Used Aircraft Maintenance & Marketability Analysis – September 2021

Year-to-date (YTD) availability of Asset Insight’s tracked fleet of business jets and turboprops has decreased every month since June 2020, and is down 37.8% (722 fewer aircraft), equating to a 47% year-over-year (YoY) reduction.

The September 30th, 2021 market analysis identified an additional 4.3% availability decrease (82 units) for the tracked fleet, covering 134 models, leaving 1,190 assets listed for sale, but with few young, low-time units available. 

The listed fleet’s Quality Rating saw little change in September, improving by 0.1%, but deteriorated 0.7% for the quarter, and 0.9% YoY. At 5.245, the inventory remained within ‘Very Good’ Quality Rating territory, but, compared to Q2, more near-term maintenance events are due for the listed fleet. 

September’s Aircraft Value Trends

Perhaps in an attempt to benefit from the lack of availability, many Large and Medium Jet sellers have increased their asset’s Ask Price. Whether or not that strategy will result in higher transaction values remains to be seen, but it did increase the tracked fleet’s average by 12.3% in September, following August’s 12-month low figure. 

Overall values were still down 2.4% during Q3, 1.7% YTD, and 4.2% YoY. Ask Price changes by group were as follows…

• Large Jets: The average Ask Price increased 14.2% in September, but was still down 5.8% for the quarter, 2.6% YTD, and 0.8% YoY.
• Mid-Size Jets: The group posted an Ask Price increase in September – and it was impressive, at 25.4%. While 6.4% lower YoY, the figure was 10.7% higher for the quarter, and 4.5% higher YTD.
• Light Jets: The average Ask Price dropped 2.9% to remain below that of Turboprops, and it was also down nearly 1% for the quarter, 13.4% YTD, and 18.1% YoY.
• Turboprops: Ask Prices decreased 2.6% in September, 4.2% for the quarter, and 0.2% YTD, although it was 0.4% higher YoY.

September’s Fleet for Sale Trends

As September ended, Q3 transactions stood at 547 for Asset Insight’s tracked models, compared to 539 during Q2. The unprecedented number of first-time buyers is continuing to strain the supply chain, making purchasing or selling a used aircraft very challenging – assuming buyers can locate the type of asset they need.

Simply securing a slot to conduct a pre-purchase inspection has become difficult, and it may soon be impossible to enter certain service centers prior to year-end.

Only 5.6% of the active, tracked fleet was listed for sale, compared to 10.4% one year ago. More challenging still, most of the available assets have been listed for quite some time, suggesting they may well be with their final owner, and average Days on Market have been steadily rising since June 2020.

• Large Jets: Availability for Asset Insight’s fleet of 43 tracked models decreased 1% in September (three units). That may read better than prevailing market conditions, considering the group has seen availability decrease 34.1% YTD (147 units) and 44.2% YoY. Total Q3 transactions stood at 128 compared to 120 during Q2.
• Mid-Size Jets: 168 aircraft changed owners during Q3, compared to 158 in Q2. Available inventory for our 45-model tracked fleet decreased 4.8% (25 units), bringing the YTD decrease to 42.8% (223 units) and 52.8% YoY.
• Light Jets: 158 aircraft transacted during Q3, the same number of units from the 29 Asset Insight-tracked models that sold during Q2. That lowered availability by an additional 5.8% (32 units), 42.4% YTD (234 units) and 49.5% YoY.
• Turboprops: Following a slight increase in availability during August, September posted a 5.4% decrease (22 units), equating to a YTD decrease of 29% (118 units) and 39.2% YoY. The availability reduction may have been why Asset Insight’s tracked 17-model fleet registered only 88 sales in Q3, compared to 102 during Q2.

September’s Maintenance Exposure Trends

Defined as an aircraft’s accumulated/embedded maintenance expense, Maintenance Exposure worsened (increased) another 1.9% in September and ended Q3 0.3% higher (worse) than Q2, as well as 1.9% higher YoY.

Accordingly, in addition to more maintenance events coming due, these tasks will be, on average, more expensive to complete. By individual group, Maintenance Exposure figures were as follows…

• Large Jets: Increased 0.2% for September, 0.7% for Q3, and 4.8% YoY.
• Mid-Size Jets: Rose (worsened) 1.4% for September, and 2.2% for Q3 (although it was 1.4% better/lower YoY).
• Light Jets: Decreased 2.6% for September (1.6% for Q3, and 4.3% YoY).
• Turboprops: Decreased 1.4% for September, but rose (worsened) 0.2% during Q3, and 1.6% YoY.

September’s ETP Ratio Trend

Proof the inventory is comprised of older, difficult to remarket aircraft is to be seen in the latest ETP Ratio, which reached a record-high (worst) 78% in September.

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 its price. ‘Days on Market’ analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s Days on the Market increases, in many cases by more than 30%.

During Q3 2021, aircraft whose ETP Ratio was 40% or greater were listed for sale nearly 84% longer than assets with an ETP Ratio below 40% (296 versus 545 days). In September, each group fared as follows…

• Turboprops: While it posted the lowest/best figure for the twenty-second consecutive month, the Turboprop group’s ETP Ratio worsened (increased) from 41.9% to 42.9%. Considering the group’s average barely surpasses the 40% point Asset Insight considers to be excessive, the latest Ratio should worry few sellers.
• Large Jets: Once again in second position, the ETP Ratio rose to 72.7%, the group’s highest (worst) Ratio over the past 12 months. Entering Q4, Asset Insight sees virtually no relief in sight, relative to availability of lower-time, younger assets.
• Mid-Size Jets: The Mid-Size Jet group’s ETP Ratio rose to a 12-month high (worst) 72.7%.
• Light Jets: With the group’s ETP Ratio reaching a new record high (worst) 119.7%, it is amazing to Asset Insight that buyers and sellers can still find common ground.

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 September 2021.

Most Improved Models

All six ‘Most Improved’ models experienced a Maintenance Exposure decrease (improvement). While the Gulfstream G100 Posted an Ask Price decrease of $35k and the Piaggio P-180 registered no change in Ask Price, the remaining four models posted the following increases:

• Gulfstream GIV: +$635,000
• Cessna Citation ISP: +$1,405
• Hawker 800A: +$27,917
• Cessna Citation CJ2+: +642,000

Gulfstream G100

The Gulfstream G100 retained the top spot on the ‘Most Improved’ list for a second month following two consecutive months in the ‘Most Deteriorated’ position. It achieved this through the sale of one-third of the model’s available inventory (meaning one unit!).

The sale of the highest-priced aircraft reduced the Ask Price by $35k, but Maintenance Exposure also decreased over $728k, allowing the model to remain on top of this list.

While only 9.6% of the active fleet is listed for sale, the model’s ETP Ratio stands at nearly 100%, meaning the embedded maintenance is virtually equal to the average Ask Price; a fact that is likely to challenge any seller.

Gulfstream GIV

This Gulfstream GIV has occupied one of these two lists two-thirds of the time we’ve run these analyses. It takes second position on September’s ‘Most Improved’ list, courtesy of a Maintenance Exposure drop (improvement) nearing $262k, along with a $625k Ask Price increase.

Though none of these industry workhorses transacted in September, two were withdrawn from inventory, and four more were added. When the final figures were in, six units were listed for sale, equating to only 3.9% of the active fleet.

Many of these aircraft are enrolled on engine Hourly Cost Maintenance Program (HCMP) coverage, but the listed fleet’s 116.4% ETP Ratio will make offers on unenrolled aircraft difficult for sellers to accept.

Piaggio P-180 Avanti

We uncovered no transactions for the Piaggio P-180 Avanti during September. In fact, nothing changed with respect to the listed fleet of six assets (7.4% of the active fleet). What did change was the Maintenance Exposure, following completion of scheduled events. That decreased/improved the listed fleet’s Maintenance Exposure by more than $294k, earning the model third place on the Most Improved list.

Regrettably, this good news will provide only nominal assistance to sellers, since the model’s ETP Ratio still stands at 97.5%.

Cessna Citation ISP

The Cessna Citation ISP has occupied one of these two lists more than half the time we’ve published figures. In September, the sale of one aircraft and the addition of two others to the listed fleet created the necessary statistics to project it onto the Most Improved list.

The 43 listed assets (16% of the active fleet) posted a Maintenance Exposure decrease approaching $105k, along with a nominal ($1,405) Ask Price increase. That bit of positive news still left an ETP Ratio approaching 118%, so sellers are advised to seriously consider all offers received.

Hawker 800A

The Hawker 800A dropped one place on the Most Improved list in September, after occupying fourth place in August. September’s single Hawker 800A sale, and a single unit withdrawal, left eight jets listed for sale (only 4.8% of the active fleet).

However, that group is carrying an ETP Ratio approaching 114%, even though Maintenance Exposure decreased by nearly $118k, while Ask Price improved nearly $28k.

The Hawker 800A continues to have a strong following. The challenge for sellers is how to differentiate their asset from others listed for sale. Since most are enrolled on HCMP, that is not usually a value enhancement. With that said, assets not enrolled on an engine program will definitely be negatively impacted.

Cessna Citation CJ2+

This is only the second time the Cessna Citation CJ2+ has made either of our lists – and represents a debut in the ‘Most Improved’ group. Three aircraft were sold in September, one was withdrawn from inventory, while another was added. The limited supply of three assets for sale as the month closed equated to 1.4% of the active fleet.

Maintenance Exposure decreased (improved) nearly $362k, and the Ask Price increased $642k to justify the asset’s position on the list.

With the model’s ETP Ratio barely exceeding 20%, sellers have ample opportunity to structure value-based transactions. Buyers, on the other hand, have limited options or negotiating leverage.

Most Deteriorated Models

Five of the six ‘Most Deteriorated’ models in September posted a Maintenance Exposure increase. The Bombardier Challenger 601-3R and Learjet 55 posted no change in Ask Price, while the remaining five models experienced the following decreases:

• Gulfstream GIV-SP: -$179,762
• Embraer Legacy 600: -$358,333
• Hawker Beechjet 400A: -$4,552
• Cessna Citation V 560: -$627,500

Gulfstream GIV-SP

Unlike its older sibling, the Gulfstream GIV-SP has been on one-or-other of these lists 25% of the time that we’ve been compiling analyses. This points to the market interest in the model, which leads to numerous changes in Maintenance Exposure and Ask Price.

Only 4.8% of the active fleet (10 units) was listed for sale, following the sale of one aircraft and the addition to inventory of three others.

The current fleet mix increased Maintenance Exposure by nearly $167k while Ask Price dropped nearly $180k to create an ETP Ratio exceeding 90%. While challenging for sellers, the hurdle will be lower for those whose engines are enrolled on HCMP.

Embraer Legacy 600

Making only its third appearance on either list, the Embraer Legacy 600 found its way onto the ‘Most Deteriorated’ list on ‘technical’ grounds. Two sales and one withdrawal during September left seven aircraft in the inventory pool.

The change in fleet mix raised Maintenance Exposure by nearly $406k, while lowering the average Ask Price by more than $358k and earning the model its ranking.

The news is not bad sellers: The ETP Ratio stood at 40.8% by the close of the month, and availability is only 4% of the active fleet. On the other hand, buyers may need to exercise some patience if no listing has the specification they desire.

Bombardier Challenger 601-3R

The Bombardier Challenger 601-3R has found its way on one-or-other list twelve times, half of them on the ‘Most Deteriorated’ side of the ledger. It is here for the second consecutive month, albeit one place higher up the rankings.

Asset Insight recorded no transaction in September, and no change in Ask Price. But a Maintenance Exposure increase approaching $231k was what earned the model its current status.

There are only six aircraft listed for sale, but that translates as 11.3% of the active fleet. For a model sporting an ETP Ratio of 158.7%, and considering the age of the listed fleet, sellers are not in the driving seat – even in the current low-inventory environment.

Hawker 400A

There are plenty of aircraft to choose from for buyers seeking to acquire a Hawker 400A, with the 27 units listed for sale equating to 10.4% of the active fleet.

Two September transactions were identified, along with two inventory withdrawals. As a direct result, Maintenance Exposure increased nearly $98k, while the Ask Price dropped by $4,532. Thus, the model plunged from fifth place on August’s ‘Most Improved’ list to its current spot on the ‘Most Deteriorated’ list.

While operators whose engines are enrolled on HCMP may have some decent opportunities to structure value-based deals, the model’s 73.4% ETP Ratio is likely to make offers for jets that are not covered a difficult pill to swallow.

Bombardier Learjet 55

Struggling to make its way out of August’s basement, the Bombardier Learjet 55 was only able to move up one slot in September. No sales were recorded for the month, but a single withdrawal from the available inventory was registered.

The Ask Price did not change, but the single unit decrease raised (worsened) Maintenance Exposure by over $108k.

With the ETP Ratio at 192.2%, the average buyer will need to rationalize why they should absorb a total cost (asset purchase plus embedded maintenance) of approximately $1.9m for an aircraft whose average Ask Price is ~$650k. (Lest we forget to mention it, the 14 listed units account for 15.1% of the active fleet.)

Cessna Citation V

The last time the Cessna Citation V was on the ‘Most Deteriorated’ list was three months ago, and its ETP Ratio was 69.3%. Its Ratio in September stood at 179.4%, so finding it in the worst possible position is not difficult to believe… but clearly demonstrates how broad statistics can be misleading.

Four aircraft transacted in September, two more were withdrawn from inventory, while only one was added, and the eight available units amounted to only 3.2% of the active fleet.

The problem is, only two assets carried Ask Prices in August, and when the higher-priced unit sold in September, the remaining asset carried an Ask Price of 25% the figure of the sold aircraft. Therefore, while Maintenance Exposure actually decreased by over $66k, the $628k Ask Price ‘decrease’ earned the model its position.

Statistics can be as useful as they can be misleading, hence the reason we continue to recommend that buyers always conduct detailed analytics on any serial number they are considering.

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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