Used Aircraft Maintenance & Marketability Analysis – March 2022

Asset Insight’s tracked fleet decreased 0.7% (five fewer aircraft) during March, and listings were 58.5% below the June 2020 peak. The analysis undertaken on March 31 examined 134 models, equating to 698 inventory assets. However, many young, lower-time aircraft continue to transact without ever being listed for sale.

The tracked fleet’s Quality Rating posted three consecutive monthly improvements to reach a 12-month high figure in March. At 5.308 on Asset Insight’s scale of -2.5 (low) to 10 (high), inventory assets moved into the ‘Excellent’ range (from February’s ‘Very Good’ status), signifying fewer near-term maintenance events and proving, yet again, that Maintenance Status does not directly relate to aircraft age. The figure was also relatively unchanged Year-over-Year (YoY).

March’s Pre-Owned Aircraft Value Trends

Ask Prices for the listed fleet increased 21.9% during March, 38.7% during Q1 2022, and 14.2% year-over-year (YoY), with all four groups posting gains. (As we have stated in previous reports, actual transaction values for young, low-time aircraft are generally higher.)

By category, the Ask Price changes for tracked models were as follows…

• Large Jets: Ask Price rose 8.8% in March to post an all-time high value that was also nearly 34% higher than in Q4 2021, and reflected a 54.4% increase YoY.
• Mid-Size Jets: Rose nearly 33% for the month to a 12-month high value that was also 65% higher for the quarter, and 15% higher YoY.
• Light Jets: Ask Price rose a dramatic 56% in March, resulting in an increase of 64.8% in Q1 2022, and 36.6% YoY. March’s value represented a 12-month high Price, and was also the first time since May of 2021 that average Light Jet values exceeded those of Turboprops.
• Turboprops: Increased 13.3% in March, resulting in a 6.6% rise during Q1 2022, and 5.2% YoY.

March’s Fleet for Sale Trends

The tracked fleet’s availability has now decreased to 3.1% of the active fleet, versus the 8.1% inventory figure posted in March 2021. The numbers equate to a 21% drop during Q1 2022, and a 58% decrease YoY.

Demand continues to set record high figures, posting a second consecutive all-time quarterly high level for all aircraft groups while more than doubling to 4.68 during Q1 2022, compared to 2.27 in Q1 2021. The figure is based on the percentage of each Make/Model’s active fleet listed for sale and its Days on Market, and the scale ranges from 0.00 (lowest Demand) to 5.00 (highest possible Demand).

As we have previously reported, while we expect demand to remain strong during 2022, availability limitations are likely to stifle pre-owned aircraft sales for the year.

• Large Jets: Preliminary figures for Asset Insight’s 43-model tracked Large Jet fleet showed 108 transactions during Q1 2022, compared to 98 in Q1 2021. Availability is down to 2.4% of the active fleet, while the figure stood at 7.1% at this time last year.
  
  Listings increased by 4.6% (six units) in March, leaving total availability down 17.9% Year-To-Date (YTD), 64.4% lower YoY, and 63.2% below the June 2020 peak. The Quality Rating skyrocketed 5.8% in March to an all-time high 5.837 (a figure deep within ‘Outstanding’ territory), while also improving 7.6% for Q1, and 4.5% YoY.
  
  
• Mid-Size Jets: Inventory for the 45-model tracked fleet posted a 2.9% increase in March (five units), but still equated to >60% drop YoY, and a 64.4% decrease since the June 2020 peak. These figures resulted, in part, from the sale of 102 aircraft during Q1 2022, which were fewer than the 110 sold during the same period in 2021.
  
  The Quality Rating was relatively stable throughout Q1, remaining within ‘Very Good’ territory while improving to 5.122, a nominal 0.3% gain, in March, and 2.2% since December 2021. Nevertheless, it remained 3.7% lower YoY.
  
  
• Light Jets: The group’s Quality Rating improved each month during the past quarter, posting a 1.6% increase in March, to 5.217 (within ‘Very Good ‘range), 3.8% during Q1 2022, and a 0.9% YoY.
  
  Light Jet sales in Q1 totaled 144 aircraft, compared to 127 last year, and reduced inventory by 2.7% (five units) in March, 52% YoY, and 58.6% since the June 2020 peak. Only 3.2% of the active fleet was listed for sale as March closed, compared to 8.2% in 2021.
  
  On a per-tracked-model basis, Light Jets posted more sales per tracked model than any other group (5.0 units) during Q1, while also offering greater availability at the end of Q1 (7.6 units per tracked model), and requiring the fewest Days on Market to create a sale.
  
  
• Turboprops: The 17 tracked Turboprop models reflected 62 transactions during Q1 2022 (versus 88 in Q1 2021). Inventory decreased 6.5% in March (11 units) to finish Q1 down 28%, approximately 56% down YoY, and 40.1% below the June 2020 peak. Availability is now 2.9% of the active fleet, while the figure stood at 6.4% one year ago.
  
  Buyer preference for assets sporting a higher Quality Rating resulted in a 1.0% Rating decrease to 5.055 for March (just within ‘Very Good’ range), 1.3% during Q1 2022, and 2.4% YoY. Considering Turboprops offer more availability per model than any other group (8.9 aircraft compared to the tracked fleet’s average of 5.1), and an ETP Ratio that’s just slightly above the 40% excessive ETP Ratio point (see below for more information), ample opportunities exist for buyers and sellers to structure value-based transactions.

March’s Maintenance Exposure Trends

After decreasing/improving a substantive 8% during February, the cost of embedded/accrued maintenance (Maintenance Exposure) increased/worsened 6.2% during March (0.7% during Q1 2022, and 3.4% YoY) to approach the 12-month worst figure.

These figures signify that upcoming maintenance events, while fewer in number (see Quality Rating above), will be more expensive to complete. By group, the Maintenance Exposure figures were as follows…

• Large Jets: Upcoming maintenance events are expected to cost 14% more, based on the group’s Maintenance Exposure during March. That’s just slightly worse (0.4%) than the Q4 2021 figure, and 4.9% higher YoY.
• Mid-Size Jets: The group’s Maintenance Exposure increased 2.3% to set a 12-month high/worst figure, while also worsening 7.4% for the quarter, and 9.6% YoY.
• Light Jets: Maintenance Exposure decreased 7.7% in March to post a 12-month low/best value, while also improving 8% during Q1, and 12.4% YoY.
• Turboprops: Maintenance Exposure posted a slight 0.5% improvement, but that decrease was not shared by the figures posted for the quarter and YoY, which increased/worsened 1.5% and 7.8%, respectively.

March’s ETP Ratio Trend

Continuous Ask Price increases during Q1 2021 helped the Maintenance Exposure to Ask Price (ETP) Ratio achieve a 12-month low figure of 65.3% in March, with all four groups benefiting.

The ETP Ratio continues to be 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 Q1 2021, assets whose ETP Ratio was 40% or higher were listed for sale more than 62% longer (on average) than aircraft whose Ratio was below 40% (308 versus 500 DoM). For the month of March, 40% of our tracked models, and nearly 55% of all listed aircraft, posted an ETP Ratio above the 40% excessive mark, with each group faring as follows:

• Large Jets: The increased Ask Price helped lower the ETP Ratio to 38.3%, the group’s second consecutive monthly improvement and the first time Large Jets have been below the 40% excessive exposure demarcation point since August 2016.
• Turboprops: Between the group’s slight Maintenance Exposure decrease and the Ask Price increase, the ETP Ratio improved to 44.4%, but that figure was higher (worse) than the group’s 12-month average.
• Mid-Size Jets: The group’s average Ask Price increase helped the ETP Ratio decrease to 69.1%, which was a major improvement over February’s 83.3%.
• Light Jets: The decrease in Maintenance Exposure and increase in Ask Price improved the group’s ETP Ratio to 90.5%, a 12-month low/best figure, and the first time the Ratio has not been within triple-digit range since October 2020.

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 March 2022.

Most Improved Models

While only three of March’s ‘Most Improved’ models experienced a Maintenance Exposure decrease/improvement, all six models posted an Ask Price increase:

• Bombardier Learjet 60: +$858,166
• Hawker 1000A: +$565,000
• Beechcraft Premier 1A: +$1,137,735
• Beechcraft Premier 1: +$419,741
• Hawker 400XP: +$650,000
• Bombardier Learjet 55: +$136,917

Bombardier Learjet 60

Two Learjet models bookend March’s ‘Most Improved’ list, with the Bombardier Learjet 60 earning top honors. Vaulting from its fourth place ranking on February’s ‘Most Deteriorated’ list, the model earned its place through one sale and four additions to inventory.

An Ask Price increase of more than $858k overtook a $5k Maintenance Exposure increase to decrease the ETP Ratio from 86.1% to 59.9%.

The 20 aircraft now listed for sale represent 7.2% of the active fleet. While the model’s availability figure is higher than the tracked Mid-Size Jet fleet’s 3.8% average, Asset Insight believes it provides more opportunities for prospective buyers, while sellers whose aircraft is enrolled on an engine Hourly Cost Maintenance Program (HCMP) should have little trouble negotiating value-based transactions.

Hawker 1000A

Making its fourth appearance on the ‘Most Improved’ list, and its sixth on one of these reports, is the Hawker 1000A, a model that occupied third place on last month’s ‘Most Deteriorated’ list.

It arrived here by virtue of a single sale, along with three inventory withdrawals, that left three aircraft listed for sale. That figure still represents 9.4% of the active fleet, though, due to the Hawker 1000A’s limited production. The changes to the inventory fleet mix actually increased the model’s Maintenance Exposure more than $164k. However, an Ask Price increase of $565k allowed the ETP Ratio to decrease from 109.2% to 84.7%.

While the latest Ratio is anything but stellar, sellers whose aircraft engines are enrolled on HCMP are likely to have better opportunities to structure a reasonably-priced transaction.

Beechcraft Premier 1A

The Beechcraft Premier 1A has earned a spot on either list only five times, and this is its second appearance on the ‘Most Improved’ grouping – probably owing to ‘technical reasons’…

Two aircraft were sold in March, two joined the inventory, and one was withdrawn. The six remaining listings accounted for 3.9% of the active fleet. While Maintenance Exposure decreased over $39k, the Ask Price figure increased over $1.1 million, thereby decreasing the ETP Ratio by more than 24%.

However, of the six assets listed for sale, only one unit had a posted Ask Price each month during February and March. February’s priced unit was withdrawn from inventory, and the value for the one priced inventory aircraft in March (which did not have an Ask Price in February) was more than two-thirds higher than February’s priced unit.

As we’ve mentioned in previous reports, statistics can sometimes create an unrealistic picture, especially when the sample size is small – which is the case for many models in the current low-inventory environment. But, if you’re a seller, an ETP Ratio of 32.5% should help your efforts, assuming the lone Ask Price is realistic, relative to the rest of the market.

Beechcraft Premier 1

Unlike its younger sibling, the Beechcraft Premier 1 has attended this report ten times, and this is its sixth appearance on the ‘Most Improved’ list. In fact, it has even improved one place from the position it held on February’s list.

Only five aircraft were listed for sale (4.3% of the active fleet) and no sales were recorded during the past month. However, one listed asset was withdrawn from inventory leading to a $91.5k Maintenance Exposure decrease along with Ask Price rise approaching $420k, and that sufficiently lowered the ETP Ratio.

As was the case with the Premier 1A, figures for the Premier 1 are based on a limited sample size, but an ETP Ratio of 54.6%, considering the model’s limited selection, may be nothing more than a speed bump for sellers – especially those whose engines are enrolled on HCMP.

Hawker 400XP

When only one percent of a model’s active fleet is listed for sale (four units), and the average ETP Ratio is 22.4%, you can be pretty confident that you’re in the driver’s seat – if you’re the seller. Such is the case for the Hawker 400XP, a model that has appeared on one of these reports only three times previously, all of them on the ‘Most Improved’ list.

The Hawker 400XP posted one sale in March, had one addition to inventory, and one withdrawal from the available fleet. The new mix led to a Maintenance Exposure decrease exceeding $237k, as well as a $650k Ask Price increase. Keeping in mind that only one of the four listed units is displaying an Ask Price, sellers appear to hold the advantage.

Bombardier Learjet 55

A frequent flyer on these reports, the Bombardier Learjet 55 makes its fifth-ever appearance on the ‘Most Improved’ list, earning the final spot through an Ask Price increase nearing $137k that overcame a Maintenance Exposure increase approaching $105k.

Alas, with an ETP Ratio of 167.7%, the future may not exactly be bright for the nine aircraft listed for sale (9.7% of the active fleet). No sales were registered in March, two units were withdrawn from the available pool, while one joined the fray. While overall availability is at an all-time low, demand for this aging industry workhorse is not exactly buoyant.

Most Deteriorated Models

All six models on the ‘Most Deteriorated’ list posted a Maintenance Exposure increase. Two models, the Cessna Citation III and Beechcraft King Air 350 (Pre-2001 models) posted no Ask Price change, while the Bombardier Challenger 601-3A registered an Ask Price increase of $37,083.

The remaining three models experienced the following Ask Price decreases:

• Cessna Citation V 560: -$77,500
• Bombardier Learjet 60XR: -$600,000
• Beechcraft King Air C90: -$72,436

Cessna Citation III

Leading off our ‘Most Deteriorated’ list is a model that posted no Ask Price change, no sales, and no other change to aircraft inventory during March. Maintenance events coming due simply increased Maintenance Exposure for the Cessna Citation III by more than $44k, earning it a place on this list.

The ten aircraft listed for sale amount to 6.1% of the active fleet. However, the model’s ETP Ratio, at 166.8%, amounts to a very tall order for sellers – unless they wish to virtually give their aircraft away. On the other hand, for some, the tax write-off may be worth it.

Bombardier Challenger 601-3A

Two Bombardier Challenger 601-3A units were sold in March, and two more withdrawn, to leave four aircraft on the market (3.5% of the active fleet).The latest inventory mix raised Maintenance Exposure by nearly $198k, and that figure overrode an Ask Price increase exceeding $37k, to land the model on this list.

With the latest ETP Ratio standing at 134.2%, March’s sales exemplify the industry’s record demand for Large Jets regardless of age.

Cessna Citation V 560

The Cessna Citation V 560 had a very active month in March, with four sales and three additions to inventory leaving a pool of nine aircraft listed for sale (3.6% of the active fleet). Changes to the inventory mix resulted in Maintenance Exposure increasing over $38k, while Ask Price fell $77.5k, and the 7.2% increase to the ETP Ratio was sufficient to earn the Cessna Citation V its place within this grouping.

The model’s 63.3% ETP Ratio may not be as problematic as it could be for sellers, based on last month’s transactions, especially if the aircraft’s engines are enrolled on HCMP.

Bombardier Learjet 60XR

For March, the Bombardier Learjet 60XR occupies the slot held by the Learjet 60 in February. It arrived here through one sale and two additions to inventory.

While Maintenance Exposure increased more than $12k, it was the $600k Ask Price decrease that earned this model its spot on this list.

The news is not bad for sellers, though. While the ETP Ratio, at 45.6%, places the model into the ‘excessive exposure’ range, the HCMP-adjusted ETP Ratio, for those aircraft whose engines are enrolled on a program, would definitely improve the unit’s marketability.

Also, keeping in mind today’s limited availability, the ten units listed for sale (9.0% of the active fleet) provide a respectable selection for prospective buyers.

Beechcraft King Air 350 (pre-2001 models)

The penultimate model on this month’s ‘Most Deteriorated’ list posted no sales in March, but two unpriced units joined the inventory, creating a pool of five aircraft, 1.8% of the active Beechcraft King Air 350 (pre-2001 models) fleet.

Maintenance Exposure was nearly $147k, and, even with no change to Ask Price, raised the ETP Ratio to 46.2%. Only a small number of King Air 350 aircraft have engine HCMP coverage, so that feature is unlikely to be a discriminator for sellers.

Nevertheless, the Turboprop market continues to be strong, giving sellers the ascendency in bargaining terms.

Beechcraft King Air C90

Sellers of Beechcraft King Air C90s may not be as fortunate, as the model’s ETP Ratio reached 123.8% in March. Maintenance Exposure increased by nearly $4k, and Ask Price fell over $72k to create that marketability hurdle.

One sale did take place in March, and, following five withdrawals from inventory, availability stood at only 5.1% of the active fleet. Those 18 available aircraft pose a fairly sizable selection for prospective buyers of a fleet that’s starting to show its age, so sellers need to carefully consider what attributes might increase their aircraft’s market appeal.

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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