Asset Insight

  • NAFA Administrator posted an article
    Used Aircraft Maintenance Analysis – October 2020 see more

    NAFA member, Tony Kioussis, President of Asset Insight, shares the October 2020 Used Aircraft Maintenance Analysis.

    Asset Insight’s October 31, 2020 market analysis of 134 fixed-wing models, and 2,174 aircraft listed for sale, revealed strong sales figures during October, leading to a 3.2% decrease of the tracked inventory (the fourth consecutive monthly reduction). Here are the aircraft that were most impacted...

    Curiously, buyer preference for lower-quality assets improved the tracked fleet’s Quality Rating and Maintenance Exposure.  October’s fleet ‘for sale’ Quality Rating (5.353) reflected a 12-month best, continuing to maintain the tracked fleet’s ‘Excellent’ standing for all of 2020 on Asset Insight’s scale of -2.5 to 10.

    October’s Aircraft Value Trends

    Average Ask Price increased 3.3% in October to set a 12-month high, while concurrently changing 2020’s downward trend to a Year-to-Date (YTD) increase of 1.7%. By aircraft group:

    • Large Jets’ average Ask Price was up 4.5%, reducing the YTD loss to 9.6%;
    • Mid-Size Jets’ pricing decreased a nominal 0.6% and is now up 3.8% in 2020;
    • Light Jets posted a loss of 0.9% in October, lowering the YTD gain to 7.8%; and
    • Turboprops gained 2.8% during the month, moving the YTD figure 0.6% into positive territory.

    October’s Fleet for Sale Trends

    Asset Insight’s tracked fleet posted its fourth consecutive monthly inventory decrease, down 3.2% (73 units), which led to a 0.4% YTD inventory decrease (-8 units).

    • Large Jet Inventory: Decreased 3.1% (-16 units), and is currently up 14.4% since December 2019 (+62 units).
    • Mid-Size Jet Inventory: Posted the largest decrease among the four groups (-23 units), and also the group’s fourth consecutive monthly reduction. Mid-Size Jet inventory is now down 7.7% YTD (-51 units).
    • Light Jet Inventory: Decreased for the fourth consecutive month, and October’s decrease of 3.2% (-20 units) reduced inventory by 4.7% YTD (-30 units).
    • Turboprop Inventory: Through its third consecutive monthly inventory decrease, this time 2.9% (-14 units), availability is currently up 2.4% (+11 units) YTD.

    October’s Maintenance Exposure Trends

    Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) improved/decreased 2.1% to $1.433m, signifying that upcoming maintenance events for available assets will be less expensive. The Maintenance Exposure figure by group was as follows:

    •    Large Jets: Improved 3.1% for October to a figure bettering the 12-month average.

    •    Mid-Size Jets: Worsened a nominal 0.2%, but Exposure was better/lower than the 12-month average.

    •    Light Jets: Improved 2.0% for the second consecutive month to a figure only marginally better than the group’s 12-month worst value.

    •    Turboprops: Improved 2.4% to a 12-month low/best figure.

    October’s ETP Ratio Trend

    The tracked inventory’s ETP Ratio improved/decreased to about the 12-month average figure at 69.8%, compared to September’s 73.7%. [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 the aircraft's price). ‘Days on Market’ analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s Days on the Market (DoM) increases, in many cases by more than 30%.

    During Q3 2020, aircraft whose ETP Ratio was 40% or greater were listed for sale 50% longer than assets with an ETP Ratio below 40% (269 days versus 404 days). How did each group fare during October?

    • Turboprops: For the eleventh consecutive month, Turboprops registered the best/lowest ETP Ratio (40.7%), achieving the group’s second consecutive best 12-month value.
    • Large Jets: Recaptured second position with an ETP Ratio of 61.8%, better than the 12-month average and a substantial improvement over September’s 12-month worst value (74.1%).
    • Mid-Size Jets: Dropped to third place, but improved to 68.9% from September’s 70.9%, equating to a 12-month best.
    • Light Jets: Improved from September’s 12-month worst figure (100.3%) to a still-troubling 98.8%.

    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 October 2020.

    Read full report here.

    This report was originally published by AvBuyer on November 19, 2020.

  • NAFA Administrator posted an article
    Used Aircraft Maintenance Analysis – September 2020 see more

    Asset Insight’s September 30, 2020 market analysis of 134 fixed-wing models, and 2,247 aircraft listed for sale, revealed the highest quarterly sales figure for the year while concurrently decreasing the tracked inventory fleet for a third consecutive month, this time by 1.5%.

    Buyer preference for higher-quality assets decreased the tracked fleet’s Quality Rating while raising (worsening) Maintenance Exposure to a 12-month high (worst) figure. However, September’s fleet ‘for sale’ Quality Rating (5.293), though below August’s 5.329, equaled July’s figure, maintaining the tracked fleet’s ‘Excellent’ range YTD on a scale of -2.5 to 10.

    September’s Aircraft Value Trends

    The average Ask Price increased 1.5% in September to a figure approaching the 12-month high level, thereby lowering the year’s average pricing reduction to 1.6%. By aircraft group:

    • Large Jets: The only group to post lower prices during September (1.5%) and Q3 (4.3%), Large Jets and are now down 13.5% for the year.
    • Medium Jets: Ask Pricing increased 5.5% in September, 10.1% during Q3, and the group’s figure is up 4.4% in 2020.
    • Small Jets: Pricing rose 2.2% in September, but recorded no change for Q3. Small Jet prices are up 8.8% YTD.
    • Turboprops: Ask Prices rose 0.3% in September and 3.1% during Q3, but are still down 2.1% during 2020.

    September’s Fleet for Sale Trends

    Asset Insight’s tracked fleet’s total number of aircraft listed for sale decreased a further 1.5% in September (34 units), resulting in a YTD inventory increase of 3.0% (65 units).

    • Large Jet Inventory: Increased yet again – this time by 2.2% (11 units) – and is now up 18.1% (78 units), YTD.
    • Medium Jet Inventory: Availability decreased for the third consecutive month, down 1.4% (nine units) and inventory is now down YTD by 4.2% (28 units).
    • Small Jet Inventory: Posted the largest decrease among the four groups for the second consecutive month. September’s decrease of 3.5% (23 units) contributes towards a 1.6% lower inventory for the year (10 units).
    • Turboprop Inventory: Posting only its second monthly decrease since January, the group’s inventory fell 2.7% (13 units) thereby lowering its YTD increase to 5.6% (25 units).

    September’s Maintenance Exposure Trends

    Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) worsened/increased 3.3% in September (6.4% during Q3), to $1.464m, a clear signal to buyers that upcoming maintenance expense for the now-available inventory mix will be higher. Maintenance Exposure worsened (increased) for all four groups in September.

    • Large Jets: Worsened by 3.0% for the month for a total Q3 increase of 3.3%. That brings Maintenance Exposure above the 12-month average.
    • Medium Jets: Worsened 1.2% during September, and rose 1.3% across Q3. Nevertheless the figure was better than the 12-month average.
    • Small Jets: Increased 2.0% for the month while skyrocketing 14.6% during Q3 to a figure only marginally better than the group’s 12-month worst.
    • Turboprops: The only group to post a Q3 improvement (3.0%), Turboprops nevertheless degraded during September by 1.3% to a figure marginally worse than August’s 12-month low (best) figure.

    September’s ETP Ratio Trend

    The tracked inventory’s ETP Ratio rose/worsened to 73.7%, from August’s 70.9%, to post a new record high figure. [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 the aircraft's price). ‘Days on Market’ analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s Days on the Market (DoM) increases, in many cases by more than 30%.

    During Q3 2020, aircraft whose ETP Ratio was 40% or greater were listed for sale 50% longer than assets with an ETP Ratio below 40% (269 days versus 404 days). How did each group fare during September?

    • Turboprops: For the tenth consecutive month, Turboprops posted the lowest (best) ETP Ratio, 41.6%, to achieve a new 12-month best (low) figure.
    • Medium Jets: Fell in step with a 12-month low figure of their own, at 70.9%. However, that is likely to create few additional opportunities for most sellers.
    • Large Jets: Set a record high (worst) figure, posting a Ratio of 74.1%.
    • Small Jets: Nearly eclipsed their record worst Ratio of 101.7%, registering a 12-month high 100.3%.

    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 2020.

    Most Improved Models

    All six ‘Most Improved’ models in September posted a Maintenance Exposure decrease (improvement). The Beechcraft Premier 1, Beechcraft King Air C90, and Cessna Citation VII posted Ask Price decreases of $15,629, $2,536, and $42,500, respectively, while the Bombardier Learjet 36A registered no Ask Price change.

    The remaining two models experienced the following price increases:

    • Dassault Falcon 2000: +$417,784
    • Bombardier Learjet 40XR: +$125,833

    Beechcraft Premier 1

    Top position for September was captured by the Premier 1, which posted a Maintenance Exposure decrease approaching $185k that more than cancelled out the model’s Ask Price loss approaching $16k.

    The inventory fleet mix saw one unit sell during September, one addition to the fleet, and one withdrawal from the ‘for sale’ pool. That left 20 assets listed ‘for sale’, or 16.8% of the active fleet.

    With a very high percentage of these aircraft enrolled on an engine Hourly Cost Maintenance Program (HCMP), that tool is not a useful differentiator for sellers. With an ETP Ratio exceeding 83% little other than price is likely to capture a buyer’s attention.

    Dassault Falcon 2000

    One of only two aircraft on the Most Improved list to post an Ask Price increase in September, the Falcon 2000 took second place, having also achieved a Maintenance Exposure decrease $136k.

    Two aircraft transacted in September, and when all of the jostling ended (including five additions to the inventory fleet), 27 aircraft were available to buyers. That equates to 12.1% of the active fleet and, keeping in mind the model’s 72.7% ETP Ratio, HCMP coverage may be the only value lever that some operators have to distinguish their asset.

    Seller Advice: Those whose aircraft are not enrolled on an engine HCMP are advised to carefully consider all offers as this model sports engines with significant overhaul costs.

    Bombardier Learjet 36A

    A model that posted no transactions in September, along with no change in Ask Price, the Learjet 36A is next on the ‘Most Improved’ list, thanks to a Maintenance Exposure decrease approaching $81k.

    However, with an ETP Ratio exceeding 175%, sellers of the four assets listed for sale must be open to all offers, even though the inventory level amounts to only 10.8% of the active fleet.

    Beechcraft King Air C90

    Four King Air C90s transacted during September, while another was withdrawn from the listed fleet. The 43-aircraft inventory that remained equated to 11.1% of the active fleet. The problem for sellers is tri-fold:

    • First, the model’s ETP Ratio stands at 114.5% (well above the problematic 40% point).
    • Second, few of these aircraft have engine HCMP coverage, limiting leverage as a discriminator.
    • Third, while Maintenance Exposure decreased over $49k, Ask Prices also decreased.

    Although this aircraft moved from August’s ‘Most Deteriorated’ list to September’s ‘Most Improved’, the facts do not really favor sellers. Buyers, on the other hand, have ample choice.

    Cessna Citation VII

    The single transaction in September, along with one withdrawal from inventory, allowed the remaining 19 aircraft listed for sale (16.7% of the active fleet) to join the ‘Most Improved’ list. Maintenance Exposure decreased nearly $156k, a figure that eclipsed an Ask Price decrease of $42.5k.

    However, the model’s ETP Ratio of nearly 73% poses a significant challenge for sellers, except, perhaps, for some whose aircraft are enrolled on engine HCMP.

    Bombardier Learjet 40XR

    The final aircraft on the ‘Most Improved’ list occupied the ‘Most Deteriorated’ list in August. A Maintenance Exposure decrease approaching $94k, and an Ask Price increase approaching $126k were what made this possible.

    No Learjet 40XRs transacted in September, and the 13 inventory assets represent 14.1% of the active fleet. While availability exceeding 10% generally favors buyers, the model’s ETP Ratio, at 58.4%, can be favorably and sufficiently adjusted by engine HCMP coverage to help many sellers.

    Read the full report here.  

    This report was originally published by AvBuyer on October 14, 2020.

  • NAFA Administrator posted an article
    Used Aircraft Maintenance Analysis – August 2020 see more

    NAFA member, Tony Kioussis, President of Asset Insight, shares the August 31, 2020 market analysis revealing a second consecutive monthly inventory decrease to the tracked business aircraft fleet, along with a 2.1% Ask Price increase.

    As August ended, Asset Insight’s tracked fleet of 134 fixed-wing models and 2,281 aircraft listed for sale equated to a 2.1% inventory fleet decrease compared to July, reducing the year-to-date (YTD) increase to 4.5%...

    Moreover, the tracked fleet’s Quality Rating increased 0.7%, posting a 12-month best figure, and the latest ‘for sale’ fleet mix registered a 0.2% decrease to the anticipated cost for upcoming maintenance events. August’s 5.329 Quality Rating moved the inventory further into the ‘Excellent’ range on Asset Insight’s scale of -2.5 to 10.

    August’s Aircraft Value Trends

    The average Ask Price increased 2.1% in August, reducing the tracked fleet’s value decline since the start of 2020 to 3.0%. By aircraft group, the figures were as follows:

    • Large Jets: Posted a 0.4% reduction, for a YTD loss of 12.2%.
    • Medium Jets: The only group posting an Ask Price increase in August, pricing rose another 2.8% to bring the YTD loss down to 1.1%.
    • Small Jets: The one group to hold a YTD price increase, Small Jet prices were down 2.5%, reducing their increase for the year to 6.5%.
    • Turboprops: Ask Prices were down a nominal 0.1% in August, and are now off by 2.5% for 2020.

    August’s Fleet for Sale Trends

    The tracked fleet’s total number of aircraft listed for sale decreased 2.1% in August (50 units), reflecting a YTD inventory increase reduction to 4.5% (99 units).

    • Large Jet Inventory: Increased by 0.6% (three units) and is now up 15.5% (67 units) YTD.
    • Medium Jet Inventory: Availability once again decreased by another 3.0% (20 units) and inventory is now down YTD by 2.9% (19 units).
    • Small Jet Inventory: Posted the largest decrease this month among the four groups, 4.1% (28 units), and is now up 2.0% YTD (13 units).
    • Turboprop Inventory: The group posted its first monthly decrease since January, dropping 1.0% of its inventory (five units) to maintain a YTD increase of 8.4% (38 units.

    August’s Maintenance Exposure Trends

    Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) decreased (improved) a nominal 0.2% in August to $1.416m, signaling upcoming maintenance for the latest fleet mix would be marginally lower. All four groups posted improvements (decrease) in August, including…

    • Large Jets: A 0.7% improvement, the figure remained better than the group’s 12-month average.
    • Medium Jets: A 0.6% improvement, virtually tying with the group’s best (lowest) 12-month figure.
    • Small Jets: A 2.6% gain, improving from July’s 12-month worst (high) figure.
    • Turboprops: A 0.7%improvement, posting the group’s second consecutive 12-month low (best) figure.

    August’s ETP Ratio Trend

    The inventory’s ETP Ratio fell (improved) to 70.9%, from July’s 71.2%, bringing the tracked fleet to a figure half way between its 12-month worst and average figures.

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

    During Q2 2020, aircraft whose ETP Ratio was 40% or greater were listed for sale nearly 53% longer than assets with an ETP Ratio below 40% (251 days versus 384 days). How did each group fare during August?

    • Turboprops: For a ninth consecutive month, Turboprops achieved the lowest ETP Ratio at 41.8%, unchanged from July’s 12-month low/best figure.
    • Large Jets: Worsened for the first time in four months, posting 63.2% (versus July’s 61.4%).
    • Medium Jets: Captured third place, improving to 71.7% from July’s 73.7%, a figure slightly worse/higher than the group’s 12-month average.
    • Small Jets: Posted the group’s second consecutive 12-month worst (highest) figure at 97.4%, further challenging sellers.

    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 August 2020.

    Most Improved Business Aircraft for August 2020, according to Asset Insight

    Most Improved Models

    All six ‘Most Improved’ models posted a Maintenance Exposure decrease (improvement). From an Ask Price perspective, the Citation CJ1 posted a $77,143 Ask Price decrease, while the Gulfstream GIV-SP (operated under MSG3 maintenance rules) had no Ask Price change. The remaining models experienced the following price increases:

    • Dassault Falcon 50 (+$157,143)
    • Bombardier Learjet 40 (+$402,500)
    • Gulfstream GIV (+$27,389)
    • Beechcraft King Air 300 (+$237,167)

    Dassault Falcon 50

    Capturing August’s top position among the ‘Most Improved’ models is the Falcon 50. Two aircraft transacted during August, two were withdrawn from inventory, and one was added to create the current mix of 20 units (10.8% of the active fleet).

    Potential buyers need to keep in mind that these assets are now between 25 and 42 years of age. While the model made this list through a Maintenance Exposure decrease approaching $204k, along with an Ask Price increase exceeding $157k, the aircraft’s ETP Ratio, exceeding 98% should not be surprising.

    However, for assets whose engines are enrolled on an Hourly Cost Maintenance Program (HCMP), the Falcon 50’s HCMP-Adjusted ETP Ratio (accounting for the program’s value) might well place the asset below the 40% excessive Maintenance Exposure reference point.

    Bombardier Learjet 40

    We saw no transactions for this model during August, but one aircraft did join the inventory bringing the total to three (7.9% of the active fleet). The Learjet 40 made this list through a Maintenance Exposure decrease exceeding $71k, and an Ask Price increase approaching $403k.

    However, a closer look shows that the recent addition to the inventory is priced nearly 54% higher than the other aircraft showing Ask Prices. Though placing the Learjet 40 on this list might not seem equitable, the figures don’t lie and Asset Insight’s analytics will always be objective.

    Bombardier Learjet 40 private jet flies over fields

    Cessna Citation CJ1

    Third on this month’s ‘Most Improved’ list is a model that posted one sale in August and saw one aircraft enter the ‘for sale’ mix, maintaining a pool of 20 units (10.3% of the active fleet).

    A Maintenance Exposure decrease exceeding $263k, along with an Ask Price increase of more than $77k earned the CJ1 its place on the list. The CJ1’s 50.3% ETP Ratio is surprisingly low for an aircraft aged between 15 and 20 years.

    Gulfstream GIV

    Next is a model that found itself in second worst position among July’s ‘Most Deteriorated’ group. Swapping to this list through a Maintenance Exposure decrease approaching $226k, and an Ask Price increase exceeding $23k, the GIV’s 171.5% will, nonetheless not improve most sellers’ challenges.

    As if that were not enough, three transactions in August, an addition to inventory, and one withdrawal from the available fleet still left 20 aircraft listed for sale (12.1% of the fleet). As we mentioned previously, at the age of 27 to 34 years, this aircraft is beginning to approach financial obsolescence, so buyers must consider whether they’re purchasing a low-priced asset or one posing good value.

    Gulfstream GIV-SP (MSG3)

    Dropping from the top of July’s ‘Most Improved’ list to fifth place on August’s list is an aircraft whose 44.5% ETP Ratio should allow ample opportunity for sellers to structure transactions of reasonable value. The model achieved its position through no change in Ask Price, no change in fleet composition, but a Maintenance Exposure decrease exceeding $683k.

    As August ended, five aircraft were listed for sale, equating to only 5.6% of the active fleet. Did we mention that sellers should have ample opportunities to structure transactions…? Buyers will have to justify their offer if they wish to achieve a good price for an MSG3 GIV-SP.

    Beechcraft King Air 300

    The final aircraft to make the ‘Most Improved’ list did so thanks to a Maintenance Exposure decrease approaching $9k and an Ask Price increase exceeding $237k. During August, Asset Insight identified three sales.

    With the 17 aircraft available to buy representing only 8.9% of the active fleet, the model’s strong following, and 48.1% ETP Ratio, the stage is set for buyers to structure value-based transactions that also provide good prices for sellers.

    Most Deteriorated Business Aircraft for August 2020, according to Asset Insight

    Most Deteriorated Models

    Four of the six models on August’s ‘Most Deteriorated’ list registered a Maintenance Exposure increase, while the Beechcraft King Air C90 posted an Ask Price increase of $4,008. The remaining models experienced the following price decreases:

    • Bombardier Challenger 601-3A (-$165,000)
    • Gulfstream G200 (-$377,667)
    • Bombardier Learjet 40XR (-$181,667)
    • Bombardier Learjet 45 w/APU (-$92,021)
    • Gulfstream G100 (-$197,500)

    Beechcraft King Air C90

    For the second consecutive month, the best aircraft among August’s ‘Most Deteriorated’ assets held the second-highest position on July’s ‘Most Improved’ list. The C90’s fall from grace was caused by a Maintenance Exposure increase exceeding $41k overshadowing a $4k Ask Price increase.

    Three aircraft sold in August, two joined the inventory, one was withdrawn from the available pool, and the remaining 46 aircraft equated to 11.9% of the active fleet for sale. This model has a strong following, but the average aircraft’s 124.2% ETP Ratio does not place sellers in a strong bargaining position.

    Bombardier Challenger 601-3A

    No stranger to this list, the CL601-3A recaptured a place in the ‘Most Deteriorated’ group thanks to a $169k Maintenance Exposure (would you believe) decrease along with a $165k Ask Price decrease.

    Two aircraft transacted in August and the 19 remaining ‘for sale’ units equate to 16.0% of the active fleet. With an ETP Ratio approaching 186%, sellers have few bargaining chips – even if the aircraft’s engines are enrolled on a HCMP.

    Gulfstream G200 private jet surrounded by clouds

    Gulfstream G200

    The third of four Gulfstreams occupying either list this month, the G200 posted one transaction during the month and three aircraft were withdrawn from the ‘for sale’ fleet. Still, that left 24 units available (10% of the active aircraft).

    The news for both buyers and sellers is quite positive: Sufficient selection exists for buyers to negotiate a deal with good value, while allowing sellers the opportunity to negotiate a reasonable selling price.

    The model posted a Maintenance Exposure increase exceeding $145k during August, along with an Ask Price decrease approaching $377k. With an ETP Ratio hovering around 54%, sellers with engines enrolled on a HCMP should see an adjusted ETP Ratio below 40%.

    Bombardier Learjet 40XR

    The second of three Learjets to occupy either of August’s lists attained its status through a Maintenance Exposure increase exceeding $64k and an Ask Price decrease approaching $182k. No aircraft transactions were recorded in August, but two assets joined the inventory increasing availability to 14.1% of the active fleet.

    With an ETP Ratio approaching 68%, sellers with aircraft whose engines are enrolled on a HCMP will have better opportunities to remarket their aircraft at a reasonable price, and in a reasonable timeframe.

    Bombardier Learjet 45XR (with APU)

    The Learjet 45XR (with APU) captured next to last place for some clear reasons. Its 76.3% ETP Ratio was caused by a Maintenance Exposure increase approaching $80k, along with an Ask Price decrease exceeding $92k.

    As if that will not pose substantial challenges for sellers, the one aircraft that transacted in August was replaced by three additions to inventory. The 23 units now available equate to 27.4% of the active fleet. If you’re trying to sell one of these assets, you should carefully consider any offers you receive.

    Gulfstream G100 flies over clear ocean

    Gulfstream G100

    Dead last on August’s ‘Most Deteriorated’ list was the G100, an asset whose 126.1% ETP Ratio was driven by a Maintenance Exposure decrease (no, that is not an error) exceeding $18k and an Ask Price decrease of $197.5k.

    It isn’t that a plethora of such aircraft are listed for sale, although the four in inventory (no sales in August) equate to 19.1% of the active fleet.

    The problem for sellers is the limited production (22 units) and age of these assets (14 to 19 years), placing them in a space where competitive aircraft are newer and often viewed as more efficient. The few buyers seeking these assets are most definitely in the driver’s seat.

    The Seller’s Challenge

    It is important to understand that the 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.

    More information from www.assetinsight.com.

    This article was originally published by AvBuyer on September 16, 2020.

  • NAFA Administrator posted an article
    Your Private Air Transportation Options – Making An Informed Decision and Executing It Correctly see more

    NAFA member, Anthony Kioussis with Asset Insight, hosts their latest podcast "Aircraft Ownership Lifecycle Podcast" featuring NAFA member, Lee Rohde President and CEO of Essex Aviation Group.  

    Lee Rohde discusses how the consulting company he founded advises aviation-related entities on a wide range of aircraft acquisition, strategic planning, financial, operational and management matters. Specifically, Lee covers:

    • Private Air Transportation options – what should prospective users consider in reviewing their options for meeting their travel requirements?
    • In the event an entity determines they want to acquire an aircraft, how should they go about identifying the best model to meet their travel requirements?
    • What factors have the greatest influence on the decision to acquire a new vs. a pre-owned aircraft?
    • The issues and complexities associated with refurbishing or upgrading a pre-owned aircraft.
    • The expertise an entity should secure if they are planning an aircraft acquisition.
    • The factors to be considered when determining an Offer Price for an aircraft.
    • What a pre-purchase inspection entails and why it is such an important part of acquisition process.

    Listen to the podcast here.  

    This podcast was originally published by Asset Insight.

  • NAFA Administrator posted an article
    Used Aircraft Maintenance Analysis – July 2020 see more

    NAFA member, Tony Kioussis, President of Asset Insight, shares Asset Insight’s July 2020 market analysis.

    Asset Insight's Juluy 31, 2020 market analysis revealed a 1.2% inventory decrease to the tracked business aircraft fleet – the first monthly reduction since January – along with an Ask Price decrease of 1.5%. Which models were impacted the most?

    As July ended, Asset Insight’s tracked fleet of 134 fixed-wing business aircraft, and 2,331 aircraft listed for sale equated to a 1.2% inventory fleet decrease compared to June, and a year-to-date (YTD) increase of 6.8%.

    The tracked fleet’s Quality Rating dipped a bit from June’s 12-month best figure, and the latest ‘for sale’ fleet mix increased the anticipated cost for upcoming maintenance events close to the 12-month high (worst) figure. However, July’s 5.293 Quality Rating kept the inventory within the ‘Excellent’ range on Asset Insight’s scale of -2.5 to 10.

    July’s Aircraft Value Trends

    Average Ask Price decreased 1.5% in July, leading to a 5.0% value decline since the start of 2020. By aircraft group, the figures were as follows:

    • Large Jets: This group fueled the loss with a reduction of 2.4%, and a total value loss during 2020 of 11.8%.
    • Medium Jets: Ask Prices increased 1.5% during July but were still down 3.7% YTD.
    • Small Jets: The group posted a 12-month high figure through a 0.3% gain in value and is now up 9.2% for the year.
    • Turboprops: Ask Prices gained 2.8% but are still off by 2.4% during 2020.

    July’s Fleet for Sale Trends

    The tracked fleet’s total number of aircraft listed for sale decreased 1.2% in July (29 units), reflecting a YTD inventory increase equating to 6.8% (149 units).

    • Large Jet Inventory: Decreased slightly by 0.4% (two units), but remains up 14.8% (64 units) YTD.
    • Medium Jet Inventory: Availability was down a substantial 2.7% (18 units) for July, bringing the YTD increase down to a single unit (0.2%).
    • Small Jet Inventory: Decreased 2.6% (18 units) in July but was still up 6.4% YTD (41 units).
    • Turboprop Inventory: The only group to post an increase, Turboprops were up 1.2% (nine units) for the month, and inventory has now grown 9.6% (43 units) YTD.

    July’s Maintenance Exposure Trends

    Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) increased (deteriorated) 3.1% in July to $1.419m, signaling upcoming maintenance for the latest fleet mix would be close to the 12-month high (worst) figure. The last time our tracked fleet posted a higher (worse) Maintenance Exposure figure was in October 2019. Individual group results were as follows:

    • Large Jets: Worsened (increased) 1.0% for the month, but the figure was better than the group’s 12-month average.
    • Medium Jets: Worsened by 0.7%, but the figure was only slightly above (worse) than last month’s 12-month best number.
    • Small Jets: Suffered greatly from the reconstituted inventory, increasing 15.3% to set a 12-month worst (high) figure.
    • Turboprops: At the other end of the spectrum, Turboprops posted a 12-month low (best) figure through a 3.6% decrease.

    July’s ETP Ratio Trend

    The inventory’s ETP Ratio rose (worsened) to 71.2%, from June’s 69.9%, following three consecutive monthly improvements (decreases), bringing our tracked fleet to just below its worst (highest) 12-month figure.

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

    During Q2 2020, aircraft whose ETP Ratio was 40% or greater were listed for sale nearly 53% longer than assets with an ETP Ratio below 40% (251 days versus 384 days). How did each group fare during July?

    • Turboprops: For the eighth consecutive month, Turboprops registered the lowest ETP Ratio at 41.8%, a 12-month low (best) figure that continued earning them the top spot among the four groups.
    • Large Jets: Improved for the third straight month, this time to 61.4% from June’s 64.0%, thereby remaining in second place.
    • Medium Jets: Deteriorated (rose) slightly to 73.7% from June’s 73.4%, with the figure remaining better (lower) than the group’s 12-month average.
    • Small Jets: Made the environment for many sellers even more challenging through a Ratio increase to 96.5%, a 12-month high figure that was substantially worse than June’s 85.8%.

    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 July 2020.

    Most Improved Business Jets and Turboprops - Asset Insight July 2020

    Most Improved Models

    All six ‘Most Improved’ models posted a Maintenance Exposure decrease (improvement). Ask Price, on the other hand, was not as uniform, with the Beechcraft King Air C90, Bombardier Global Express, and Cessna Citation II, posting decreases of $5,976, $101,143, and $23,789, respectively. The remaining models experienced the following price increases:

    • Gulfstream GIV-SP (MSG3): +$2,102,500
    • Dassault Falcon 50: +$84,286
    • Beechcraft King Air B200 (pre-2001): +$9,247

    Gulfstream GIV-SP (MSG3)

    Eclipsing all models in July is the one that occupied the ‘Most Deteriorated’ spot during our June analysis. It earned the top position through a Maintenance Exposure decrease exceeding $852k, along with an Ask Price increase exceeded $2.1m. But that does not bring visibility to the full story.

    There were two aircraft listed ‘for sale’ in June carrying Ask Prices. When the asset carrying an Ask Price approximately one-third lower than the remaining one sold, the figure naturally shifted dramatically.

    Still, there’s no getting around the model’s substantial improvement in Maintenance Exposure, derived through the single July transaction and three additions to inventory. With an ETP Ratio of 55%, and with inventory at only five units (5.6% of the active fleet), sellers should have some realistic opportunities to trade their aircraft, assuming price expectations are sensible.

    Beechcraft King Air C90

    Our research uncovered two aircraft trades in July, and the 47 units comprising the latest inventory mix equated to 12.1% of the active King Air C90 fleet – hardly the stuff of legend.

    While the model’s Maintenance Exposure decrease of $71k far exceeded its Ask Price reduction, the resulting 116.6% ETP Ratio does not hold much promise for sellers. Buyers, on the other hand, have their pick of the litter.

    Dassault Falcon 50

    Two units found new owners in July. The remaining inventory of 23 aircraft equated to 12.3% of the active fleet. While the ‘for sale’ fleet saw Maintenance Exposure decrease over $33k and Ask Price increase more than $84k, the resulting ETP Ratio still exceeded 126%.

    Although statistically deserving of its spot on the ‘Most Improved’ list, it is doubtful that sellers will experience a dramatic change in fortune although, for some buyers, this may still be the perfect solution for their geographic operating environment.

    Beechcraft King Air B200 (Pre-2001 Models)

    The second King Air model to occupy a spot on this month’s ‘Most Improved’ list definitely belongs here. Four units traded in July, and the 55 aircraft listed for sale create good selection for buyers, while sellers can benefit from availability only equating to 7.1% of the active fleet.

    The model’s ETP Ratio, at 46.2%, is also a great deal more conducive to deal-making and resulted from a Maintenance Exposure drop exceeding $70k and a slight Ask Price increase.

    Bombardier Global Express

    By no means a stranger to this list, the Global Express gained its position in July following a Maintenance Exposure decrease approaching $393k that was overshadowed an Ask Price decrease exceeding $101k.

    We did not record a sale during July, and the model’s 21 listed units equate to 14.6% of the active fleet. However, with an ETP Ratio of 67%, and considering the aircraft’s capabilities and industry following, sellers should have more opportunities than sellers of many other models posting such figures.

    Cessna Citation II

    Occupying the final slot on July’s ‘Most Improved’ list is a model whose constituents range in age from 25 to 42 years, and whose 83 inventory units equate to 16.5% of the active fleet. For buyers not afraid to become the final owner of an asset within the Small Jet range, the Citation II might be worth considering, as Ask Price fell nearly $24k in July while Maintenance Exposure improved (decreased) over $55k.

    Of course, the aircraft’s actual Maintenance Exposure could make your acquisition a bit more expensive that planned, considering the ETP Ratio stood at nearly 128% when last calculated.

    Most Deteriorated Business Jets and Turboprops - Asset Insight July 2020

    Most Deteriorated Models

    All six models on July’s ‘Most Deteriorated’ list registered a Maintenance Exposure increase. The Bombardier Learjet 36A posted no Ask Price change, while the remaining models experienced the following decreases:

    • Cessna Citation ISP: -$58,192
    • Bombardier Learjet 55: -$26,071
    • Gulfstream GIV-SP: -$348,000
    • Hawker Beechjet 40: -$75,000
    • Gulfstream GIV: -$11,111

    Cessna Citation ISP

    The best aircraft among July’s ‘Most Deteriorated’ assets held the second-highest position on June’s ‘Most Improved’ list. Its dramatic change in stature came from a $7k Maintenance Exposure increase, along with a $58k drop in Ask Price.

    As if the model’s 128.5% ETP Ratio posed an insufficient challenge for sellers, inventory stood at 20% of the active fleet (55 units) as we closed out July. Three aircraft did trade last month, but this model’s fleet is aged between 35 and 43 years of age, so prospective buyers need to keep in mind that any future resale is unlikely to generate a price much above salvage value.

    Bombardier Learjet 55

    First the good news: One asset transacted last month and we did not record any additions to the Learjet 55 inventory.

    Now the bad news: The 14 units listed for sale equate to 14.6% of the active fleet for an asset whose ETP Ratio is 188% (by virtue of Maintenance Exposure increase exceeding $55k and an Ask Price decrease of more than $26k).

    Ask Prices for this model range between just below $500k to just below $1.0m. For an aircraft aged 33 to 39 years, even the low end of the pricing spectrum will be challenging for sellers to achieve, unless they can effectively monetize their aircraft’s Maintenance Equity.

    Gulfstream GIV-SP

    Three transactions took place in July proving, yet again, this model’s strong following. However, with a Maintenance Exposure increase approaching $487k, along with an Ask Price decrease of $348k, the GIV-SP, unlike those operated under MSG3 Maintenance rules (see above), found its way onto the ‘Most Deteriorated’ list.

    While the 19 aircraft listed for sale represent only 9.1% of the active fleet, the model’s 97% ETP Ratio will make selling against its MSG3 brethren challenging for most existing owners, especially if the aircraft’s engines are not enrolled on an Hourly Cost Maintenance Program.

    Hawker Beechjet 400

    This 31 to 34-year-old model joined the ‘Most Deteriorated’ list having completed no transactions during July. It did so on its Maintenance Exposure weakness which increased (worsened) over $25k, along with a $75k reduction in Ask Price.

    Only four units are listed for sale. Unfortunately for sellers, that equates to 12.1% of the active fleet, while the model’s average ETP Ratio, at over 131%, equates to a challenging selling environment.

    Gulfstream GIV

    The third Gulfstream model to make either list finds itself in the second worst position among July’s ‘Most Deteriorated’ group.

    Two aircraft transacted in July to lower the number available for sale to 21 units (12.4% of the active fleet). Unfortunately, at the ripe old age of 27 to 34 years, this superb aircraft is beginning to reach its financial obsolescence through an ETP Ratio approaching 185%, due to a Maintenance Exposure increase exceeding $477k, along with another Ask Price reduction.

    Bombardier Learjet 36A

    With an ETP Ratio approaching 185%, and units that are as much as 44 years old, it is not difficult to understand why this model occupied the most deteriorated spot on July’s list. What might be surprising is that one aircraft did trade in July, and only four are listed for sale.

    Unfortunately, those listings equate to 10.8% of the active fleet whose Maintenance Exposure increased by more that $306k by virtue of the latest inventory mix.

    While air ambulance work has kept this model flying, it, too, is staring at financial obsolescence with some units probably already at that destination.

    The Seller’s Challenge

    It is important to understand that the 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.

    More information from www.assetinsight.com.

    This article was originally published by AvBuyer on August 14, 2020.

  • NAFA Administrator posted an article
    Used Aircraft Maintenance Analysis – July 2020 see more

    NAFA member, Tony Kioussis, President of Asset Insight, shares the latest used aircraft maintenance report.

    As July ended, Asset Insight’s tracked fleet of 134 fixed-wing business aircraft, and 2,331 aircraft listed for sale equated to a 1.2% inventory fleet decrease compared to June, and a year-to-date (YTD) increase of 6.8%.

    The tracked fleet’s Quality Rating dipped a bit from June’s 12-month best figure, and the latest ‘for sale’ fleet mix increased the anticipated cost for upcoming maintenance events close to the 12-month high (worst) figure. However, July’s 5.293 Quality Rating kept the inventory within the ‘Excellent’ range on Asset Insight’s scale of -2.5 to 10.

    July’s Aircraft Value Trends

    Average Ask Price decreased 1.5% in July, leading to a 5.0% value decline since the start of 2020. By aircraft group, the figures were as follows:

    • Large Jets: This group fueled the loss with a reduction of 2.4%, and a total value loss during 2020 of 11.8%.
    • Medium Jets: Ask Prices increased 1.5% during July but were still down 3.7% YTD.
    • Small Jets: The group posted a 12-month high figure through a 0.3% gain in value and is now up 9.2% for the year.
    • Turboprops: Ask Prices gained 2.8% but are still off by 2.4% during 2020.

    July’s Fleet for Sale Trends

    The tracked fleet’s total number of aircraft listed for sale decreased 1.2% in July (29 units), reflecting a YTD inventory increase equating to 6.8% (149 units).

    • Large Jet Inventory: Decreased slightly by 0.4% (two units), but remains up 14.8% (64 units) YTD.
    • Medium Jet Inventory: Availability was down a substantial 2.7% (18 units) for July, bringing the YTD increase down to a single unit (0.2%).
    • Small Jet Inventory: Decreased 2.6% (18 units) in July but was still up 6.4% YTD (41 units).
    • Turboprop Inventory: The only group to post an increase, Turboprops were up 1.2% (nine units) for the month, and inventory has now grown 9.6% (43 units) YTD.

    July’s Maintenance Exposure Trends

    Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) increased (deteriorated) 3.1% in July to $1.419m, signaling upcoming maintenance for the latest fleet mix would be close to the 12-month high (worst) figure. The last time our tracked fleet posted a higher (worse) Maintenance Exposure figure was in October 2019. Individual group results were as follows:

    • Large Jets: Worsened (increased) 1.0% for the month, but the figure was better than the group’s 12-month average.
    • Medium Jets: Worsened by 0.7%, but the figure was only slightly above (worse) than last month’s 12-month best number.
    • Small Jets: Suffered greatly from the reconstituted inventory, increasing 15.3% to set a 12-month worst (high) figure.
    • Turboprops: At the other end of the spectrum, Turboprops posted a 12-month low (best) figure through a 3.6% decrease.

    July’s ETP Ratio Trend

    The inventory’s ETP Ratio rose (worsened) to 71.2%, from June’s 69.9%, following three consecutive monthly improvements (decreases), bringing our tracked fleet to just below its worst (highest) 12-month figure.

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

    During Q2 2020, aircraft whose ETP Ratio was 40% or greater were listed for sale nearly 53% longer than assets with an ETP Ratio below 40% (251 days versus 384 days). How did each group fare during July?

    • Turboprops: For the eighth consecutive month, Turboprops registered the lowest ETP Ratio at 41.8%, a 12-month low (best) figure that continued earning them the top spot among the four groups.
    • Large Jets: Improved for the third straight month, this time to 61.4% from June’s 64.0%, thereby remaining in second place.
    • Medium Jets: Deteriorated (rose) slightly to 73.7% from June’s 73.4%, with the figure remaining better (lower) than the group’s 12-month average.
    • Small Jets: Made the environment for many sellers even more challenging through a Ratio increase to 96.5%, a 12-month high figure that was substantially worse than June’s 85.8%.

    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 July 2020.

    Most Improved Business Jets and Turboprops - Asset Insight July 2020

    Most Improved Models

    All six ‘Most Improved’ models posted a Maintenance Exposure decrease (improvement). Ask Price, on the other hand, was not as uniform, with the Beechcraft King Air C90, Bombardier Global Express, and Cessna Citation II, posting decreases of $5,976, $101,143, and $23,789, respectively. The remaining models experienced the following price increases:

    • Gulfstream GIV-SP (MSG3): +$2,102,500
    • Dassault Falcon 50: +$84,286
    • Beechcraft King Air B200 (pre-2001): +$9,247

    Gulfstream GIV-SP (MSG3)

    Eclipsing all models in July is the one that occupied the ‘Most Deteriorated’ spot during our June analysis. It earned the top position through a Maintenance Exposure decrease exceeding $852k, along with an Ask Price increase exceeded $2.1m. But that does not bring visibility to the full story.

    There were two aircraft listed ‘for sale’ in June carrying Ask Prices. When the asset carrying an Ask Price approximately one-third lower than the remaining one sold, the figure naturally shifted dramatically.

    Still, there’s no getting around the model’s substantial improvement in Maintenance Exposure, derived through the single July transaction and three additions to inventory. With an ETP Ratio of 55%, and with inventory at only five units (5.6% of the active fleet), sellers should have some realistic opportunities to trade their aircraft, assuming price expectations are sensible.

    Beechcraft King Air C90

    Our research uncovered two aircraft trades in July, and the 47 units comprising the latest inventory mix equated to 12.1% of the active King Air C90 fleet – hardly the stuff of legend.

    While the model’s Maintenance Exposure decrease of $71k far exceeded its Ask Price reduction, the resulting 116.6% ETP Ratio does not hold much promise for sellers. Buyers, on the other hand, have their pick of the litter.

    Dassault Falcon 50

    Two units found new owners in July. The remaining inventory of 23 aircraft equated to 12.3% of the active fleet. While the ‘for sale’ fleet saw Maintenance Exposure decrease over $33k and Ask Price increase more than $84k, the resulting ETP Ratio still exceeded 126%.

    Although statistically deserving of its spot on the ‘Most Improved’ list, it is doubtful that sellers will experience a dramatic change in fortune although, for some buyers, this may still be the perfect solution for their geographic operating environment.

    Beechcraft King Air B200 (Pre-2001 Models)

    The second King Air model to occupy a spot on this month’s ‘Most Improved’ list definitely belongs here. Four units traded in July, and the 55 aircraft listed for sale create good selection for buyers, while sellers can benefit from availability only equating to 7.1% of the active fleet.

    The model’s ETP Ratio, at 46.2%, is also a great deal more conducive to deal-making and resulted from a Maintenance Exposure drop exceeding $70k and a slight Ask Price increase.

    Bombardier Global Express

    By no means a stranger to this list, the Global Express gained its position in July following a Maintenance Exposure decrease approaching $393k that was overshadowed an Ask Price decrease exceeding $101k.

    We did not record a sale during July, and the model’s 21 listed units equate to 14.6% of the active fleet. However, with an ETP Ratio of 67%, and considering the aircraft’s capabilities and industry following, sellers should have more opportunities than sellers of many other models posting such figures.

    Cessna Citation II

    Occupying the final slot on July’s ‘Most Improved’ list is a model whose constituents range in age from 25 to 42 years, and whose 83 inventory units equate to 16.5% of the active fleet. For buyers not afraid to become the final owner of an asset within the Small Jet range, the Citation II might be worth considering, as Ask Price fell nearly $24k in July while Maintenance Exposure improved (decreased) over $55k.

    Of course, the aircraft’s actual Maintenance Exposure could make your acquisition a bit more expensive that planned, considering the ETP Ratio stood at nearly 128% when last calculated.

    Most Deteriorated Business Jets and Turboprops - Asset Insight July 2020

    Most Deteriorated Models

    All six models on July’s ‘Most Deteriorated’ list registered a Maintenance Exposure increase. The Bombardier Learjet 36A posted no Ask Price change, while the remaining models experienced the following decreases:

    • Cessna Citation ISP: -$58,192
    • Bombardier Learjet 55: -$26,071
    • Gulfstream GIV-SP: -$348,000
    • Hawker Beechjet 40: -$75,000
    • Gulfstream GIV: -$11,111

    Cessna Citation ISP

    The best aircraft among July’s ‘Most Deteriorated’ assets held the second-highest position on June’s ‘Most Improved’ list. Its dramatic change in stature came from a $7k Maintenance Exposure increase, along with a $58k drop in Ask Price.

    As if the model’s 128.5% ETP Ratio posed an insufficient challenge for sellers, inventory stood at 20% of the active fleet (55 units) as we closed out July. Three aircraft did trade last month, but this model’s fleet is aged between 35 and 43 years of age, so prospective buyers need to keep in mind that any future resale is unlikely to generate a price much above salvage value.

    Bombardier Learjet 55

    First the good news: One asset transacted last month and we did not record any additions to the Learjet 55 inventory.

    Now the bad news: The 14 units listed for sale equate to 14.6% of the active fleet for an asset whose ETP Ratio is 188% (by virtue of Maintenance Exposure increase exceeding $55k and an Ask Price decrease of more than $26k).

    Ask Prices for this model range between just below $500k to just below $1.0m. For an aircraft aged 33 to 39 years, even the low end of the pricing spectrum will be challenging for sellers to achieve, unless they can effectively monetize their aircraft’s Maintenance Equity.

    Gulfstream GIV-SP

    Three transactions took place in July proving, yet again, this model’s strong following. However, with a Maintenance Exposure increase approaching $487k, along with an Ask Price decrease of $348k, the GIV-SP, unlike those operated under MSG3 Maintenance rules (see above), found its way onto the ‘Most Deteriorated’ list.

    While the 19 aircraft listed for sale represent only 9.1% of the active fleet, the model’s 97% ETP Ratio will make selling against its MSG3 brethren challenging for most existing owners, especially if the aircraft’s engines are not enrolled on an Hourly Cost Maintenance Program.

    Hawker Beechjet 400

    This 31 to 34-year-old model joined the ‘Most Deteriorated’ list having completed no transactions during July. It did so on its Maintenance Exposure weakness which increased (worsened) over $25k, along with a $75k reduction in Ask Price.

    Only four units are listed for sale. Unfortunately for sellers, that equates to 12.1% of the active fleet, while the model’s average ETP Ratio, at over 131%, equates to a challenging selling environment.

    Gulfstream GIV

    The third Gulfstream model to make either list finds itself in the second worst position among July’s ‘Most Deteriorated’ group.

    Two aircraft transacted in July to lower the number available for sale to 21 units (12.4% of the active fleet). Unfortunately, at the ripe old age of 27 to 34 years, this superb aircraft is beginning to reach its financial obsolescence through an ETP Ratio approaching 185%, due to a Maintenance Exposure increase exceeding $477k, along with another Ask Price reduction.

    Bombardier Learjet 36A

    With an ETP Ratio approaching 185%, and units that are as much as 44 years old, it is not difficult to understand why this model occupied the most deteriorated spot on July’s list. What might be surprising is that one aircraft did trade in July, and only four are listed for sale.

    Unfortunately, those listings equate to 10.8% of the active fleet whose Maintenance Exposure increased by more that $306k by virtue of the latest inventory mix.

    While air ambulance work has kept this model flying, it, too, is staring at financial obsolescence with some units probably already at that destination.

    The Seller’s Challenge

    It is important to understand that the 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.

    More information from www.assetinsight.com.

    This article was originally published by AvBuyer on August 14, 2020.

  • NAFA Administrator posted an article
    Used Aircraft Maintenance Analysis – May 2020 see more

    NAFA member, Tony Kioussis, President of Asset Insight, shares the latest Used Aircraft Maintenance Analysis for May 2020.  

    The number of aircraft transactions continued to be fewer than normal in May, primarily owing to uncertainty over the COVID-19 pandemic. Assets listed for sale continued to increase at a slower pace, but which models were impacted most? 

    During May 2020, Asset Insight’s tracked fleet of 134 fixed-wing models and 2,324 aircraft listed for sale equated to a 0.7% inventory fleet increase over April, and a year-to-date (YTD) increase of 6.5%.

    While the fleet remained within the ‘Excellent’ range, posting a figure of 5.301 in May, the Quality Rating was lower than in April (5.311) on Asset Insight’s scale of -2.5 to 10.

    A more detailed examination of May’s inventory fleet mix revealed fewer near-term maintenance events, but individual event costs are anticipated to run slightly above the 12-month average.

    May’s Aircraft Value Trends

    Average Ask Price for the tracked fleet decreased another 4.4%, following April’s 1.6% reduction, with May’s pricing approximately half-way between the 12-month average and high figures. All four groups contributed to the decrease:

    • Large Jets: Ask Prices fell 6.4%, leaving them at their 12-month average.
    • Medium Jets: Ask Prices decreased 3.9%, virtually equidistant between the group’s 12-month high and average figures.
    • Small Jets: Ask Prices decreased 1.3% to only slightly lower than their 12-month high posted in April.
    • Turboprops: Lost 2.3%, but prices remained above the group’s 12-month average.

    May’s Fleet for Sale Trends

    The tracked fleet’s total number of aircraft listed for sale increased 0.7% in May (5.8% YTD). That’s a month-over-month increase of 16 units in May, and 142 units YTD.

    • Large Jet Inventory: Increased 1.0% (five units), and 13.5% YTD (+58 units).
    • Medium Jet Inventory: Rose another 0.3% (two units) for May, and 1.1% YTD (seven units).
    • Small Jet Inventory: Decreased 0.3% (two units) in May, but the total YTD increase is 9.0% (+58 units).
    • Turboprop Inventory: Increased another 2.4% (+11 units) during May, and is now up 4.2% (+19 units), YTD.

    May’s Maintenance Exposure Trends

    Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) increased (worsened) 0.9% to $1.39m, meaning upcoming maintenance for the current fleet mix would be a bit more expensive to complete.

    The figure was slightly worse than the $1.385m 12-month average, and individual results were as follows:

    • Large Jets: Worsened (increased) 1.7% for the month, but remained better than their 12-month average.
    • Medium Jets: Worsened (increased) by 0.6%, but also managed to maintain a better (lower) figure than their 12-month average.
    • Small Jets: Worsened (increased) 1.1% to post the group’s second consecutive 12-month worst (highest) figure.
    • Turboprops: Improved (decreased) 1.8% to a Maintenance Exposure only slightly worse than the group’s lowest (best) 12-month figure.

    May’s ETP Ratio Trend

    The fleet’s ETP Ratio was unchanged during May 2020 at 69.8%, a figure half-way between the 12-month high and the 12-month average Ratio.

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

    During Q1 2020, aircraft whose ETP Ratio was 40% or greater were listed for sale nearly 68% longer than assets with an ETP Ratio below 40% (245 days versus 413 days). How did each group fare during May?

    • Turboprops: At 43.5%, the group maintained the top (best) spot by posting the lowest ETP Ratio – a figure only slightly worse than April’s 43.2%.
    • Large Jets: Worsened from April’s 64.4% to 66.0% in May, but remained in second place.
    • Medium Jets: Remained in third position by posting a second consecutive 12-month low (best) figure of 71.2%, following April’s 72.3%.
    • Small Jets: Deteriorated from April’s 87.8% to 88.5%, slightly increasing the selling challenge for most assets.

    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 May 2020.

    Read the full report here.

    This article was originally published by AvBuyer on June 19, 2020.

     

  • NAFA Administrator posted an article
    Asset Insight Launches Podcast Series Focusing on the Aircraft Ownership Lifecycle see more

    July 7, 2020 – Asset Insight today announced the launch of a new podcast series, available through the company’s website (www.assetinsight.com) and across all podcast platforms, free of charge. The library of episodes is stocked with 15 to 30-minute sessions focused on all segments of the Business & General Aviation aircraft ownership lifecycle – Acquiring, Financing, Operating, Maintaining and Selling. Host Anthony Kioussis visits with expert guests from numerous industry organizations and sectors who offer best practices, timely advice, proven principles, and explore specific aspects of the business aviation industry.

    The Asset Insight Podcast library presently features 8 episodes, including sessions with Jay Mesinger at Mesinger Jets; Jim Blessing at Air Fleet Capital; Shelly Svoren at First Republic Bank; Lee Rohde at Essex Aviation; Jim Simpson at First Republic Bank; René Bangelsdorf at Charlie Bravo Aviation; Janine Iannarelli at Par Avion Ltd; and Ryan Waguespack with NATA. More podcasts will be made available each week.

    “Asset Insight is in a unique position to bring aviation professionals together to hold timely discussions in short, interesting, educational and entertaining on-demand podcasts.” said Tony Kioussis, president of Asset Insight, LLC and host of the series. “This new aviation podcast series offers our community the opportunity to select episodes and topics on their schedule, and according to their interest and business segment. As many of us work from home to maintain safe social distancing, our podcasts allow people to remain connected. The podcasts can also assist new personnel entering the industry; people that would otherwise find it challenging to secure such information.”

    Asset Insight Podcasts are available on Apple Podcasts, Spotify, Stitcher, Google Podcasts, www.assetinsight.com http://www.assetinsightpodcast.com, and wherever you get your podcasts.

    This release was originally published by Asset Insight on July 7, 2020.

  • Tracey Cheek posted an article
    Used Aircraft Maintenance Analysis – March 2020 see more

    NAFA member, Tony Kioussis, President of Asset Insight, shares the March 2020 Used Aircraft Maintenance Analysis. 

    During March, Asset Insight’s tracked fleet of 134 fixed-wing models and 2,218 aircraft listed for sale identified a 1.2% inventory fleet increase over February’s figure, for a year-to-date (YTD) increase of 1.6%.

    Concurrently, the available inventory’s maintenance status posted a 12-month best (highest) Quality Rating, keeping the fleet within the ‘Excellent’ range, virtually unchanged (at 5.297) compared with February’s 5.295, on a scale of -2.500 to 10.000.

    March’s Aircraft Value Trends

    While the average Ask Price for aircraft in the tracked fleet decreased a bit, the posted figure was only $20k below the 12-month high figure achieved in February, and only one group experienced a decrease.

    • Large Jets: Ask Prices remained virtually unchanged, increasing a nominal 0.1%.
    • Medium Jets: The only group to post a value loss, Medium Jets decreased 6.7%.
    • Small Jets: Increased 3.0%.
    • Turboprops: Rose 1.7%.

    March’s Fleet for Sale Trends

    The total number of used aircraft listed for sale increased 1.2% in March, and 1.6% for Q1 2020. That translated into a tracked inventory increase of 26 units in March and 36 units for all of Q1. Individual group figures broke down as follows.

    • Large Jet Inventory: Increased 1.3% in March (+6 units) and 7.9% during Q1 (+34 units)
    • Medium Jet Inventory: Rose 1.8% (+11 units) for the month, but down 4.9% for Q1 (-32 units)
    • Small Jet Inventory: Increased 0.4% (+3 units) in March and 7.5% (+48 units) YTD
    • Turboprop Inventory: Increased 1.4% (+6 units) for the month, but down 3.1% for Q1 (-14 units).

    March’s Maintenance Exposure Trends

    Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) increased (worsened) 5.5% for the month and 4.0% during Q1. Individual results were as follows:

    • Large Jets: Worsened (increased) by 5.9% for the month and 6.3% during Q1.
    • Medium Jets: Improved (decreased) 0.6% in March and 4.1% for Q1.
    • Small Jets: Worsened (increased) 14.5% to post the group’s worst (highest) 12-month figure, while also increasing 22.3% during Q1.
    • Turboprops: Worsened (increased) by 1.3% in March, but improved by 11.7% YTD.

    March’s ETP Ratio Trend

    The fleet’s ETP Ratio worsened (increased) in pretty dramatic fashion in March, virtually erasing any previous improvement to post a figure of 71.1% (versus February’s 65.4% and the 64.8% it registered at Year-End 2019).

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

    During Q1 2020, aircraft whose ETP Ratio was 40% or greater were listed for sale nearly 68% longer than assets with an ETP Ratio below 40% (245 days versus 413 days). How did each group fare during March?

    • Turboprops: Continued to hold the top (best) spot by a wide margin posting the lowest ETP Ratio of 42.1% (the group’s third consecutive 12-month low/best figure).
    • Large Jets: Held on to second place at 64.7%.
    • Medium Jets: Kept their third position at 74.6%.
    • Small Jets: Posted the group’s 12-month worst (highest) figure of 90.2%.

    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 March 2020.

    Asset Insight - March 2020 Most Improved Business Aircraft

    Most Improved Models

    All of the ‘Most Improved’ models posted a Maintenance Exposure decrease (improvement). While the Hawker 800A experienced an Ask Price decrease of $29,622 and the Dassault Falcon 900 saw no change in Ask Price, the remaining four models experienced price increases, as follows:

    • King Air B200 – Pre-2001 +$74,913
    • Gulfstream GV +$228,194
    • Hawker 800XP +$77,760
    • Hawker Beechjet 400A +$27,969

    Hawker 800A

    Since appearing at the bottom of January’s ‘Most Deteriorated’ list, the Hawker 800A claimed third place on February’s ‘Most Improved’ list, and leads the ‘Most Improved’ list for March.

    Two aircraft traded last month, and the 31 currently listed for sale equate to 13.7% of the active fleet. The latest fleet mix helped the model achieve its standing through a Maintenance Exposure decrease exceeding $243k (which overcame an Ask Price drop approaching $30k).

    The model’s 152.5% ETP Ratio is not going to magically spark additional buyer interest, but its improvement is notable, as is its ongoing market following.

    Dassault Falcon 900

    Second place goes to a model whose appearance was created through a 50% increase in available units for sale in March. That difference resulted in a decreased Maintenance Exposure of nearly $369k. With no change in the average Ask Price, the Falcon 900 earned its position on this list.

    Translation: Three aircraft are now listed for sale (as opposed to the two listed last month) and the recently-listed unit did not show an Ask Price. This should serve as proof that statistics can be misleading!

    The Falcon 900 has a strong following, though, and with an ETP Ratio below 45%, sellers should be able to locate interested buyers, even though the listed units represent 13% of the active fleet.

    King Air B200 (Pre-2001 Models)

    Third place goes to a model that recorded three transactions, one withdrawal, and four additions to the fleet for sale in March, lowering the Maintenance Exposure by nearly $48k and increasing the Ask Price by nearly $75k.

    The 43 units listed for sale offer a good selection for buyers while still representing only 5.5% of the active fleet, creating ample opportunities for sellers. Moreover, the model’s near 46% ETP Ratio is a testament to the following this >20 year-old aircraft continues to enjoy.

    Gulfstream GV

    Next on the ‘Most Improved’ list is an aircraft whose 19 sellers should have little problem locating interested buyers, considering listings represent 10% of the active fleet, and the Gulfstream GV’s ETP Ratio is below 30%. (Admittedly, the current pandemic may delay deal-making a bit.)

    One aircraft transaction was registered as we closed March, leading to a Maintenance Exposure decrease exceeding $556k that, along with an Ask Price increase of more than $228k, earned the model its ‘Most Improved’ ranking.

    Hawker 800XP

    Following the behavior of the Hawker 800A, the Hawker 800XP made the ‘Most Improved’ list thanks to a Maintenance Exposure decrease approaching $24k and an Ask Price increase nearing $78k. Four aircraft transactions were posted in March that, following some additions, a withdrawal and some other changes, meant 13.3% of the active fleet is currently listed for sale.

    The 800XP is sporting an ETP Ratio nearly half that of the 800A. Assuming an asset’s engines are enrolled on an Hourly Cost Maintenance Program, the model has sufficient following in the market for sellers to structure sensibly-priced transactions.

    Hawker Beechjet 400A

    Rounding out March’s ‘Most Improved’ list is the Beechjet 400A, an aircraft that occupied a place in the ‘Most Deteriorated’ rankings last month, and whose sellers may have a hard time convincing a limited pool of buyers that their aircraft is worthy of the price they seek.

    With 61 units, 22.6% of the active fleet, listed for sale, and aircraft age ranging from 17 to 30 years, differentiation is likely to focus heavily on price. The model’s 78.6% ETP Ratio was created through three sales last month, as well as one withdrawal from, plus six additions to the ‘for sale’ fleet.

    The revised inventory mix lowered Maintenance Exposure by over $20k while boosting Ask Price nearly $28k. Regrettably, with the current ETP Ratio most sellers are likely to find pricing discussions challenging.

    Asset Insight - March 2020 Most Deteriorated Business Aircraft

    Most Deteriorated Models

    All six models on March’s ‘Most Deteriorated’ list registered a Maintenance Exposure increase. The Bombardier Learjet 31A posted an Ask Price increase of $17,731, the Learjet 35A experienced no Ask Price change, and the remaining models underwent the following decreases:

    • Cessna Citation II -$4,444
    • Cessna Citation ISP -$20,015
    • Hawker Premier 1 -$13,183
    • Gulfstream GIV -$25,556

    Cessna Citation II

    March’s ‘Most Deteriorated’ model registered five transactions, but the 89 units currently listed for sale account for 17.5% of the active fleet, creating serious pricing challenges for sellers.

    The aircraft’s $241k Maintenance Exposure increase and Ask Price decrease are both symptomatic of the model’s 147.4% ETP Ratio. With aircraft age ranging from 25 to 42 years, sellers must rely on buyers seeking low pricing that addresses the very real probability they would become the aircraft’s final owner.

    Cessna Citation ISP

    The second ‘Most Deteriorated’ model this month is another member of the Citation family, except this one is older, since Citation ISPs range from 35 to 43 years of age. No transactions were noted in March, but three withdrawals from inventory left 17% of the active fleet (47 units) available for buyers focused on still-operable ‘antiques’.

    Surprisingly, the Citation ISP sports a lower ETP Ratio than the younger Citation II fleet. Nevertheless, the 126.1% Ratio (courtesy of a Maintenance Exposure increase approaching $176k and an Ask Price decrease exceeding $20k) offers buyers the opportunity to earn ‘final owner’ status with this model.

    Bombardier Learjet 31A

    The first of two Learjets on the ‘Most Deteriorated’ list this month posted no transactions in March, although one aircraft was withdrawn from inventory. At the last count, 38 Learjet 31As were listed for sale, representing 19.5% of the active fleet.

    These aircraft are now between 17 and 29 years of age, and while they are still quite productive assets, their 128.1% ETP Ratio is a testament to their challenging marketability.

    The Learjet 31A essentially earned its spot on this list through a Maintenance Exposure increase exceeding $246k, even though the aircraft actually posted an Ask Price increase. Whether or not the higher Ask Pricing can be achieved, especially at this challenging time, remains to be seen…

    Bombardier Learjet 36A

    The second Learjet on this list is a 27-44-year old model that also recorded no transactions during March, and no Ask Price change. (While statistically correct, this fact is also somewhat misleading as only one of the four listed units displays an Ask Price.)

    The aircraft earned its spot on this list thanks to a Maintenance Exposure figure approaching $210k. With its ETP Ratio exceeding 151%, this model is not readily marketable, although its operating capabilities are still quite impressive, by any standard.

    Beechcraft Premier 1

    No transactions were identified for the month of March, but the two inventory withdrawals and four additions created an availability of two dozen units, 20.2% of the active fleet. These assets are only aged between 15 and 19 years, but their ETP Ratio, which stood at nearly 90% during this latest analysis, negatively impacts their marketability.

    Maintenance Exposure approached $308k in March, while Ask Price dropped over $13k. Enrollment on an engine Hourly Cost Maintenance Program would lower the HCMP-Adjusted ETP Ratio, but that is not an effective differentiator for sellers, as most of these assets are enrolled on a program.

    Gulfstream GIV

    Rounding out our ‘Most Deteriorated’ list this month is a model whose ETP Ratio, quite frankly, surprised us. The GIV continues to have a respectable following. However, its ongoing Ask Price decreases (nearly $26k last month) and high Maintenance Exposure figure (over $563k in March) are clearly reflecting the aircraft’s 27-34 years of age.

    Two units transacted in March, one was withdrawn from inventory, and another was added to total 20 available units, equivalent to 11.6% of the active fleet.

    Here again, sellers whose aircraft engines are enrolled on an Hourly Cost Maintenance Program will see a lower HCMP-Adjusted ETP Ratio, but the figure will still be such that price is likely to be the transaction’s primary driver.

    The Seller’s Challenge

    It is important to understand that the 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 Hourly Cost Maintenance Program 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.

    More information from www.assetinsight.com.

    This Asset Insight report was originally published by AvBuyer on April 16, 2020.

  • Tracey Cheek posted an article
    Used Aircraft Maintenance Analysis – January 2020 see more

    NAFA member, Tony Kioussis, President of Asset Insight, discusses which business aircraft showed the most improvement and deterioration in terms of their maintenance exposure to ask price ratio during January 2020, and what the market factors impacting those models were. 

    During January 2020, the average Ask Price for aircraft in Asset Insight’s revised, and substantially expanded, tracked fleet increased 16.8%. Which models were impacted the most? Tony Kioussis explores.

    In January, Asset Insight expanded the number of aircraft in its tracked fleet of 134 fixed-wing models, and the new inventory mix posted a 1.6% unit decrease to 2,147 aircraft for sale, compared to the 2,182 assets comprising the same make/model list in December.

    Asset quality improved 1.3% during the month, from December’s 5.206 to 5.272, a 12-month best figure that moved the Quality Rating from ‘Very Good’ into the ‘Excellent’ range on our scale of -2.5 to 10.

    Additionally, at $1.332m, Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) posted the lowest (best) 12-month figure for the second consecutive month.

    January’s Aircraft Value Trends

    During January, the average Ask Price for aircraft in the expanded fleet increased 16.8%, with all four groups contributing.

    • Medium Jets led the way through an increase of 22.7%
    • Large Jets were a close second rising 22.4%
    • Turboprop Ask Prices increased 10.2%
    • Small Jets increased 1.6%.

    January’s Fleet for Sale Trends

    The total number of used aircraft listed for sale decreased 1.6%, although this comprised a larger overall fleet size by virtue of the increase in tracked models. Total tracked inventory decreased 35 units with individual group figures breaking down as follows:

    • Large Jet inventory: Increased 0.9% (+4 units since December 2019)
    • Medium Jet inventory: Decreased 7.0% (+46)
    • Small Jet Inventory: Increased 5.9% (+38) and
    • Turboprop inventory: Decreased 6.9% (+31)

    January’s Maintenance Exposure Trends

    Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) decreased 1% to post a 12-month low figure in January. Individual results were as follows:

    • Large Jets: Increased (worsened) by 2%, based on January’s expanded fleet mix;
    • Medium Jets: Maintenance Exposure improved (decreased) 1.7%;
    • Small Jets: Worsened by increasing 6.5% due, in part, to the new fleet mix;
    • Turboprops: Improved by 10.5% as a result of the new models added in January.

    January’s ETP Ratio Trend

    The latest fleet mix increased (worsened) the average ETP Ratio to 72%, from December’s 64.8%, but Turboprops posted a respectable improvement (decrease).

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

    During Q4 2019, aircraft whose ETP Ratio was 40% or greater were listed for sale nearly 84% longer than assets with an ETP Ratio below 40% (215 versus 395 DoM). How did each group fare during January?

    • Turboprops held the top (best) spot by a wide margin posting the lowest ETP Ratio, 42.6% (a 12-month low/best figure for this group and a substantive improvement on December’s 52.1%);
    • Large Jets held on to second place, but the 70.7% Ratio represented the group’s record high (worst) figure;
    • Small Jets captured third position but worsened from December’s 67.3% to 76.8%;
    • Medium Jets took last place while posting the group’s record low (worst) figure of 87.4% compared to December’s 75.5%.

    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 January 2020.

    Most Improved Models

    Four of the ‘Most Improved’ models posted a Maintenance Exposure decrease (improvement), while the Hawker 1000A and the Falcon 900 experienced a Maintenance Exposure increase. Excepting the Citation VI, which had no Ask Price change, the remaining five models experienced price increases as follows:

    • Hawker 1000A $264,250
    • Beech King Air C90 $17,714
    • Cessna Citation ISP $14,409
    • Gulfstream GIV $189,141
    • Dassault Falcon 900 $1,700,000

    Asset Insight Most Improved Aircraft - January 2020

     

    Hawker 1000A

    The Hawker 1000A captured top spot on the ‘Most Improved’ list, following its third place showing on December’s list after occupying the ‘Most Deteriorated’ slot in November. No transactions were posted for January, but two transactions were confirmed for December after we closed out that month.

    There were nine assets listed for sale at the end of January, equating to 22.5% of the active fleet. The model earned its top spot via a 17.6% ETP Ratio improvement thanks to a Maintenance Exposure decrease approaching $13k, along with a substantial Ask Price ‘increase’, but only because the two least expensive aircraft were the ones that changed ownership.

    Seller Advice: With current listings averaging an Ask Price 53% higher than December’s average trading value, along with an average ETP Ratio of 91.4%, sellers should carefully consider offers that, on first blush, may appear to be low.

    Cessna Citation VI

    The Citation VI took second place on January’s ‘Most Improved’ list thanks to a Maintenance Exposure decrease exceeding $170k that played well with no change in the model’s Ask Price.

    One aircraft transacted in January, and the seven inventory units amount to 20% of the active fleet for sale. With an ETP Ratio exceeding 115%, sellers need to be sure before turning down any offers. Buyers are likely to be few and far between.

    Beechcraft King Air C90

    This model posted four transactions in January and 43 units remained for sale (10.8% of the active fleet). The King Air C90 joined the Most Improved list due to a 14.5% ETP Ratio improvement, and this was thanks to a Maintenance Exposure reduction approaching $53k and an Ask Price increase.

    Although the C90 fleet is between 38 and 49 years of age, this aircraft continues to enjoy a decent following. Its current ETP Ratio of 113.2% will create difficult decisions for some sellers, but there is sufficient market interest for most owners to find buyers, assuming they are realistic about the market’s view of their asset’s value.

    Cessna Citation ISP

    The Citation ISP found itself in this same position in November, and was on the ‘Most Deteriorated’ list in December. The 13.1% ETP Ratio improvement resulted from a near $66k decrease in Maintenance Exposure, along with an Ask Price increase exceeding $14k.

    Four transactions were posted in January, but 55 units were listed for sale at the end of the month (19.6% of the active fleet). The model’s current 94.3% ETP Ratio places buyers squarely in the driving seat.

    Gulfstream GIV

    Two aircraft joined the ‘for sale’ fleet in January, and with no transactions being posted, inventory rose to 25 units (14.3% of the active fleet). The model has demonstrated resilience over the past few years and earned its place on this list by virtue of an $18k Maintenance Exposure decrease along with an Ask Price increase exceeding $189k.

    However, at 27 to 34 years of age, and carrying an ETP Ratio of 131.5%, one wonders how much longer GIV aircraft that are not covered by an engine Hourly Cost Maintenance Program will be truly marketable.

    Dassault Falcon 900

    The final model joined this month’s ‘Most Improved’ list on technical grounds and proved, yet again, why small fleets can create misleading statistics. No Falcon 900s transacted in January, the lone December inventory aircraft was withdrawn, and two other units entered the for-sale fleet.

    These changes led to a $338k Maintenance Exposure increase, but a whopping $1.7m Ask Price increase helped secure a place for the Falcon 900 on the list. The problem is, the latest listings are priced over 60% higher than the withdrawn aircraft, making the Ask Pricing difficult to achieve while also artificially enhancing the group’s ETP Ratio.

    Hope is never a well-founded strategy.

    Most Deteriorated Models

    All six models on January’s ‘Most Deteriorated’ list registered a Maintenance Exposure increase. The Cessna Citation II and the Gulfstream GV posted an Ask Price increase of $5,504 and $249,167, respectively. The remaining models registered the following decreases:

    • Hawker 800A   -$64,968
    • Bombardier Global Express -$426,250
    • Piaggio P-180   -$58,696
    • Dassault Falcon 900B -$367,500

    Asset Insight Most Deteriorated Aircraft - January 2020

     

    Hawker 800A

    January’s ‘Most Deteriorated’ model posted no transactions during the month, and the 33 units listed for sale accounted for 14.3% of the active fleet. To achieve its position on this list, the Hawker 800A posted a Maintenance Exposure increase approaching $149k, and an Ask Price reduction approaching $65k.

    With a listed fleet ETP Ratio of 191%, any seller whose aircraft engines are not enrolled on an Hourly Cost Maintenance Program is likely to keep flying their aircraft until it reaches the salvage yard.

    Cessna Citation II

    The Citation II was second-best on the ‘Most Improved’ list in December, so how did it get here one month on? A Maintenance Exposure increase exceeding $93k was the primary culprit, but its problems do not stop there.

    Two units transacted in January, one was withdrawn from inventory, and five more aircraft joined the fleet to offer buyers a selection of 95 assets (18.5% of the active fleet) sporting an ETP Ratio of 108.8%.

    Seller Advice: If an offer comes your way, consider it a gift no matter how small!

    Bombardier Global Express

    This model occupied top spot on our ‘Most Improved’ list last month, but inventory changes through additions and withdrawals increased Maintenance Exposure over $1.1m, and an Ask Price reduction exceeding $426k certainly didn’t help.

    On a positive note, the model’s 13 listings equate to only 9% of the active fleet, and its ETP Ratio of 68.8% will make many of these aircraft quite marketable, especially if they are enrolled on an engine Hourly Cost Maintenance Program.

    Note: As we pointed out last month, the Bombardier Global Express still has plenty of financial and operating life remaining, along with a strong following. For this reason, many current and potential owners are considering upgrading their asset utilizing the JANUS Modernization Program, a decision that could add substantial value to the aircraft while making it virtually indistinguishable from a new production unit, particularly with respect to passenger amenities.

    Piaggio P-180

    The market has not been kind to this model, which is unfortunate considering its cabin size, low interior noise level, and speed for a turboprop. No transactions were reported in January, while the three additions to inventory increased buyer selection to 14 units, or 16.7% of the active fleet.

    The aircraft’s 115.9% ETP Ratio, created through a Maintenance Exposure increase approaching $75k and an Ask Price drop of nearly $59k, is undoubtedly challenging sellers. Buyers are firmly in the driving seat here as well.

    Dassault Falcon 900B

    One aircraft transacted in January and two were withdrawn from inventory, leaving 12 units listed for sale (8% of the active fleet). Unfortunately, those inventory changes increased Maintenance Exposure by nearly $247k, while Ask Price fell approximately $368k, landing the model on this list.

    With an ETP Ratio of 45%, most of these aircraft are infinitely marketable, especially if their engines are enrolled on HCMP.

    Gulfstream GV

    Even though the GV posted an Ask Price increase in January, the model could not overcome a Maintenance Exposure increase approaching $1.1m, created through the withdrawal from inventory of two assets and no sales transactions. The GV thereby found its way to this list after occupying sixth place on the ‘Most Improved’ group in December.

    With only 12 units listed for sale (6.3% of the active fleet), an ETP Ratio averaging 41.4%, the aircraft’s superb operating capabilities, and the market following for this model, most sellers should have the ability to extract good value from the sale of their asset.

    The Seller’s Challenge

    It is important to understand that the 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 Hourly Cost Maintenance Program 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.

    This report was originally published by AvBuyer on February 17, 2020.

  • Tracey Cheek posted an article
    Over and Above - Hourly Cost Maintenance Programs Offer Unexpected Benefits see more

    NAFA member, Anthony Kioussis, President of Asset Insight, LLC, discusses the benefits of Hourly Cost Maintenance Programs.

    As OEMs sought to expand aircraft deliveries to Business and General Aviation (B&GA) during the early ’80s, they encountered two hurdles. One was the perceived, if not real, inability of certain engines to achieve their published maintenance intervals, thereby increasing operating costs. The other was operator perception that certain airframes and engines were more expensive to maintain than advertised.

    To address both concerns, numerous OEMs modified offerings already available to the airlines, and Hourly Cost Maintenance Programs (HCMP) were born. Initially viewed as expensive, the idea of “guaranteed operating costs” soon was embraced by B&GA operators. And once lenders and lessors began relying on their value to securitize their assets, HCMP coverage became an industry staple.

    Today, aircraft owners routinely experience enhanced value when their Program-enrolled aircraft is sold. In fact, not enrolling some models on HCMP may result in a valuation reduction to the aircraft, since the majority of certain models are so enrolled. However, some new and used aircraft buyers may not consider that HCMP offers benefits over and above the value increase to the aircraft. These are quantifiable and can provide value directly to the owner. For example:

    • Additional Coverage While Under Warranty – Certain “related expenses” are not covered by warranty, such as the cost for shipping the affected component to the maintenance facility, shipping a rental component to the aircraft, installing the component, the cost of the rental component during the repair period, removing the rental part once the original component has been repaired, return shipping for the rental, shipping cost to the maintenance facility for the original component, and logistical support associated with these tasks – including the cost to transport and house personnel at an unscheduled maintenance event site. That is not to say the warranty is not valuable, but its coverage often is limited to the cost of repairing the affected component.
    • Exposure at Resale – Depending on market conditions, an owner may choose to pay to enroll an uncovered aircraft on HCMP rather than having to discount its sale price in excess of that enrollment fee. While incurring the expense at the time of sale, they have enjoyed none of the HCMP coverage benefits.
    • Days on Market – Detailed analytics from resale organizations show that an in-service aircraft will take longer to sell absent HCMP coverage. This could mean a substantial loss in value as aircraft are depreciating assets.
    • Rental Component Expense – Many owners fail to account for the true cost of rental components, the potential difference in their travel experience when chartering aircraft, the total cost of charters during their asset’s downtime, and storage as well as other fees for their grounded aircraft.
    • Freight and Shipping Charges – The cost to ship “Aircraft on Ground” parts, and the freight charges and logistical challenges to transport a component from wherever the event occurred to the service facility, as well as the cost to ship a rental component to the site of the maintenance event, should not be underestimated.
    • Financing Benefits – Each aircraft financing entity has its own way of valuing Hourly Cost Maintenance Programs, so it’s difficult to determine the exact value that any one financier may place on HCMP coverage. However, the savings differential over the term of a loan or lease could be substantial.

    In addition to the OEMs, HCMP coverage is available from independent sources. Their advantage is the ability to cover components produced by more than one OEM, making them a one-stop-shop. However, some firms may not be acceptable to financing entities, may not offer coverage equivalent to the OEM, and their program may not be transferable – making its value questionable.

    Hourly Cost Maintenance Programs are by no means free, but the additional value they can provide to the aircraft’s owner, can make them a wise investment. 

    This article was originally published by Business Aviation Advisor on January 1, 2020.

  • Tracey Cheek posted an article
    Used Aircraft Maintenance Analysis – December 2019 see more

    NAFA member, Tony Kioussis, President of Asset Insight, shares the December 2019 Used Aircraft Maintenance Analysis.  

    Average Ask Price for aircraft in Asset Insight’s tracked fleet decreased 0.7% in December, but value changes varied substantively based on model size. Which models were impacted the most? 

    During December, the number of inventory aircraft comprising Asset Insight’s tracked fleet of 96 fixed-wing models decreased 1.6% to 1,748 units.

    Asset quality improved 0.2% during the month, but worsened overall during Q4 by the same amount, and by 1.8% during the calendar year. Still, at 5.206, the ‘for sale’ fleet’s Quality Rating remained within the ‘Very Good’ range on Asset Insight’s scale of -2.5 to 10

    Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) posted the best (lowest) figure for 2019 during December at $1.345m, equating to an improvement of 1% for the month, 0.9% for Q4, and 4.9% year-over-year.

    December’s Aircraft Value Trends

    Asset Insight’s tracked fleet closed out 2019 by losing an additional 0.7% of asset value in December and, even though pricing increased 0.8% during Q4, the average aircraft in our tracked fleet lost 3.1% of its value year-over-year. Group performance varied as follows:

      December 2019 Q4 2019 Since December 2018
    Large Jets -1.2% -1.6% -9.1%
    Medium Jets -3.0% 0.4% 11.0%
    Small Jets -2.9% -1.8% -5.7%
    Turboprops 2.0% 4.7% -2.2%

     

    December’s Fleet for Sale Trends

    The total number of used aircraft listed for sale within Asset Insight’s tracked fleet decreased 1.6% following six consecutive monthly increases, reducing inventory by 28 units during the December transaction frenzy while resulting in an increase in ‘for sale’ fleet of 9.9% during 2019 (157 units).

    All four groups ended the year with higher availability:

    • Large Jet inventory: Unchanged for the month, and up 8.7% year-over-year (30 units);
    • Medium Jet inventory: Decreased 1.7% (nine units) in December, but gained 9.8% (48 units) during 2019;
    • Small Jet Inventory: Receded an additional 2.8% (16 units) in December, but gained 15.4% (73 units) throughout the year; and
    • Turboprop inventory: Decreased 1% (three units) for the month while increasing 2.1% (six units) since December 2018.

    December’s Maintenance Exposure Trends

    Graphically, Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) traveled a sawtooth journey in 2019. It improved 1% in December (to post the year’s best figure); 0.9% during Q4; and 4.9% for the calendar year. Individual results were as follows…

    • Large Jets: Posted their lowest (best) maintenance exposure of 2019 during the month of December through a 2% decrease (improvement) for the month, along with a decrease of 3.6% during Q4, and a 15% year-over-year improvement;
    • Medium Jet: Exposure improved (decreased) 1.1% in December, but worsened 2.7% during Q4 and 6.9% since the start of 2019;
    • Small Jets: Suffered a couple of costly spikes during the year, but fell (improved) by 1.4% in December, 1.9% during Q4, and 3.5% for the year;
    • Turboprops: Maintenance exposure improved a bit during Q4, decreasing 4.2% (with 0.8% coming in December), but lost ground for the year by increasing (worsening) over 4.8% since last December.

    December’s ETP Ratio Trend

    The latest fleet mix increased (worsened) the average ETP Ratio slightly to 64.8%, from November’s 64.3%. While the year ranged from a low of 63.6% up to 70.9%, the tracked fleet posted the same figure in January 2019 as it did in December 2019.

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

    During Q4 2019, aircraft whose ETP Ratio was 40% or greater were listed for sale nearly 84% longer than assets with an ETP Ratio below 40% (215 versus 395 DoM). How did each group fare during December?

    • Turboprops recaptured the top (best) spot with the lowest ETP Ratio, 52.1% (compared to November’s 54.1% and December 2018’s 51.1%);
    • Large Jets moved down into second place with a Ratio of 55.1% (versus November’s 53.9% and December 2018’s 58.8%;
    • Small Jets captured third position by remaining unchanged for the month at 67.3%. But the group’s figure increased a bit from December 2018’s 66.4%;
    • Medium Jets took last place at 75.5% (compared to November’s 73.6% and December 2018’s 77.8%.

    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 December 2019.

     

    Asset Insight - Most Improved Business Jets and Turboprops (December 2019)

     

    Most Improved Models

    Five of the ‘Most Improved’ models revealed a Maintenance Exposure decrease (improvement), while the King Air 300’s Exposure increased. Two aircraft – the Bombardier Global Express and Gulfstream GV – posted no price change, while the Cessna Citation II posted a price decrease of $4,596. The remaining three models experienced price increases as follows:

    • Hawker 1000A  $88,000
    • Beech King Air 300  $219,090
    • Bombardier Learjet 45XR $292,500

     

    Bombardier Global Express

    The Bombardier Global Express captured top spot on the ‘Most Improved’ list as a single sale, an aircraft’s withdrawal from inventory and two additions to the ‘for sale’ fleet lowered the group’s Maintenance Exposure by nearly $1.6m.

    The 14 listed aircraft represent 10.3% of the active fleet and, while that percentage may be a little high, many of those aircraft are enrolled on an engine Hourly Cost Maintenance Program (HCMP) that should bring the 55.1% ETP Ratio to below 40% once adjusted for HCMP coverage.

    Note: The Bombardier Global Express still has plenty of financial and operating life remaining, along with a strong following. For this reason, many current and potential owners are considering upgrading their asset utilizing the JANUS Modernization Program, a decision that could add substantial value to the aircraft while making it virtually indistinguishable from a new production unit, particularly with respect to passenger amenities. Some owners are also contemplating upgrading their avionics suite.

     

    Cessna Citation II

    The Cessna Citation II placed second on November’s ‘Most Improved’ list and earned the same position in December thanks to a Maintenance Exposure decrease approaching $97k (even though its Ask Price actually dropped in December).

    Two aircraft transacted in December, two were withdrawn from inventory, while two more entered the ‘for sale’ pool. The 93 units currently available represent 18.5% of an aging fleet, and the model’s near 94% ETP Ratio make this a potential ‘buy it to keep it’ asset for prospective owners.

     

    Hawker 1000A

    The Hawker 1000A moved from occupying the ‘Most Deteriorated’ position in November, to third best on the ‘Most Improved’ list in December thanks to a Maintenance Exposure decrease exceeding $30k and a respectable Ask Price increase by virtue of a single repriced inventory aircraft.

    The seller’s repriced unit perhaps notwithstanding, this model’s ETP Ratio suggests that the average buyer should count on incurring Maintenance Exposure equivalent to the price of the aircraft they’re purchasing, and that’s not the type of asset sought by most buyers, especially a model sporting a limited production run.

    Seller Advice: Consider any offer that comes your way. Another proposal may not come any time soon.

     

    Beechcraft King Air 300

    Two aircraft transacted in December, but three more entered inventory raising availability to 18 units, approximately 8% of the active fleet. The King Air 300 made this list primarily due to an Ask Price increase exceeding $219k that overrode a Maintenance Exposure increase exceeding $11k.

    With few such models enrolled on engine HCMP, the King Air 300’s 54.8% ETP Ratio might require some sellers to accept a lower price than they’d like. However, even an ETP Ratio slightly above 40% should not be a serious impediment to mutually beneficial transactions, in view of the model’s fan base.

     

    Bombardier Learjet 45XR

    Three sales and one lease were completed in December, but with four additions to inventory the number of units for sale remained at 18, representing 8.8% of the active fleet.

    The model’s ETP Ratio of 33.7% makes this aircraft readily marketable, especially if the asset’s engines are covered by HCMP. Whether the Ask Price increase can be supported remains to be seen.

     

    Gulfstream GV

    The final model on this month’s ‘Most Improved’ list experienced no average Ask Price change in December, but a single transaction and two additions to inventory lowered the average Maintenance Exposure by more than $658k.

    The 14 inventory units equate to 7.3% of the active fleet for sale. With an ETP Ratio of 31.5%, and with more than half of this fleet enrolled on engine HCMPs, sellers of HCMP-covered assets should experience less trouble securing an acceptable offer than the current 260 Days on Market would suggest.

    Asset Insight - Most Deteriorated Business Jets and Turboprops (December 2019)

     

    Most Deteriorated Models

    Five of the six models on December’s ‘Most Deteriorated’ list registered a Maintenance Exposure increase, while the Dassault Falcon 50 posted a decrease. The Bombardier Learjet 55C posted no Ask Price change; the Challenger 601-3R Ask Price rose by $50,000; and the remaining models registered the following decreases:

    • Dassault Falcon 50  -$185,909
    • Cessna Citation ISP  -$38,461
    • Dassault Falcon 900EX -$316,667
    • Bombardier Learjet 35A -$1,455

     

    Bombardier Learjet 55C

    December’s ‘Most Deteriorated’ model posted no transactions in December, and only two inventory aircraft remained after one of the ‘for sale’ units was withdrawn. The Learjet 55C’s Maintenance Exposure increase exceeded $189k that, along with no Ask Price change, earned the jet its position on this list.

    This Learjet’s problem is two-fold: First, it’s an aging asset with limited market following. Second, with an ETP Ratio approaching 109%, buyer offers are unlikely to be appealing for sellers.

     

    Dassault Falcon 50

    The second ‘Most Deteriorated’ asset to make this list registered two transactions in December, two aircraft were withdrawn from inventory, three were added to the ‘for sale’ fleet, and the 30-unit availability equated to 15.7% of the active fleet.

    The model earned its spot on this list through a Maintenance Exposure increase approaching $16k, along with an Ask Price decrease approaching $186k that combined to create an ETP Ratio approaching 126%.

    Considering the aircraft’s age, the only surprise is the model’s relatively short remarketing period of approximately six months, which speaks to the aircraft’s operating capabilities that continue to create followers.

     

    Bombardier Challenger 601-3R

    Those of you following these monthly reviews may recall that this aircraft led all models on November’s ‘Most Improved’ list. How quickly an asset’s fortune changes as it approaches financial obsolescence.

    One asset sold in December, but two more entered inventory and the six available units represented 9.8% of the active fleet. That statistic is not the problem. The 601-3R’s ETP Ratio of 125% (created by a Maintenance Exposure increase nearing $394k, and the fleet’s age) are this asset’s greatest challenges.

     

    Cessna Citation ISP

    As we closed out December, there were 53 Citation ISP units listed for sale (19.3% of the active fleet). With this level of competition, singling out their aircraft’s value is a serious challenge for sellers. Nevertheless, some were able to do so and four sold in December.

    Unfortunately, two other units entered the fleet, and the change in availability resulted in a Maintenance Exposure increase exceeding $17k, along with an Ask Price drop of more than $38k. The model’s ETP Ratio (which now exceeds 107%) makes this a buyer’s paradise, assuming they’re willing to risk becoming the aircraft’s final owner.

     

    Dassault Falcon 900EX

    This model earned its place on the ‘Most Deteriorated’ list for technical reasons. Its ETP Ratio of 34.9% should cause few challenges for sellers who understand their aircraft’s value relative to comparable assets listed for sale.

    Three aircraft transacted in December and one new asset joined the inventory. The seven available units equate to only 5.9% of the active fleet.

    The technical figures creating the model’s ETP Ratio deterioration were a Maintenance Exposure increase approaching $479k, along with an Ask Price decrease of nearly $317k (thanks to the latest entry to inventory). These aircraft continue to be financially and operationally viable assets.

     

    Bombardier Learjet 35A

    This is yet another example of a model nearing financial, and probably operational, obsolescence. And yet one aircraft sold during December (and another was withdrawn from inventory), leaving 43 units, or 10.1% of the active fleet, listed for sale.

    When a model offers this much selection to buyers, along with an ETP Ratio exceeding 181%, complements of a Maintenance Exposure increase nearing $46k and a nominal Ask Price decrease, sellers are at a severe disadvantage. The one thing buyers should ensure they consider is if they truly wish to own an asset of this age.

     

    ADS-B Equipage and Values

    The new year could result in some dramatic price decreases for older aircraft that have not met the January 2020 ADS-B equipage mandate. While we do not believe non-equipped turbine assets will be ‘worthless’, their values will be negatively impacted.

    For aging assets, especially those with little time left before their recommended engine overhaul point, Salvage Value is a very real possibility, although actual transaction figures will be the true determinant.

     

    The Seller’s Challenge

    It is important to understand that the 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 Hourly Cost Maintenance Program 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

    This article was originally published by AvBuyer on January 10, 2020.

  • Tracey Cheek posted an article
    Used Aircraft Maintenance Analysis – July 2019 see more

    NAFA member, Tony Kioussis, President of Asset Insight, shares the July 2019 Used Aircraft Maintenance Analysis.

    How did the Beechcraft King Air 350 (Post-2000) models do? 

    Average Ask Prices for Asset Insight’s tracked fleet increased somewhat in July but values are still below the 12-month average. Asset availability rose to the highest year-to-date figure. Tony Kioussis explores which models were impacted the most…

     

    Asset Insight’s monthly market analysis covering 96 fixed-wing models and 1,693 aircraft listed for sale was most recently conducted on July 31st, 2019 and marked the fourth consecutive month of asset quality deterioration for the inventory fleet (in this case -0.6%) to post a 12-month worst Quality Rating figure.

    However, the figure did remain within the ‘Very Good’ range even after decreasing from 5.196 to 5.165 on a scale of -2.5 to 10.

    Asset Insight’s tracked fleet’s Maintenance Exposure figure (an aircraft’s accumulated/embedded maintenance expense) followed suit, rising (worsening) 3.9% to an amount only marginally better than the 12-month high (worst) figure.

     

    July’s Aircraft Value Trends

    The average Ask Price for Asset Insight’s tracked fleet increased 0.9% in July, but only Large Jets were responsible for the Ask Price increase as, following classical supply dynamics, the three groups experiencing an inventory increase registered an Ask Price decrease:

    • Large Jet values posted a 7.3% increase;
    • Medium Jets lost 2.1% in July;
    • Small Jet values decreased 4.2% to post a 12-month low figure; and 
    • Turboprops posted a record-low figure for the group by decreasing 0.9%.

     

    July’s Fleet for Sale Trends

    The total number of used aircraft listed for sale within Asset Insight’s tracked fleet posted another increase in July, 0.8% (13 units), on top of June’s 27 aircraft increase, raising inventory availability to the highest year-to-date figure.

    • Large Jet inventory, the only one to decrease, fell 1.3% (five units);
    • Medium Jet inventory increased 1.2% (six units) for the second consecutive month;
    • Small Jets posted a 0.4% increase (two units); and
    • Turboprops inventory increased 3.8% (10 units).

     

    July’s Maintenance Exposure Trends

    Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) due to July’s inventory fleet mix rose (worsened) 3.9% to a value only marginally better than the 12-month high (worst) figure, increasing to nearly $1.5m from last month’s $1.4m. Results for each of the four groups were as follows:

    • Large Jet maintenance exposure rose (worsened) 4.0% to a figure marginally better than the group’s 12-month average;
    • Medium Jet exposure rose (worsened) 0.8% to a figure slightly worse than the 12-month average;
    • Small Jets rose (worsened) 0.4% to virtually equal the group’s 12-month average;
    • Turboprops posted the only maintenance exposure decrease (improvement) of 2.1%, but that was only slightly better than last month’s 12-month worst figure.

     

    July’s ETP Ratio Trend

    As a result of all these changes, the average ETP Ratio figure increased (worsened) to 68.3% from June’s 65.4%, with all four groups contributing to the degradation.

    Why is this information important? 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 the aircraft's price). ‘Days on Market’ analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s Days on the Market (DoM) increase, in many cases by more than 30%.

    How did each group fare during the month of July?

    • Turboprops regained their leadership position by posting the lowest (best) ETP Ratio at 56.9% although, for the second consecutive month, the figure represented this group’s highest (worst) Ratio;
    • Large Jets were next at 58.5%, a substantive worsening over last month’s 52.5%;
    • Small Jets followed at 71.5%, higher than June’s 68.8%;
    • Medium Jets posted 77.3%, equating to the group’s average figure over the past twelve months.

    Excluding models whose ETP Ratio has remained over 200% during the previous two months (considered outliers), following is a breakdown of which individual business jet and turboprop models fared the best and worst during July 2019.

     

    Asset Insight Most Improved Jet Models - July 2019

     

    Most Improved Models

    All ‘Most Improved’ models posted a Maintenance Exposure decrease (improvement). Although the Bombardier Challenger 601-3R and Global Express did not experience an Ask Price change the Cessna Citation V 560 had an Ask Price decrease of $24,519. The remaining three models posted the following price increases:

    • Hawker 800A    +$29,558
    • King Air 350 (Post-2000 Models) +$23,143
    • Beechcraft Premier 1A  +$18,686

     

    Hawker 800A

    After appearing on the ‘Most Deteriorated’ list in June, the model captured top spot on the ‘Most Improved’ list in July through an ETP Ratio improvement exceeding 21%, thanks to a Maintenance Exposure reduction exceeding $114k and a substantial Ask Price increase.

    Three units transacted in July, one was added, and three were withdrawn, leaving 36 listed for sale. Regrettably, nearly 26% of the active fleet remains on the market, and an ETP Ratio approaching 167% is not making the 800A a highly marketable model.

    Still, this aircraft has quite a following and, if a unit’s maintenance status is in better-than-average condition, and if the asset’s engines are enrolled on HCMP, the seller should be able to generate some genuine interest in their aircraft.

     

    Bombardier Challenger 601-3R

    While this model experienced no sales in July, and no change to posted ask prices, one higher quality aircraft joined the fleet for sale, thereby reducing (improving) Maintenance Exposure by over $445k to earn the model second position on the ‘Most Improved’ list.

    Alas, that’s where the good news ends because, even though only 6.9% of the active fleet is on the market, the model’s average ETP Ratio, at nearly 134%, is unlikely to make acceptable offers magically materialize.

     

    Cessna Citation V 560

    This model moved from the middle of the ‘Most Deteriorated’ group for June to this position in July. One aircraft transacted during the month, but two were added to the fleet for sale, increasing the inventory total to 28 (11% of the active fleet).

    The Citation V 560 gained its spot on this list by virtue of a Maintenance Exposure decrease approaching $15k, and a respectable Ask Price increase.

    Not surprisingly, its average ETP Ratio will prove troublesome for most sellers. However, owners whose aircraft is enrolled on engine HCMP coverage may fare better relative to offer price, assuming they’re able to identify a willing buyer.

     

    Beechcraft King Air 350 (Post-2000 Models)

    Generating four transactions in July, and with an ETP Ratio of only 22.6%, most sellers of this model should have little difficulty generating acceptable offers, even though current inventory represents 22.6% of the active fleet.

    This aircraft has a well-deserved following, and its place on this list was caused by a Maintenance Exposure decrease exceeding $213k, along with an Ask Price increase that may, or may not be achievable.

     

    Bombardier Global Express

    The 18 aircraft listed for sale represent 12.3% of the active fleet, and demand for this model is low at present, with no units transacting in July.

    The aircraft’s appearance on the ‘Most Improved’ list is due a Maintenance Exposure decrease for the listed fleet approaching $417k. But there were no notable price changes and the ETP Ratio is still hovering near 77% placing some sellers on the edge of the 40% Excessive Exposure demarcation point. The opportunity to generate good offers is not stellar for most owners.

     

    Beechcraft Premier 1A

    Closing out July’s ‘Most Improved’ list is the Premier 1A, which earned its place on this list through a $73k Maintenance Exposure Improvement and an Ask Price Increase. With an ETP Ratio of 44.5% - and considering that most of these aircraft have engine HCMP coverage – the news should be good for most sellers.

    Unfortunately, no units transacted in July and, by virtue of four additions to the fleet during the month, total availability presently stands at 22 units, equating to 14.3% of the active fleet. That much selection and very low demand are not transaction-conducive elements.

     

    Why was the Gulfstream GV on the 'Most Deteriorated' list for July 2019?

     

    Most Deteriorated Models

    All models on July’s ‘Most Deteriorated’ list experienced a Maintenance Exposure increase (deterioration). Two assets experienced no price change, the Gulfstream G100 and GV, while the remaining four posted an Ask Price decrease, as follows:

    • Gulfstream GIV  -$67,500
    • Bombardier Learjet 55 -$32,153
    • Dassault Falcon 900B -$1,122,500
    • Beechcraft Premier 1  -$71,950

     

    Asset Insight Most Deteriorated Jet Models - July 2019

     

    Gulfstream G100

    The model’s inventory was cut in half when two of the four aircraft listed for sale transacted in July. Demand is below average for the G100, so the change in inventory was surprising.

    What was not surprising was the model’s place on our ‘Most Deteriorated’ list, as it was well-earned, thanks to a Maintenance Exposure increase approaching $533k for the two remaining listings. Even without an Ask Price change, there was little chance for the G100 to miss this list.

     

    Gulfstream GIV

    The Gulfstream GIV found its way to the position occupied by its younger GIV-SP (MSG) cousin in June. One aircraft transacted in July and two entered inventory to increase Maintenance Exposure by nearly $458k, while the average Ask Price dropped $67.5k.

    The 14 units listed for sale equate to only 8% of the active fleet.  However, with an ETP Ratio of 143%, sellers are likely to find it challenging to negotiate acceptable transaction values, even though these older aircraft continue to have a reasonable following.

     

    Bombardier Learjet 55

    We registered no trades for this model in July, but one was withdrawn from inventory leaving 14 listings that equate to approximately 13.5% of the active fleet. With an ETP Ratio approaching a figure that only astronomers can interpret, the model is on this list due to a near $75k Maintenance Exposure increase and an Ask Price decrease exceeding $32k.

    None of this is surprising, considering these aircraft are between 32 and 38 years old. What we do find surprising is the aircraft’s ongoing buyer following, considering its age and technology.

     

    Dassault Falcon 900B

    No trades took place for this model during the month of July, but one aircraft was withdrawn from inventory leaving nine listed for sale, or about 6% of the active fleet.

    The Falcon 900B earned a place on this list for ‘technical reasons’, as an Ask Price decrease exceeding $1.1m is unlikely to keep any asset off the ‘Most Deteriorated’ list. However, this represents another case where statistics do not tell the whole story.

    Only two aircraft had a posted Ask Price in June, and one was withdrawn from the market, dramatically changing the model’s average Ask Price figure – in this case downward.  The $12k change in Maintenance Exposure is fairly benign for the Falcon 900B’s size, and the model’s 52.7% ETP Ratio makes many of the available units quite marketable.

    This is another case where statistics might point owners and buyers down a blind alley if they lack the supporting information.

     

    Beechcraft Premier 1

    Unlike the story for its younger brother, the Premier 1A (on July’s ‘Most Improved’ list), the Premier 1’s story is not as positive… but neither is it grim. One aircraft transacted in July, three were withdrawn from inventory, and two were added to the pool. When July ran out of days, we found 17 aircraft still listed for sale, or approximately 14.2% of the active fleet.

    The changes to the fleet mix led to a Maintenance Exposure increase exceeding $114k and an Ask Price decrease approaching $72k, neither statistic aiding transaction-structuring opportunities.

    However, considering these assets range in age between 14 and 18 years, and that the HCMP-adjusted ETP Ratio for many aircraft will be closer to the 40% excessive exposure demarcation point, many sellers have reason to be confident of achieving a reasonable transaction value. It should also be noted that this aircraft’s demand exceeds that of the Premier 1A. Not by much, but every little helps.

     

    Gulfstream GV

    Rounding out our ‘Most Deteriorated’ list was an unexpected model, as the GV’s ETP Ratio has been tracking well within acceptable levels, and only 13 units are listed for sale, which equates to 6.8% of the active fleet.

    Again, statistics have a way of skewing things. No aircraft traded in July, but two were withdrawn from inventory and two more joined the fleet for sale, and these changes increased Maintenance Exposure nearly $989k. Even without an Ask Price change, that level of maintenance expense variance is significant, even for this class of asset.

    We believe most sellers have strong bargaining positions in the case of this model, and buyers have a sufficient pool of assets to choose from to facilitate transactions. In fact, we wouldn’t be surprised if the GV appears on our ‘Most Improved’ list for August.

     

    The Seller’s Challenge

    It is important to understand that the 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 Hourly Cost Maintenance Program where more than half of their model’s in-service fleet is enrolled on an HCMP.

    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.

    More information from www.assetinsight.com.

    This article was originally published by AvBuyer on August 20, 2019.

  • Tracey Cheek posted an article
    Used Aircraft Maintenance Analysis – June 2019 see more

    NAFA member, Tony Kioussis, President of Asset Insight, shares the June 2019 Used Aircraft Maintenance Analysis.

    Average Ask Prices for Asset Insight’s tracked fleet decreased in June to just above the 12-month low figure while asset availability rose near to April’s YTD high. Tony Kioussis explores which models were impacted most.

    Asset Insight’s June 30, 2019 market analysis covering 96 fixed-wing models and 1,680 aircraft listed for sale, revealed a Quality Rating only slightly better than the 12-month worst figure, but remained within the ‘Very Good’ range after decreasing from 5.212 to 5.196 on a scale of -2.5 to 10.

    At the same time, our tracked fleet’s Maintenance Exposure figure (an aircraft’s accumulated/embedded maintenance expense) improved 3.1% last month, and 1.1% for the second quarter of 2019.

    June’s Aircraft Value Trends

    The average Ask Price for Asset Insight’s tracked fleet fell 1.1% in June, as all four groups lost ground:

    • Large Jet values posted a new record low figure, decreasing 5.5% in June and 8% during Q2;
    • Medium Jets lost 1.3% over the last 30 days but registered a 7.5% overall increase during Q2;
    • Small Jet values decreased 1.2% for the month and 1.8% for Q2; and 
    • Turboprops suffered their third consecutive monthly Ask Price decrease, posting a record-low figure with a 1.6% reduction, and a total decrease of 2.4% during Q2.

    June’s Fleet for Sale Trends

    The total number of used aircraft listed for sale within Asset Insight’s tracked fleet increased by 27 units in June.

    • Large Jet inventory increased 5.9% (21 units);
    • Medium Jet inventory increased 1.2% (6 units);
    • Small Jets was the only group whose inventory decreased (0.5%, or 3 units); and
    • Turboprops increased 1.2% (3 units).

    June’s Maintenance Exposure Trends

    Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) for June’s inventory fleet mix improved 3.1%, decreasing to $1.4m from May’s $1.45m. Results for each of the four groups were as follows:

    • Large Jet maintenance exposure rose (worsened) 0.2% to remain just above the 12-month low figure. For Q2 the maintenance exposure improved 7.1%;
    • Medium Jet exposure fell (improved) 4% in June and 1.4% during Q2;
    • Small Jets posted a dramatic 11.4% reduction (improvement), but maintenance exposure ended Q2 6.7% higher;
    • Turboprop maintenance exposure increased (worsened) 2.5% in June and 6.3% during Q2.

    June’s ETP Ratio Trend

    Based on June’s maintenance exposure and ask price changes, the average ETP Ratio figure decreased (improved) to 65.4%% from May’s 69.8%, with all but the Turboprop group contributing to the improvement. Why is this information important…?

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

    So, for example, aircraft whose ETP Ratio exceeded 40% during Q2 2019 were listed for sale an average 71% longer than aircraft whose Ratio was below 40% (226 days versus 386 days on the market, respectively).

    By comparison, during Q1 2019 aircraft whose ETP Ratio exceeded 40% took 62% longer to sell (237 versus 384 Days on Market).

    How did each group fare during the month of June?

    • For the first time ever, Large Jets posted the lowest (best) ETP Ratio at 52.5% (which was also the group’s 12-month best figure);
    • Turboprops were not in first place for the first time since Asset Insight has been keeping records, due to the group’s all-time highest (worst) ETP Ratio at 56.6%;
    • Small Jets were third with a Ratio of 68.8%; and
    • Medium Jets improved slightly by decreasing to 75.2%.

    Excluding models whose ETP Ratio has remained over 200% during the previous two months (considered outliers), following is a breakdown of which individual business jet and turboprop models fared the best and worst during June 2019.

    Most Improved Models

    All of the ‘Most Improved’ models posted a Maintenance Exposure decrease (improvement). Interestingly, the Bombardier Learjet 31 did not experience an Ask Price change, while the Bombardier Learjet 35A, Cessna Citation ISP and Cessna Citation II experienced decreases of -$46,073, -$1,690 and -$30,399, respectively. Only two models posted price increases. They were:

    • Cessna Citation V Ultra   +$179,385
    • Bombardier Learjet 45 (APU equipped) +$395,875

    Most Improved Business Jets and Turboprops - June 2019

     

    Bombardier Learjet 31

    The Learjet 31 leads our ‘Most Improved’ list after placing second from the bottom on May’s ‘Most Deteriorated’ list. Although no aircraft traded in June, the model captured this spot complements of a Maintenance Exposure decrease (improvement) for the listed fleet that exceeded $226k.

     

    Nevertheless, while only four aircraft (11.5% of the active fleet) are listed for sale, the asset’s 118.6% ETP Ratio holds about the same minimal hope for sellers during the coming months as it did in June.

    Bombardier Learjet 35A

    In terms of a statistical recovery, it doesn’t get much better than the Learjet 35A’s leap from worst on May’s ‘Most Deteriorated’ list to the model’s ranking in June – and it’s all thanks to a Maintenance Exposure decrease exceeding $265k (a figure that overshadowed a substantive ask price decrease).

    One aircraft transacted in June, and two joined the inventory fleet to increase that number to 43. That only represents 8.6% of the active fleet, but the aircraft’s ETP Ratio (170.3%) is unlikely to find buyers for too many sellers.

    Cessna Citation ISP

    Three aircraft transacted in June, three were withdrawn from the market, and three were added to an inventory mix that now totals 53 units (19.9% of the active fleet). The model earned its way onto the ‘Most Improved’ list through a Maintenance Exposure reduction exceeding $131k, and the inventory fleet also posted a slight Ask Price decrease.

    The resulting ETP Ratio – approaching 102% - combined with high availability of this well-aged fleet is unlikely to generate sudden purchasing exuberance.

    Cessna Citation II Private Jet

     

    Cessna Citation II

    From May’s ‘Most Deteriorated’ list to June’s ‘Most Improved’ grouping, the Citation II’s reversal of fortune appears impressive – until you start to peel back the technical onion: No trades occurred during the month of June; the asset’s Ask Price dropped over $30k; 94 aircraft are listed for sale (16.8% of the active fleet); and the ETP Ratio stood at 109.1%, even after a Maintenance Exposure decrease approaching $148k.

    While a 17.7% one-month ETP Ratio decrease technically earned the model a place on this list, it’s unlikely to aid sellers seeking to dispose of a Citation II.

    Seller Advice: Carefully consider all offers, as prospective buyers will be few in number and are unlikely to be negotiation motivated.

    Cessna Citation V Ultra

    Sellers of this model have some opportunities, especially if their aircraft’s engines are enrolled on an Hourly Cost Maintenance Program. No aircraft transactions were posted for the Citation V Ultra in June, but one unit was withdrawn from the inventory and three were added, resulting in 26 aircraft listed for sale (8.4% of the active fleet).

    With the model’s average ETP Ratio falling below 65% by virtue of a Maintenance Exposure decrease exceeding $89k and an Ask Price increase exceeding $179k, both buyers and sellers have an opportunity to structure transactions offering good value.

    Bombardier Learjet 45 (APU-equipped)

    As with three other models on June’s ‘Most Improved’ list, we captured no transactions during the month of June. The 17 aircraft in inventory, when added to listed Learjet 45 units that are not APU-equipped, represent approximately 10.8% of the model’s active fleet.

    With the model experiencing a Maintenance Exposure decrease exceeding $67k, along with a sizeable Ask Price increase, the resulting average ETP Ratio should make many listed units (especially those enrolled on an engine HCMP) quite marketable – assuming a willing buyer can be located.

    Most Deteriorated Models

    All but two models on June’s ‘Most Deteriorated’ list (the Hawker Beechjet 400 and Hawker 800A) experienced a Maintenance Exposure increase (deterioration), and all six asset types posted Ask Price decrease, as follows:

    • Hawker Beechjet 400   -$125,250
    • Gulfstream GIV-SP (MSG3)  -$947,500
    • Cessna Citation V 560  -$7,538
    • Hawker 800A    -$73,714
    • Beechcraft King Air 350 (Pre 2001) -$97,019
    • Beechcraft King Air C90  -$21,228

    Most Deteriorated Business Jets and Turboprops - June 2019

     

    Hawker Beechjet 400

    The model earned the ‘Most Deteriorated’ position for June through a Maintenance Exposure increase exceeding $11k and an Ask Price reduction exceeding $125k. Only four aircraft are presently listed for sale (10.1% of the active fleet), and two aircraft traded during the past 90 days.

    However, at nearly 152%, the model’s ETP Ratio is too high for even engine Hourly Cost Maintenance Program coverage to help much on the valuation front – although it may make the asset slightly more appealing.

    Gulfstream GIV-SP (MSG3)

    We were somewhat surprised to find this model on the ‘Most Deteriorated’ list, but it earned its way here through a $570k Maintenance Exposure increase along with an Ask Price decrease approaching $945k. One aircraft traded in June and the seven remaining in inventory represent only 8.6% of the entire GIV-SP active fleet.

    As we have cautioned in previous reports, whenever a limited number of units are listed for sale, changes to one or two assets can radically alter the view. In this case, only two aircraft are posting an Ask Price and one asset dropped its price by nearly 22% in June.

    This model may be on the ‘Most Deteriorated’ list, but with an ETP Ratio of 60.3%, and with many units enrolled on engine HCMP, many sellers should have the opportunity to entertain reasonable offers.

    Gulfstream GIV-SP Private Jet

     

    Cessna Citation V 560

    Two units transacted in June, and the 27 inventory assets represent 10.2% of the active fleet. The model’s Maintenance Exposure increased nearly $117k in June, while value decreased as a result of two sellers lowering their Ask Price.

    The problem here is the aircraft’s economic usefulness and its ETP Ratio – neither of which is assisting its marketability.

    Hawker 800A

    The single trade we uncovered during the month of June left 40 aircraft listed for sale (16.4% of the active fleet). The model actually posted an almost $33k maintenance exposure decrease in June, but that was overshadowed by an Ask Price decrease of more than twice that magnitude.

    The real problem affecting sellers of these assets is how far prices have fallen leading to the model’s 188.1% ETP Ratio. Since most of this fleet is enrolled on engine HCMP, there few levers (other than price) that sellers can engage to help them compete for the limited number of buyers.

    Beechcraft King Air 350 (Pre 2001)

    The King Air 350 was another model we were surprised to see on this list, especially since its ETP Ratio is 44.4%. However, price reductions to a couple of listed assets, along with a Maintenance Exposure increase approaching $138k earned the asset its recognition.

    Three units traded in June and the 21 aircraft listed for sale now represents 5.3% of the active fleet. Many sellers should be well-positioned to negotiate a decent price, while many buyers will find sufficient selection to maintain the model’s fairly robust trading environment.

    Beechcraft King Air C90

    The story is a little different for the King Air C90, and we recorded no trades for the month of June with one addition to inventory. With 50 aircraft listed for sale (13.1% of the active fleet), buyers hold the stronger hand.

    The King Air C90 earned its spot on this list through a Maintenance Exposure increase approaching $18k and an Ask Price drop exceeding $21k that, combined, raised the model’s ETP Ratio past 124%.

    Considering that we’re dealing with aircraft aged between 37 and 48 years, the ETP Ratio is unsurprising. What is surprising is the sudden deterioration this relatively popular model has experienced.

    The Seller’s Challenge

    It is important to understand that the 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 Hourly Cost Maintenance Program where more than half of their model’s in-service fleet is enrolled on HCMP.

    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.

    More information from www.assetinsight.com

    This article was originally published in AvBuyer on July 17, 2019.

  • Tracey Cheek posted an article
    In-Service Aircraft Values & Maintenance Condition see more

    NAFA member, Tony Kioussis, President of Asset Insight, shares the latest market analysis.

    Asset Insight’s April 30, 2019 market analysis covering 96 fixed-wing models and 1,684 aircraft listed for sale, revealed a 1.7% inventory increase to the tracked fleet. Large Jets experienced the greatest percentage inventory increase (a 4.6% gain), followed by Small Jets (3.5% inventory increase). Meanwhile Medium Jet and Turboprop inventory decreased 0.5% and 1.1%, respectively.

    Aircraft Values

    Average aircraft value for the tracked fleet increased just under 1% to post a figure just over $60k higher than the record low value.

    While Medium Jets posted a 12-month high figure and Small Jet values remained above their 12-month average, these increases could not overcome ask price decreases posted by Large Jets and Turboprops.

    Inventory Fleet Maintenance Condition

    Fleet asset quality improved nearly 1.2% in April while Maintenance Exposure also improved 1.4%. Overall, the tracked inventory posted the following:

    • Quality Rating was below the 12-month average, but it did manage to skirt into the ‘Excellent’ range, increasing from 5.191 in March to 5.251 for April, on Asset Insight’s scale of -2.5 to 10.

    • Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense), although below the 12-month average, improved (decreased) to $1.4m from March’s $1.42m.

    Maintenance Exposure to Ask Price (ETP) Ratio

    The ETP Ratio is a useful indicator of an aircraft’s marketability. It’s 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’ analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s time for sale on the market increases, usually by more than 30%. During Q1 2019, assets whose ETP Ratio was 40% or more were listed for sale over 62% longer (on average) than aircraft whose Ratio was below 40% (i.e. 237 days versus 384 days on the market).

    April’s analysis also noted that 55% of all tracked models and nearly 63% of the tracked fleet posted an ETP Ratio above 40% (see Table B).  

    Our tracked fleet’s ETP Ratio posted another improvement in April, decreasing to 63.6% from March’s 66%.

    • Turboprops posted the lowest (best) ETP Ratio at 54.9% (although that reflected a worsening from last month’s 52.9% and a 12-month worst figure;

    • Large Jets improved from 62.2% to 60.2%;

    • Small Jets improved from 62% to 61.5%; and

    • Medium Jets improved from 79.5% to 72.9%.

    Large Jets

    Market Summary

    The continued increase to the inventory fleet must be worrisome for Large Jet sellers as final transaction values have shown a noticeable drop during the past few weeks.

    Small Jets also experienced an increase to the fleet for sale, but the impact on their pricing has not been as dramatic... at least, not yet.

    Large Jets April Market Summary

    Large Jet inventory increased by another 16 units, with April’s fleet mix change seeing a large number of higher quality assets enter inventory.

    Better asset quality ought to command higher pricing, but that does not appear to be the case as values are under supply pressure and there is an apparent desire by many sellers to transact while the trading climate is still favorable.

    Ask Prices decreased another 2.5% in April and are now 

    down 8.2% for the year. While the group’s ETP Ratio improved due to higher quality assets entering the fleet for sale, the improved selection is creating downward pricing pressure.

    Medium Jets April Market Summary

    Inventory for the tracked fleet decreased by three units in April, and asset quality improved an impressive 3.7% while Maintenance Exposure improved (decreased) 2.1%. If you combine those figures with a 4% price increase in April (a 12- month high figure and a 7.5% increase for the year) the result is an ETP Ratio of 72.9%, the group’s best figure since July 2018.

    Buyers and sellers are clearly finding common ground and, since 11.6% of the tracked inventory fleet is listed for sale, Asset Insight believes the traditional 10% transition point between a buyer’s and seller’s market may be shifting to a higher number.

    Click here for full report.

    This article was originally published in AvBuyer Magazine, Volume 23, Issue 6, p. 30.