintenance Exposure by more than $147k, while decreasing Ask Price by more than $128k to create the necessary statistics. To be fair, the Ask Price reduction was due to an older unit entering the availability pool, which would be logical for any aircraft, including this very capable model.

Beechcraft King Air 300

Only six Beechcraft King Air 300 aircraft were listed for sale (3.2% of the active fleet) when July closed. Maintenance Exposure increased by more than $116k to earn the model its spot on the ‘Most Deteriorated’ list, even without a change to the average Ask Price.

No sales were recorded in July, but one additional aircraft entered the available pool. Keeping in mind the King Air line’s industry following, an ETP Ratio of 46.6% is unlikely to pose a very high hurdle for sellers.

Hawker 400XP

The Hawker 400XP has appeared on a report only four times, and this is its first listing on the ‘Most Deteriorated’ grouping. It arrived here, complements of a near $98k Maintenance Exposure increase, along with a $352.5k drop in the model’s Ask Price.

An inventory mix change that included four July sales and one addition were behind the statistical changes. However, with only four known listings (1.8% of the active fleet) and an ETP Ratio of 34.4%, sellers are still squarely in the driving seat with respect to dealmaking.

Bombardier Learjet 60

Occupying the slot held by the Learjet 55 in June is the Bombardier Learjet 60, following five sales (some posting in June after we had closed the month) and two inventory fleet additions.

A Maintenance Exposure increase exceeding $413k was sufficient to earn the model its twelfth appearance on a report, and it didn’t even need an Ask Price change to do so.

Fifteen aircraft were listed for sale when July ended, equating to 5.5% of the active fleet. While the ETP Ratio stood at 56.8%, sellers that have enrolled their engines on HCMP will have an HCMP-adjusted ETP Ratio below the 40% demarcation point, making their aircraft quite marketable – statistically, at least.

Dassault Falcon 20-5

The Dassault Falcon 20-5 props up the ‘Most Deteriorated’ table for July. This is the model’s ninth appearance on one of our reports, and its seventh during the past twelve months (five being on this side of the ledger).

With no changes to the inventory mix during July, the Falcon 20-5 still managed to find its way into last place, partly through a Maintenance Exposure increase approaching $60.5k, but also by virtue of an Ask Price decrease of $105k. With only one priced asset listed for sale, though, we believe ‘technical grounds’ earned the model its unfortunate placement.

Nevertheless, even though only four units are listed for sale (5.0% of the active fleet), its position on this month’s ‘Most Deteriorated’ list seems appropriate considering an ETP Ratio exceeding 153%.

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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