Used Aircraft Maintenance & Marketability Analysis – September 2022

Posting its sixth consecutive monthly increase, Asset Insight’s tracked 134-model fleet inventory rose 2.3% in September, although the 20-unit increase was lower than any one of the previous five months and did not affect all four groups equally.

Year-to-Date (YTD) listings are now down only 0.3% (-3 units), but remain 47.6% lower than the June 2020 peak. The figures brought the active fleet’s overall availability up to 4.0%, compared to last September’s 5.5%.

Meanwhile, the listed fleet’s Quality Rating improved 1.0% to 5.303 from August’s 5.250, on Asset Insight’s scale of -2.5 (low) to 10 (high). The Rating pushed the available aircraft further into the ‘Excellent’ range, and remained virtually unchanged for Q3, and 1.1% better/higher Year-over-Year (YoY). The latest Rating signals fewer maintenance events will be due in the near future.

September’s Pre-Owned Aircraft Value Trends

Irrational as it might appear to be, the tracked fleet’s average Ask Price increased for the fifth consecutive month, and the 10% increase equated to the fifth consecutive 12-month high figure. September’s rise reflected increases of 8.9% for Q3, 53.8% YoY, and 75% YTD.

We believe value stabilization is continuing as the higher Ask Price figures correlate with the inventory fleet’s improving asset Quality Rating. By category, the Ask Price changes for tracked models were as follows…

• Large Jets: Ask Price rose for the second consecutive month, and September’s 6.7% increase resulted in the highest value since April. It was also 4.4% higher for Q3, 34.2% YTD, and 53.6% higher YoY.
• Mid-Size Jets: Following four consecutive monthly increases, Ask Price receded 10.8% from August’s second consecutive monthly all-time high value. For Q3 Ask Price still rose 6.9%, remains 60.2% up YoY, and 140.3% YTD.
• Light Jets: Rising 5.5%, Ask Price resulted in the Light Jet group posting its third consecutive all-time high figure that was also up 11.9% for Q3, 67.6% YoY, and 91.8% higher YTD.
• Turboprops: Ask Price has been rising every month since February in the Turboprop category, and September’s 2% increase represents the group’s third consecutive monthly all-time high figure. Turboprop pricing increased 12.3% during Q3, 33.6% YoY, and 33.8% YTD.

September’s Fleet for Sale Trends

Third quarter sales decreased 22.7% YoY (419 versus 542). While Q3 sales in 2021 were slightly higher than Q2 2021 sales (542 vs. 539), transactions for this year’s Q3 were substantially lower than Q2 (419 vs. 523).

Year-to-Date, sales for Asset Insight’s tracked models are running significantly lower than 2021 figures (1,358 vs. 1,504), meaning that, for 2022 to match 2021 sales figures, 733 transactions will need to close during Q4. That’s a high hurdle for all concerned.

On a slightly brighter note, the average Days on Market figure has decreased steadily during the past three quarters, with the 24.6% drop in Q3 (227 vs. 301 during Q2) – nearly a 50% decrease YTD.

As we have previously stated, any prospective purchaser wishing to secure the enhanced bonus depreciation available under US tax law should already be active in the market, having secured the help of an experienced aircraft broker.

• Large Jets: The group’s Q3 transaction figures (90 units) appeared to be more in line with sales figures generated during Q3 of 2020 (86 units) and 2019 (74 units), as opposed to the 128 transactions generated during Q3 2021.
  
  Partly resulting from the unexpectedly low sales figure, inventory increased 12.2% (23 units) for our 43-model tracked fleet, and availability is now up 26.2% YTD, but is still down 25.4% YoY and 43.3% off the June 2020 peak.
  
  The group’s Quality Rating improved/rose 0.8% in September, 1.6% in Q3, and 3.3% YoY. September’s 5.632 Rating was better than the 12-month average, pushing the group further into the ‘Outstanding’ range.
  
  
• Mid-Size Jets: Transactions for Q3 were down to 132 sales, from 158 during Q2. This was also lower than the 168 transactions completed during Q3 2021. Following August’s 24-unit increase, availability rose by another two assets in September. Inventory for Asset Insight’s 45-model tracked fleet is now up 4.8% YTD, while still being almost 19% lower YoY, and 52% below the June 2020 peak.
  
  The group’s Quality Rating rose another 1.8% to 5.251 during September. The figure equated to an increase of 0.9% for Q3 but was 0.1% lower YoY. By the slightest of margins, Mid-Size Jet Quality entered the ‘Excellent’ range.
  
  
• Light Jets: As with the two other jet groups, Q3 transactions decreased compared to Q2 (112 vs. 130), as well as compared to Q3 2021 (112 vs. 158). Listed assets for the 29-model tracked fleet decreased a marginal 0.8% in September (two units), bringing the YTD figure 1.5% below where it was on December 31, 2021. YoY availability is down 17.6%, and is 51.6% lower compared to June 2020.
  
  The Quality Rating improved 1.2% for September, and 0.7% YoY, but degraded 0.1% during Q3. At 5.259, the Rating raised Light Jets into ‘Excellent’ territory from August’s ‘Very Good’.
  
  
• Turboprops: Year-over-Year Turboprop transactions did not experience as dramatic a drop as any of the jet groups, but quarterly sales stood at 85 by the end of September, compared to 88 during Q3 2021. Transactions decreased by ten units, compared to the 95 sales of Q2 2022.
  
  The number of units listed for sale decreased by just three (or 1.8%), contributing to a 24.8% decrease YTD, 43.3% YoY, and 37.4% since June 2020.
  
  The Quality Rating posted a slight improvement in September (0.2%), and 0.4% YoY to remain within the ‘Very Good’ range, but the Rating actually worsened almost 3% during Q3.

September’s Maintenance Exposure Trends

The cost of embedded/accrued maintenance for the listed fleet improved/decreased 2.3% during September, and remained unchanged in Q3, but increased/worsened 3.4% YoY. Compared to one year ago, upcoming maintenance for listed assets will be more costly to complete. By group, the Maintenance Exposure figures were as follows…

• Large Jets: Rose/worsened a slight 0.1% for the month, and 1.0% YoY, but actually improved/decreased 0.9%, during Q3.
• Mid-Size Jets: Although September posted a 2.9% improvement/decrease, the figure was 4.6% worse for Q3 and 9.5% worse YoY.
• Light Jets: Improvements of 8.3% during September, 4.8% for Q3, and 1.0% YoY were registered.
• Turboprops: Decreased 3.3% for September, and 0.1% YoY, while increasing/worsening for Q3 by 3.7%.

September’s ETP Ratio Trend

The ETP Ratio has now set a 12-month best/low figure during each of the past four months, and in September it decreased to 52.7% (from August’s 54.6%). The improvement was the result of continuing Ask Price increases for three of the four groups, as well as Maintenance Exposure decreases for all but the Large Jets.

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 were listed for sale nearly 89% longer (on average) than aircraft whose Ratio was below 40% (331 Days on Market versus 175). In September, over 34% of Asset Insight’s tracked models, and more than 39% of the listed fleet, posted an ETP Ratio above the 40% excessive mark. Each group fared as follows…

• Turboprops: The Maintenance Exposure improvement and Ask Price increase combined to favorably impact the ETP Ratio, lowering it to 36%. That’s slightly worse/higher than April’s 12-month low of 35.2%. It was also the group’s fifth month below the 40% ‘excessive’ demarcation point, and the third where Turboprop marketability has exceeded that of Large Jets.
• Large Jets: Maintained second place, although the group’s ETP Ratio rose/worsened for the third consecutive month. September’s 41.3% figure represented the first time since February that the group’s Ratio was above the 40% ‘excessive’ mark.
• Mid-Size Jets: The latest fleet mix increased the group’s ETP Ratio to 53.5%, following four consecutive monthly improvements, and three consecutive 12-month low/best figures.
• Light Jets: The average Ask Price increase led to the ETP Ratio setting the group’s third consecutive 12-month low/best figure, this time at 72.5%.

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 September 2022.

Most Improved Models

All six ‘Most Improved’ models recorded a Maintenance Exposure decrease, and while the Bombardier Learjet 55 and the Beechcraft Premier 1 experienced no Ask Price change, the remaining four models registered the following increases:

• Cessna Citation Bravo: +$266,167
• Bombardier Challenger 601-1A: +$300,000
• Gulfstream GIV-SP: +$1,997,500
• Piaggio P-180: +$268,750

Cessna Citation Bravo

Capturing top spot in September’s ‘Most Improved’ grouping is a model that occupied last place on August’s ‘Most Deteriorated’ list. This represents the fourth time in as many months that the Cessna Citation Bravo has appeared in one of our reports alternating between the ‘Most Deteriorated’ and ‘Most Improved’ model each time.

The model’s fourth dramatic change in fortune came after four September transactions, one withdrawal from inventory, and three additions. That left 10 aircraft populating the ‘for sale’ pool, equating to 3.2% of the active fleet.

The substantial changes to a limited inventory lowered Maintenance Exposure by $1.47m, increased Ask Price by more than $266k, and lowered the ETP Ratio from 139% to about 79%. 

All of this should allow some sellers whose aircraft engines are enrolled on an Hourly Cost Maintenance Program (HCMP) to post an adjusted ETP Ratio very close to, if not below, the 40% ‘excessive’ point, making their aircraft quite marketable.

Bombardier Challenger 601-1A

The model capturing second place began September with a single listing, and, while no transactions were recorded, two aircraft were added to inventory. The three-unit pool (representing 10.7% of the active fleet) improved the Bombardier Challenger 601-1A’s ETP Ratio from 164% to 126%.

While not exactly a great opportunity booster for sellers, the group’s Maintenance Exposure did decrease by more than $633k, while Ask Price increased $300k. Although this may sound encouraging, with one of the three aircraft priced approximately one-third higher than the average of the other two units, it remains to be seen whether the model’s position on this list is due to reality, or is a statistical anomaly.

Bombardier Learjet 55

The ‘frequent flyer’ capturing third place on this month’s ‘Most Improved’ grouping has been on one of our reports 16 times, with nine coming in the past 12 months. The Bombardier Learjet 55 made September’s ‘Most Improved’ list after holding third place on August’s ‘Most Deteriorated’ table. And it did so without a single transaction…

The removal from inventory of one aircraft was sufficient to improve/lower the Maintenance Exposure by nearly $262k to earn the model its position, even without a change to its Ask Price. Alas, while the ETP Ratio might have improved from 182%, the current 150% is unlikely to dramatically improve the fortunes of sellers.

Gulfstream GIV-SP

Asset Insight recorded three transactions during the month for the Gulfstream GIV-SP that, along with four additions to inventory, created a pool of 11 aircraft listed for sale (5.5% of the active fleet).

The model’s Maintenance Exposure decreased over $48k, while Ask Price increased by nearly $2m to earn this spot. The fleet mix change also lowered the model’s ETP Ratio from 83% to 59%, allowing virtually any seller whose engines are enrolled on HCMP to achieve an HCMP-adjusted ETP Ratio below the 40% ‘excessive’ mark.

While the statistics appear to be positive, it should be noted that the Ask Price increase is due to a new inventory arrival priced about 80% higher than the only other priced inventory unit. This model continues to have a strong industry following, but its actual marketability may not be as high for some units as the numbers seem to indicate.

Beechcraft Premier 1

Two transactions, two withdrawals, and two additions during the month created the necessary ETP Ratio changes for the Beechcraft Premier 1 to join this list.

Maintenance Exposure decreased by more than $354k that, even without an Ask Price change, allowed the model to secure a spot on one of our reports for the eleventh time – its seventh on this side of the ledger.

The inventory mix change lowered the ETP Ratio to 40%, making virtually all nine of these aircraft (7.8% of the active fleet) quite marketable, as most of this fleet has its engines enrolled on an Hourly Cost Maintenance Program.

Piaggio P-180

Occupying the last position on this month’s ‘Most Improved’ list is the Piaggio P-180, an aircraft that has been in one of our 45 reports 13 times, eight of those appearances within this group.

No transactions were recorded for September, but one aircraft left the inventory and another replaced it to lower Maintenance Exposure by more than $164k. Ask Price, meanwhile, increased by nearly $269k.

The six current listings equate to 7.5% of the active fleet, and the inventory now sports an ETP Ratio of 53.4%. This very capable model has had more than its share of marketability issues, but the current figure should create some decent opportunities for sellers.

Most Deteriorated Models

Two of September’s six ‘Most Deteriorated’ models, the Cessna Citation III and the Bombardier Learjet 60, experienced a Maintenance Exposure decrease, while all six models experienced the following Ask Price decreases:

• Cessna Citation III: -$87,667
• Bombardier Learjet 31A: -$34,214
• Gulfstream GIV: -$695,000
• Socata TBM 700A: -$68,100
• Bombardier Learjet 60: -$768,333
• Cessna Citation CJ1: -$152,500

Cessna Citation III

The addition of a single unit to inventory, along with the sale of one aircraft in late August (recorded after we closed out the month), earned the Cessna Citation III its place on this list.

Though the eight assets ‘for sale’ (6.2% of the active fleet) registered a Maintenance Exposure decrease approaching $46k, an Ask Price decrease nearing $88k was sufficient to increase the ETP Ratio to 139.2%, as if August’s 132% Ratio did not already pose a sufficient marketing hurdle for sellers.

Bombardier Learjet 31A

The Bombardier Learjet 31A placed fifth on August’ ‘Most Improved’ list, but a Maintenance Exposure increase exceeding $54k, along with an Ask Price decrease of more than $34k ensured the model changed sides in September.

Two aircraft transacted in September, one was withdrawn from inventory, and another was added. The new fleet mix led to the ETP Ratio increasing to 94.8% from August’s 86.9%. Considering the first Learjet 31A was manufactured in 1991, these figures come as little surprise.

Gulfstream GIV

Among the 45 reports published to date, the Gulfstream GIV has appeared 25 times, making the model our most ‘frequent flyer.’ It managed to capture a thirteenth appearance on the ‘Most Deteriorated’ list through a Maintenance Exposure increase approaching $69k that was ably assisted by a $695k Ask Price decrease.

Three transactions were recorded in September, and with one addition to inventory the total stood at 11, equating to 7.2% of the active fleet. The 64.5% ETP Ratio is certainly not a positive development, but many sellers have enrolled their engines on HCMP, creating an HCMP-adjusted figure that can easily be under the 40% ‘excessive’ mark.

We continue to see ample opportunity for sellers, although the model’s marketability may significantly decrease for any buyers planning to resell one of these assets five years hence.

Socata TBM 700A

This model has appeared in our reports five times in the past eight months. This is the fourth time the Socata TBM 700A has appeared on the ‘Most Deteriorated’ list. There were no changes to September’s inventory, but one aircraft did trade after we’d closed out August, leaving seven aircraft listed for sale and equating to 7.3% of the active fleet.

The change in the composition of the model’s inventory increased Maintenance Exposure by nearly $94k, while Ask Price dipped a little over $68k. That was sufficient to increase the ETP Ratio to 57.8% and, while this model has a great industry following, the average seller will likely find negotiating a value-based sale to be more challenging.

Lastly, while engine HCMP coverage might statistically help a seller, very few of these assets are enrolled on a Program.

Bombardier Learjet 60

Numerous inventory changes took place over the past two months for the Bombardier Learjet 60, including four sales in September and one addition to the listed fleet. 

The revised fleet mix lowered Maintenance Exposure more than $77k, but also decreased the average Ask Price in excess of $768k to earn the model its place on this list.

The 17 aircraft listed for sale (6.2% of the active fleet) averaged an ETP Ratio of 66.2%. For sellers whose engines are enrolled on HCMP, their aircraft’s adjusted marketability Ratio could well make their aircraft quite marketable – statistically speaking.

Cessna Citation CJ1

Rounding out this month’s report, occupying the ‘Most Deteriorated’ position is the Cessna Citation CJ1. The model posted three transactions in September, while three other aircraft joined inventory. The eight listings equate to 4.1% of the active fleet.

To raise the ETP Ratio from 39% to 56.4% for an aircraft manufactured as far back as the turn of this century, it took the combined efforts of a Maintenance Exposure increase nearing $279k, and an Ask Price decrease of $152.5k. Considering that a seller whose engines are enrolled on HCMP might be able to reduce their aircraft’s HCMP-adjusted ETP Ratio below the 40% level, the model’s marketability potential is impressive.

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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