Used Aircraft Maintenance & Marketability Analysis – November 2022

Asset Insight’s tracked 134-model fleet achieved its eighth consecutive inventory increase with all four groups participating. November’s 9.6% rise in listed assets (93 units) equated to a 20.6% increase Year-to-Date (YTD) that left only Turboprop availability below the December 2021 level.

While still 36.5% below the June 2020 overall inventory peak, the active fleet’s availability has now risen to 4.8%, which is higher than the 4.6% figure posted one year ago. At 10.3, Turboprops continued to offer the largest per-model aircraft selection, followed by Light Jets (10.1), Large Jets (6.8), and Mid-Size Jets (6.5).

The Quality Rating’s 0.1% monthly improvement, albeit nominal, was the best figure since April’s 12-month high.

On Asset Insight’s scale of -2.5 (low) to 10 (high), November’s 5.327 kept listed assets within the ‘Excellent’ range, and the Rating was 2.7% better/higher Year-over-Year (YoY), meaning fewer maintenance events coming due in the near future for the currently listed fleet.

November’s Pre-Owned Aircraft Value Trends

Led by Light Jet and Turboprop record-high Ask Prices, the tracked fleet’s average increased by 1.9% in November to a record-high overall value. While reflecting the eighth consecutive monthly rise, the increase was also the seventh consecutive 12-month high figure, and in November equated to 58.9% increase YoY, and 79.2% YTD.

Bonus depreciation appears to be providing a tailwind for US-based taxpayers, as the annual Q4 purchasing frenzy spools up to full power. By category, the Ask Price changes for tracked models were as follows…

• Large Jets: Ask Price decreased 0.7% after rising for three consecutive months, but Large Jet Ask Price is up 35% YoY and 44.3% YTD.
• Mid-Size Jets: Ask Price is up 64% YoY and 105.1 YTD, with those figures including a 17.4% tumble during November.
• Light Jets: Rising 20.7% in November to a record-high figure, the average Light Jet Ask Price is now up 87.5% YoY, and more than 117% YTD.
• Turboprops: Ask Price, which has risen every month since February, rose an additional 5.2% to a record-high figure in November, representing a 49.2% hike YoY and 50.1% YTD.

November’s Fleet for Sale Trends

While inventory has been increasing, several experienced aircraft brokers have advised that few recently-listed assets are models most buyers are seeking. Equally, for models in demand, most recent listings do not have the specification and/or pedigree required for presentation to their clients, irrespective of the aircraft’s maintenance status.

Based on current sales figures, we believe 2022 will end with fewer private aircraft transactions than were completed in 2021.

• Large Jets: Listed assets increased 16.2% (41 units) for Asset Insight’s 43-model tracked fleet, and availability is now up 75% YTD (126 units). While a significant improvement, the group’s inventory is, unsurprisingly, 21.6% below the June 2020 peak.
  Quality Rating improve/rose 0.4% during November, representing a 1.9% increase YoY. November’s 5.658 Rating was better than the 12-month average for a third consecutive month, keeping the group well-within ‘Outstanding’ territory.
• Mid-Size Jets: The number of assets listed for sale increased 6.2% in November (17 units), raising inventory for the 45-model tracked Mid-Size Jet fleet by 26.8% YTD, while still being 41.4% below the June 2020 peak
  The Quality Rating rose (improved) a slight 0.2% to 5.414 in November, the group’s second consecutive 12-month high figure that equated to a 6% improvement YoY. The latest Rating pushed the group into the upper level of the ‘Excellent’ range.
• Light Jets: Inventory for the 29-model tracked Light Jet fleet increased 8.4% for November (23 units), raising the YTD figure 11.2% (30 units) above the year-end level. Availability stood at 45.3% below the June 2020 peak.
  The Quality Rating improved/increased 1.2% for the month and 2.5% YoY. The figure was slightly worse than the 12-month average but, at 5.202, moved Light Jets further into ‘Very Good’ territory.
• Turboprops: Availability for the 17-model tracked Turboprop fleet grew 7.1% in November (12 units), meaning there are still 16.5% fewer Turboprops listed for sale compared to December 31, 2021, and 30.5% less than the June 2020 industry peak.
  The Quality Rating worsened by 1.5% for the month and YoY, but it remained within ‘Very Good’ territory.

November’s Maintenance Exposure Trends

The embedded/accrued maintenance expense associated with November’s listed fleet improved/decreased an additional 0.3%, signifying a somewhat lower cost to complete upcoming events compared to October’s fleet mix, although that cost is also projected to be 7.1% higher than November 2021. By group, the Maintenance Exposure figures were as follows…

• Large Jets: The latest fleet mix increased/worsened Maintenance Exposure 1.7% in November, but the value was 5.9% better YoY.
• Mid-Size Jets: Although 0.6% higher YoY, Maintenance Exposure improved/decreased 4.7% for the month to post a 12-month low/best value.
• Light Jets: Worsened/rose 0.2% YoY, but the figure improved/decreased 3.1% in November.
• Turboprops: Worsened, increasing 2.8% for the month and 2.7% YoY, to a figure worse than the 12-month average.

November’s ETP Ratio Trend

Improving/decreasing for the seventh consecutive month, the ETP Ratio has now also set a 12-month best/low figure for each of the past six months. With Ask Price rising and Maintenance Exposure decreasing, November’s Ratio improved to 47.9%, marking the value’s first venture below 50% since December 2014, when it was 45.7%.

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%.

Assets whose ETP Ratio was 40% or higher during Q3 2022 were listed for sale nearly 89% longer (on average) than aircraft whose Ratio was below 40% (175 versus 331 Days on Market). In November, 36.8% of the tracked models, and 37.3% of the listed fleet, posted an ETP Ratio above the 40% mark considered to be ‘excessive’. Each group fared as follows…

• Turboprops: The Ask Price increase improved/lowered the group’s ETP Ratio to 32.7%, a second consecutive 12-month low/best Ratio and, once again, only slightly higher than the group’s all-time low of 32%.
  The ETP Ratio for Turboprops has now been below the 40% ‘excessive’ demarcation point for seven consecutive months, and November represented the fifth consecutive month that Turboprop marketability has exceeded that of Large Jets.
• Large Jets: The ETP Ratio absorbed the Ask Price and Maintenance Exposure statistics by increasing/worsening to 37.1% from October’s 36.6%. The figure was better than the 12-month average and considering that Large Jets have been below the 40% mark for eight of the last nine months, the average Large Jet aircraft’s marketability is certainly not being negatively impacted by its maintenance status.
• Mid-Size Jets: The group’s Maintenance Exposure decrease was useful, but insufficient to address the Ask Price drop, and the ETP Ratio worsened/rose to 49.2% from October’s 12-month best of 48.8%.
• Light Jets: Even with a Maintenance Exposure increase, the ETP Ratio improved/decreased to a 12-month best 66.2%, thanks to the group’s record-high Ask Price. While sales statistics will be the ultimate determinant, Light Jet marketability appears to have made a dramatic improvement since February 2022’s triple-digit ETP Ratio figure.
  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 November 2022.

Most Improved Models

Five of the six ‘Most Improved’ models recorded a Maintenance Exposure decrease, while the Beechcraft King Air 300 posted an increase. The Bombardier Challenger 601-3R and the Beechcraft King Air C90 experienced no Ask Price change, while the remaining four models registered the following increases:

• Hawker Beechjet 400A: +$296,708
• Beechcraft King Air 300: +$1,570,000
• Bombardier Learjet 35A: +$50,403
• Bombardier Learjet 60XR: +$1,875,000

Hawker Beechjet 400A

The Hawker Beechjet 400A replaced its older brother, the Beechjet 400, atop the ‘Most Improved’ list in November. The model has appeared on our reports eight times (half of that time on this list) – but not since September 2021.

It captured its position through a Maintenance Exposure decrease approaching $22k and an Ask Price increase nearing $297k.

One transaction was recorded for the month, with another asset entering inventory to maintain a 20-unit pool (8% of the active fleet). The two changes resulted in the ETP Ratio decreasing/improving to 48.3% and that figure will definitely adjust to below the 40% ‘excessive’ demarcation point for any aircraft enrolled on an engine Hourly Cost Maintenance Program (HCMP).

Bombardier Challenger 601-3R

There were no sales that we could identify during November for this model, but one Bombardier Challenger 601-3R was added to inventory creating a four-aircraft pool equating to 7.8% of the active fleet.

While the new listing did not post an Ask Price, it did help decrease Maintenance Exposure by nearly $835k, thereby improving the ETP Ratio from 62.7% to 48.8%. With only one priced asset creating the ‘average’ Ask Price, it is difficult to tell if the improvement truly reflects a marketability improvement...but as this is the ‘fourth quarter silly season’, anything is possible.

Beechcraft King Air 300

Pickings are sparse when it comes to the Beechcraft King Air 300, so finding it on one of our reports, and on this side of the ledger, comes as no surprise.

An Ask Price increase of $1.57m overrode a Maintenance Exposure increase approaching $330k to reduce the ETP Ratio from 47.5% to 34.9%. It all resulted from two trades (one taking place in October, after we closed out the month) and two additions to the listed fleet. However, only one aircraft now occupying inventory has a posted Ask Price, and that figure is more than 90% higher than the single priced asset that sold.

There is no question the very low Beechcraft King Air 300 inventory could allow for a price hike. Whether the amount is as high as at least one seller is hoping for, we’ll leave that for prospective buyers to judge.

Bombardier Learjet 35A

The Bombardier Learjet 35A took over fourth place on this month’s list from its younger brother, the Learjet 60. It earned the right to do so through a Maintenance Exposure decrease exceeding $4k and an Ask Price increase exceeding $50k.

That appears to paint a positive picture, until you realize that the ‘improvement’ was from an ETP Ratio of 182.2% reducing to 170.2%. To add insult to injury relative to the model’s marketability, we uncovered no sales in November, and the single aircraft withdrawal from the listed fleet still left 27 units seeking a new owner (7.4% of the active fleet).

Beechcraft King Air C90

Making its seventh appearance on a report over the past twelve months, three of those times on this side of the ledger, is the Beechcraft King Air C90. It arrived here following the sale of two unlisted aircraft, and one withdrawal from the listed pool, leaving 14 assets for buyers to consider (4.1% of the active fleet).

There was no Ask Price change, but Maintenance Exposure did improve nearly $48k. What did not improve as much as sellers might like is the model’s marketability: The ETP Ratio stood at 127.1%, improving on October’s 137.5%.

Bombardier Learjet 60XR

The final position on November’s ‘Most Improved’ list is occupied by the Bombardier Learjet 60XR, a model that has made it into one of our reports only six times, four of those during the past nine months, with its last three appearances on the ‘Most Improved’ list.

We identified no aircraft transactions during November, but two assets joined the inventory to create a 13-unit pool (11.7% of the active fleet). While this led to a Maintenance Exposure decrease exceeding $12k, Ask Price increased nearly $1.9m due to a single, previously unpriced asset posting a figure nearly 37% higher than the average of the two aircraft showing a price in October – neither of which are now advertising an Ask Price.

Under normal circumstances, the limited Ask Price statistics would raise a red flag. However, the Learjet 60XR was already quite marketable with an ETP Ratio of 26.8% in October, and a decrease/improvement to 19.5% during November should make sellers even happier.

Most Deteriorated Models

All six ‘Most Deteriorated’ models experienced a Maintenance Exposure increase. The Beechcraft Premier 1 posted a $54,667 Ask Price increase, while the remaining five models experienced the following Ask Price decreases:

• Beechcraft King Air 350 - Pre-2001: -$300,000
• Bombardier Global 5000: -$5,150,000
• Cessna Citation Sovereign+: -$8,370,000
• Beechcraft Premier 1A: -$101,547
• Dassault Falcon 2000: -$883,333

Beechcraft King Air 350 (Pre-2001)

Beechcraft King Air 350 models manufactured prior to 2001 have appeared in this report only three times previously, and all of those have been on the ‘Most Deteriorated’ list. The aircraft leads November’s cadre after three November sales (including one unlisted aircraft), and three additions to a ‘for sale’ fleet that amounts to nine assets (3.2% of the active fleet).

The inventory mix changes increased Maintenance Exposure by more than $181k and dropped the model’s Ask Price by $300k. The news is not bad for sellers, though, as all these changes only increased the ETP Ratio from 13.6% to 19.8% – the model remains very marketable.

Beechcraft Premier 1

A Maintenance Exposure increase approaching $149k overrode an Ask Price increase approaching $55k to keep the Beechcraft Premier 1 on the ‘Most Deteriorated’ list for the second consecutive month, although the model did improve from the penultimate position it occupied on October’s grouping.

We noted one November sale of an unlisted aircraft along with four additions to the listed fleet leading to 14 available aircraft (12.2% of the active fleet).

While these statistics increased/worsened the ETP Ratio to 63.7%, many of these units are enrolled on engine HCMP, potentially lowering the HCMP-adjusted ETP Ratio to below the 40% ‘excessive’ point.

Bombardier Global 5000

This Bombardier Global 5000 has only appeared on a report four times before, but three of those appearances have been on this side of the ledger. It earned its position due to a Maintenance Exposure increase nearing $500k that was very ably aided by a $5.15m Ask Price decrease.

The changes were not precipitated by sales but, rather, six new inventory listings that included one unit posting an Ask Price more than 47% lower than the Global 5000 average. Clearly, the model is still quite marketable, even though its ETP Ratio increased to 29.7% and availability increased to 17 assets (7.3% of the active fleet).

Cessna Citation Sovereign+

The Cessna Citation Sovereign+ has been on the ‘Most Deteriorated’ list twice, with both occurrences taking place in the past seven months. However, the jet represents an extreme example of how statistics from a low inventory pool can be misleading.

One aircraft transacted in October (after we had closed out the month), another transacted in November, and one entered inventory. The four listed assets (4.1% of the active fleet) increased the model’s Maintenance Exposure by over $532k. However, a lack of priced assets in November created a ‘theoretical’ Ask Price drop approaching $8.4m, thereby increasing the ETP Ratio to 13.4%.

The Citation Sovereign+ market is currently quite active, so the November figure, although statistically correct, is in this case virtually meaningless – especially when October’s ETP Ratio was only 3.7%.

Beechcraft Premier 1A

Pulling into the spot held by the Premier 1 in October is the younger Beechcraft Premier 1A. The model has appeared on a report six times, with four on the ‘Most Deteriorated’ list.

No sales, one withdrawal, and two additions to inventory in November meant the 12 listed aircraft (7.9% of the active fleet) increased the model’s Maintenance Exposure by nearly $253k and dropped Ask Price by nearly $102k.

Unlike the Premier 1, the Premier 1A’s ETP Ratio only rose to 41.9%, just marginally above the 40% ‘excessive’ level. Since most of these assets are enrolled on engine HCMP, the HCMP-adjusted marketability figure should enable most sellers to receive decent offers.

Dassault Falcon 2000

One Dassault Falcon 2000 transacted after we closed the books on October, two unlisted units were sold in November, while three joined the inventory, and the new fleet mix created the statistics necessary for the model to earn the ‘Most Deteriorated’ slot for the month.

Maintenance Exposure increased nearly $436k while Ask Price dropped more than $883k when one of the three inventory additions posted a price that was 54% lower than October’s only priced aircraft.

The nine available units (4.2% of the active fleet) carry a 44.3% ETP Ratio compared to October’s 32.4%. Most sellers that have enrolled their engines on HCMP are unlikely to be negatively affected. Those not enrolled on a program are likely to regret their decision through the lower-priced offers they receive for their aircraft.

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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