FC January AFC - black logo.qxp_FC December 06 20/12/2018 09:44 Page 1

January 2019

™

ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION

THIS MONTH Where is Business Aviation Heading in 2019? After 20 Years in the Industry and Over 90% Retention Rate, Aircraft Finance Corporation are Leaders in Financing New and Pre-owned Aircraft See pages 13 for further details

Jet Comparison: Phenom 100EV vs HondaJet Is a Business Jet Lease Right for You? www.AVBUYER.com

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THE BEST JETS FROM THE PEOPLE WHO KNOW THEM BEST.

FALCON 900DX • • • • • •

2007 – S/N 616 3,744 hrs. / 1,944 cycles

14 passengers with Forward and Aft lavatories EASA / EU-OPS1 compliant EASy II (Baseline, LPV, ADS-B Out, CPDLC ATN-B1 & FANS 1/A+) 3 FMS, 3 IRS, 3 VHF, Satcom Iridium Level D Engines and APU on MSP Gold FalconCare enrolled, 2C due in February 2020

FALCON 900EX EASy • • • • • • •

2004 – S/N 128 4,562 hrs. / 2,435 cycles

14 passengers with Forward and Aft lavatories EASA / EU-OPS1 compliant EASy II (Baseline, SVS, Dual Jeppesen Charts) Winglets 3 FMS, 3 IRS, 3 VHF, Satcom MCS-7000, HUD Engines and APU on MSP Gold 1C due March 2022

VISIT DASSAULTFALCON.COM/PREOWNED I FRANCE: +33 1 47 11 60 71 I USA: +1 201 541 4556

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When buying a pre-owned Falcon from Dassault, you’re not only investing in a jet that’s renowned for versatility, flexibility, and lasting value. You’re also making the most of your investment by going to the source. The people whose knowledge and experience will keep your Falcon flying for years to come.

FALCON 2000EX EASy • • • • • •

9 passengers EASA compliant EASy II (Baseline, LPV, ADS-B Out, CPDLC ATN-B1 & FANS 1/A+) 3 FMS, 3 IRS, 3 VHF, 2 RAD ALT, HUD, Iridium Satcom with DIU Engines on ESP Gold and APU on MSP Gold 2C due August 2019

FALCON 2000 • • • • •

2007 – S/N 113 2,516 hrs. / 906 cycles

2004 – S/N 208 6,270 hrs. / 3,937 cycles

10 passengers EASA / EU-OPS1 compliant 2 FMS, 2 IRS, 2 VHF, Satcom Jetsat Aero I Engines on CSP Gold and APU on MSP Gold 1C due in March 2022

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Editor Welcome Jan19.qxp_JMesingerNov06 18/12/2018 12:18 Page 1

Guest Editor’s VIEWPOINT

Per Marthinsson

Is Business Aviation Ready for the Challenges Ahead? he latest statistics show real evidence, not just hope, that global Business Aviation is recovering after many difficult years. So how can the industry continue to thrive despite the challenges ahead? These are exciting times for Business Aviation. The last few years have seen renewed and justified optimism spreading across the industry. After a tough decade, and the lingering impact of the global financial crisis, we can finally talk confidently of sustained growth. So, is the battle won? Probably not. Relaxing is rarely an option and never a good idea in business – there are always foreseeable challenges and unwelcome surprises ahead. Nonetheless, let’s take a moment to enjoy the current health of international BizAv. At the heart of the industry, the Medium Jet sector (Mid-size, Super-Mid-size and Heavy) is particularly strong. For the year November 1, 2017 through October 31, 2018, there were 100,209 ‘Trips’ (meaning journeys sourced, not necessarily booked, through Avinode) for Medium Jets for domestic US flights. That’s an impressive 39% increase on the previous year (72,262 Trips). Better yet, good news is not limited to the US. There were 176,848 Trips for Medium Jet flights originating in Europe for the year to October 31, 2018, up a lively 29% on the previous 12 months (137,091 Trips). France, the UK and Germany remain important markets for European BizAv, with the UK enjoying the highest number of transatlantic business jet movements. Unfortunately, talk of Europe brings us to one of the most likely brakes on growth – Brexit. Hoping for the best while preparing for the worst is a smart approach here. In many ways, uncertainty is harder than being sure there’s a crisis ahead but, realistically, uncertainty is all we have. The rising price of jet fuel is another financial concern, as is pilot availability, which is worsening toward a crisis point. But these headwinds aren’t stalling progress in all areas. Firstly, technology will keep driving us forward through the challenges ahead. Disruptive technologies

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are bringing charter operators, brokers and customers closer than ever before. The online marketing, booking and payment of charter flights is becoming easier every day. Automation is bringing unprecedented levels of speed, accuracy and efficiency to the administration of BizAv, not least in the generation of quotes. And new application programming interfaces (APIs) and Software-as-a-Service (SaaS) platforms mean companies can enjoy state-of-the-art IT without spending big money. As technology helps BizAv become increasingly unified and interconnected, the industry will become stronger and more resilient to changing market forces. Secondly, none of these challenges – Brexit, rising fuel costs, pilot shortages – are unique to BizAv; all are shared by the broader aviation industry. And there are many areas where BizAv already outperforms the services delivered by commercial airlines, a fact which must be promoted and exploited. Anyone who has circled waiting for a packed airliner to land behind schedule will appreciate the joy of landing without delay in a private jet at a dedicated Business Aviation airport. A third critical point is that Business Aviation can – and must – attack the pilot shortage to beat airlines to top talent. If you want the prestige of flying famous CEOs around in Gulfstream G650s, there isn’t much point working for easyJet. Everyone involved in BizAv needs to be spreading the word about the unique benefits of a career in the sector. Good times never last forever. Inevitably, there will be troubles ahead for Business Aviation. But with the right strategies in place, and particularly the intelligent use of technology, our industry can be ready for anything. ❙ Per Marthinsson is co-founder and executive vice president Americas, Avinode Group, a leading technology and data partner for the business air charter industry. Since founding Avinode in 2001 alongside Niklas Berg and Niclas Wennerholm, Per has held several positions within the company including Sales Director, Product Manager, CFO and CEO. Visit www.a vinode.com

www.AVBUYER.com

GLOBAL JET INVENTORY

AIRBUS A319 VIP 2008 (DELIVERED 2011) / SN 3542

AIRBUS A318 ELITE 2008 / SN 3100

ASKING PRICE / USD $49.75M

ASKING PRICE / USD $23.50M

BOMBARDIER GLOBAL 7500 2 POSITIONS AVAILABLE IN 2020 & 2021

BOMBARDIER GLOBAL 6000 2014 / SN 9537

BOMBARDIER GLOBAL XRS 2008 / SN 9280

BOMBARDIER GLOBAL 5000 2006

ASKING PRICE / USD $32.00M

MAKE OFFER / MOTIVATED SELLER

OFF MARKET

GULFSTREAM 550 2010 / SN 5279

DASSAULT FALCON 900LX 2016/ SN 298

PRICE REDUCTION / USD $22.90M

MAKE OFFER

EMBRAER LEGACY 650 2013/ SN 114501161

CESSNA CITATION XLS+ 2012/ SN 560-6108

PRICE REDUCTION / USD $12.50M

ASKING PRICE / USD $7.10M

GLOBALJETMONACO.COM

3D & TECHNICAL DETAILS AVAILABLE HERE

[email protected] T +377 97 77 01 04

Inventory.indd 1

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AIRCRAFT SALES & ACQUISITIONS

AIRBUS A319 2008 / SN 3542

AIRFRAME HOURS / 3688 AIRFRAME CYCLES / 1061 CAPACITY / 18 PAX

PRICE REDUCED / USD $49.75M GLOBALJETMONACO.COM

3D & TECHNICAL DETAILS AVAILABLE HERE

[email protected] T +377 97 77 01 04

AV_BUYER_January 2019.indd 1

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AIRCRAFT SALES & ACQUISITIONS

AIRBUS A318 ELITE 2007 / SN 3100

AIRFRAME HOURS / 5414 AIRFRAME CYCLES / 1870 CAPACITY / 19 PAX

PRICE REDUCED / USD $23.50M GLOBALJETMONACO.COM

3D & TECHNICAL DETAILS AVAILABLE HERE

[email protected] T +377 97 77 01 04

AV_BUYER_January 2019.indd 2

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AIRCRAFT SALES & ACQUISITIONS

BOMBARDIER GLOBAL 6000 2014 / SN 9537

AIRFRAME HOURS / 1402 AIRFRAME CYCLES / 507 CAPACITY / 12 PAX

ASKING PRICE / USD $32.00M GLOBALJETMONACO.COM

3D & TECHNICAL DETAILS AVAILABLE HERE

[email protected] T +377 97 77 01 04

AV_BUYER_January 2019.indd 3

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AIRCRAFT SALES & ACQUISITIONS

DASSAULT FALCON 900LX 2016 / SN 298

AIRFRAME HOURS / 1139 AIRFRAME CYCLES / 704 CAPACITY / 14 PAX

ASKING PRICE / MAKE OFFER GLOBALJETMONACO.COM

3D & TECHNICAL DETAILS AVAILABLE HERE

[email protected] T +377 97 77 01 04

AV_BUYER_January 2019.indd 4

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AIRCRAFT SALES & ACQUISITIONS

EMBRAER LEGACY 650 2013 / SN 114501161

AIRFRAME HOURS / 1366 CYCLES / 581 CAPACITY / 13 PAX

PRICE REDUCED / USD $12.50M GLOBALJETMONACO.COM

TECHNICAL DETAILS AVAILABLE HERE

[email protected] T +377 97 77 01 04

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AIRCRAFT SALES & ACQUISITIONS

CESSNA CITATION XLS+ 2012 / SN 560-6108

AIRFRAME HOURS / 2172 AIRFRAME CYCLES / 1227 CAPACITY / 8 PAX

ASKING PRICE

/ USD $7.10M

GLOBALJETMONACO.COM

TECHNICAL DETAILS AVAILABLE HERE

[email protected] T +377 97 77 01 04

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Contents Layout Dec18.qxp 19/12/2018 11:53 Page 1

4

Guest Editor

January 2019

22

Trends and observations from the leading analysts…

Contents

Volume 23, Issue 1

Market Intelligence

Buying & Selling

38

Business Jet & Turboprop Market Reflections

42

Where is Business Aviation Heading in 2019?

48

Is Now a Good Time to Buy a Business Jet?

54

Four Cockpit Mods to Help Sell Older Jets

60

Finance

When is a Business Jet Lease Right for you?

Ownership

66

When to Use Charter to Offset Ownership Costs

70

How to Save Money in Business Jet Ownership

76 84

Aircraft Price Guide

Large Cabin Jet Values

Aircraft Specifications

Large Cabin Jet Performance & Specifications Guide

Jet Comparision

88

Embraer Phenom 100EV versus HondaJet HA-420

96

How Will NextGen Evolve in Private Aviation

102

How are Flight Decks Developed for Pilots?

106

OEM News, Events and Industry Appointments

109

Products & Services

111

Showcases

117

Market Place

120

Advertisers Index

121

Aircraft for Sale Index

Avionics

Community News

Next Month

• Heli Comparison: Agusta AW109E vs Bell 429 • Jet Connectivity: Understanding the Options • How do Registries Impact International Operations?

EDITORIAL Commissioning Editor Matthew Harris +44 (0)20 8939 7722 [email protected] Editorial Contributor (USA Office) Dave Higdon [email protected] Consulting Editor Sean O’Farrell +44 (0)20 8255 4000 [email protected] ADVERTISING Lee McLoughlin Freephone from USA: +1- 855 425 7638 [email protected] Matt Chappell Freephone from USA: +1- 855 425 7638 [email protected] Lise Margin +1- 703 818 1024 [email protected] Maria Brabec (European Sales) +420 604 224 828 [email protected] UK Sales +44 (0)208 549 9508 STUDIO/PRODUCTION Helen Cavalli / Mark Williams +44 (0)20 8939 7726 [email protected] [email protected] CIRCULATION Sue Brennan +44 (0)20 8255 4000 Freephone from USA: +1- 855 425 7638 [email protected] AVBUYER.COM Jayne Jackson [email protected] Emma Davey [email protected] MANAGING DIRECTOR John Brennan +44 (0)20 8255 4229 [email protected] USA OFFICE 1210 West 11th Street, Wichita, KS 67203-3517 EUROPEAN OFFICE AvBuyer House, 34A High Street, Thames Ditton, Surrey KT7 0RY, UK +44 (0)20 8255 4000 Freephone from USA: +1- 855 425 7638 PRINTED BY Fry Communications, Inc. 800 West Church Road, Mechanicsburg, PA 17055

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www.AVBUYER.com

Aircraft Finance Corporation January.qxp_Layout 1 17/12/2018 15:21 Page 1

PLANE & SIMPLE Earlier this year, we refinanced a Challenger 605 for a Texas business owner. The client had previously financed the aircraft with one of the “big banks” with a monthly payment of $70,169 on a seven year term. With our 20-year term, his payment became $29,515 per month, allowing his business to utilize their new found cash flow. At Aircraft Finance Corporation, we base our amortization on 20 years. It is our benchmark and it works - it adds to the bottom line of our customers cash flow.

“Aircraft Finance Corporation will give you the lowest rate and longest terms on pre-owned Jet and Turboprop aircraft, guaranteed. Our 20-year term starts at 4.74%.” Martin Ormon, President

800-434-4185 | 949-698-0085 | [email protected] | AIRCRAFTBANKER.COM

Avpro January.qxp_Layout 1 17/12/2018 15:21 Page 1

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Avpro branding December.qxp_Layout 1 19/11/2018 14:18 Page 1

Avpro realizes that

opportunities are fleeting and time is money.

Our strong relationships throughout the industry allow us to capitalize on trends as they emerge.

Our unparalleled team

of in-house experts in research, marketing, contract negotiations and closings allow us to navigate the complexities of each transaction. The underlying principles behind everything we do -

Performance. Integrity. Reputation. Expect No Less. WWW.AVPROJETS.COM 900 Bestgate Road, Suite 412 Annapolis, MD 21401 • 410.573.1515

[email protected] (410) 573-1515

It’s time. What are the most precious things in your life? Your family, your friends, your business? Whatever they are, the most precious resource that links them all together is time. That’s why we’ve taken the time to make CorporateCare® even more comprehensive, with additional line maintenance, expanded support and even nacelle coverage on later engine models. Supported by the industry’s leading global service network and cutting-edge digital tools, we are focused on getting you to your destination on time, every time. It’s time to protect your most precious resource. It’s time to consider CorporateCare Enhanced. For more information, email [email protected] The future. Rolls-Royce.

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MarketIndicators Jan19.qxp_Layout 1 18/12/2018 11:56 Page 1

MARKET INDICATORS

Business Aviation Market Summary With images of sugar plums, and sweet year-end new airplane deals still dancing in their heads, business aircraft customers begin the New Year with hope for a solid economy, optimistic consumers and bright days ahead, projects Rollie Vincent, Editor, Market Indicators... he year 2018 finished with a flurry of business aircraft transactions, as new and used models traded hands in the ramp-up to the December 31 deadline. Although some paperwork may ultimately have been finalized on (or about) December 32, in the euphoria and camaraderie of the New Year celebrations, did anyone even stop to take notice? Optimism amongst the business aircraft owner/operator community continues, at least based on the results of the JETNET iQ Q4 2018 Survey. With more than 90% of the targeted 500 quarterly survey responses received by press time, optimists outnumbered pessimists by a factor of 3.8-to-1 – continuing the rather upbeat outlook that has characterized the market. No more so is

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this true than in Europe and North America over the last four quarters.

Large-Cabin Jet Progress

Large-Cabin Jets look strong, at least for the time being, as OEMs begin to see the fruits of their years-long efforts to bring new designs to market. Gulfstream’s G500 and G600 are in production ramp-up. These aircraft were smartly conceived from the outset with a high level of commonality of parts, structures and systems; fly-by-wire flight controls to enhance flight safety and cabin comfort; and enough long-range/high-speed performance to make an aerodynamicist put down the TV remote and take notice. Never to be outdone, Bombardier’s sparkling www.AVBUYER.com

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AVBUYER.com Rolland Vincent is president, Rolland Vincent Associates, LLC (RVA), a consultancy focused on aviation market research, strategy, and forecasting. RVA’s client base includes the world’s foremost civil aircraft and engine manufacturers, aerospace suppliers, aviation service providers, fleet operators, lenders / lessors, and the investment community. With 35+ years in the aviation industry, Rollie has served as a trusted consultant at Textron, Bombardier and ICAO in various roles. RVA also partnered with JETNET in 2010 to create JETNET iQ, a respected source of independent market intelligence. Contact him via [email protected]

new Global 7500 took to the skies with initial customer deliveries beginning late last month. Meanwhile Dassault’s loyal customers continue to flock to the French OEM, especially for the elegant Falcon 8X and versatile Falcon 2000LXS. Dassault’s much-anticipated Falcon 6X may be a few years away, but it is positioned to put the W-I-D-E in ‘widebody’. The 6X will inaugurate a platform that will be the basis for a new family of business jets from the good people who also bring us CATIA design software, the Rafale fighter, nEUROn unmanned flying aircraft, and (one day) Europe’s sixth generation fighter jet.

Middle of the Market

In the middle of the market, competition is fierce and customers are the beneficiaries, as Bombardier, Gulfstream, Embraer and Textron battle for market share, each with their respective offerings in the increasingly crowded Super-Midsize Jet segment. With capabilities that match (and for the most part even exceed) most customer mission requirements, the Challenger 350, Gulfstream G280, Praetor 600 and Citation Longitude offer significant value for the dollar to new aircraft buyers, who have nevertheless been consistently able to negotiate substantial price discounts from the OEMs. Just below the Super Mid-size offerings, business jets at the higher end of the Light Jet segment (from the Phenom 300 to the Pilatus PC24 and Citation CJ4, and newer offerings like the Citation Latitude and Praetor 500) are well received by customers, and account for the bulk of remaining shipments at this time.

The 2019 ‘High Watch’ List

With essentially flat utilization rates, weak charter pricing, still-reduced residual values, flat overall production rates, and continuing OEM discounting, it is apparent that not all is well with Business Aviation, however. In the high-rollers game of business aircraft development, returns on investment on hundreds of millions (and sometimes billions) of dollars are far from certain. www.AVBUYER.com

Collectively, with too many OEMs building too many different aircraft models at too low production rates, the pressures are mounting for something to change. From a market outlook perspective, what are some of the items that are on our ‘high watch’ list as we launch into 2019? •

• •

•

•

•

Residual values: Although their rate of decline has slowed, aircraft residual values remain depressed, discouraging existing owners/operators who have limited trade-in equity to bring to any new aircraft deal. New aircraft prices: Some OEMs continue to aggressively discount their prices to sell aircraft. Will this change? Aircraft utilization: It is hard to get too excited about 2% Year-over-Year (YoY) utilization growth when the underlying fleet is only expanding at about the same rather tepid rate. Production rates: We look for modest increases in overall business jet delivery volumes in 2019, with YoY growth concentrated among models that have been certified recently. Very light jets: What’s up with the very light jet segment? Certainly not orders. This segment has not recovered in the post-2008 financial crisis and looks particularly vulnerable in a slower-growth era in North America, Latin America and Europe. Talent: Companies and organizations that ‘get it’ are working diligently to find the right new people they need to keep their operations humming. Pilots, mechanics, engineers, technicians, flight planners and dispatchers, and sales experts are already in short supply. Therefore, talent shortages will remain a hot topic in 2019 and beyond.

With most key national markets expected to grow more slowly in 2019/2020, we should not be surprised if the New Year brings some newsworthy changes in the Business Aviation industry – with Darwin’s theories regarding survival of the fittest making for some informative, if not entertaining reading on a cold winter’s night. MI www.navigating360.com

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January 2019


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MARKET INDICATORS

AVBUYER.com

European Business Jet Fleet ADS-B Out Risk More than one-tenth of Europe's business jets could be grounded by the beginning of the next decade, a new study warns, as upgrading certain older aircraft to meet new safety requirements will be prohibitively costly… Under European regulations, all aircraft operating in the region from June 7, 2020 are mandated to be equipped with Automatic Dependent Surveillance– Broadcast (ADS-B) Out technology. UK aircraft sales and marketing company Colibri has identified 219 business jets from Europe’s 1,944-strong fleet where the cost of installing the new equipment will prove too much for operators. The identified aircraft have a value of $750k or less, and were built in 1996 or earlier, according to Colibri. The list includes 42 aircraft in France (23% of the country's fleet); 31 jets in the

UK (16%) and 46 in Germany (11%). Depending on the platform, an ADS-B Out upgrade can cost between $25,000 and $200,000, Colibri says. It describes this outlay as an ‘unjustifiable expense’ for some aircraft, which could prohibit them from flying and leave them grounded. “The value of certain business aircraft in Europe may mean it's not worth spending tens of thousands, and sometimes hundreds of thousands of pounds installing ADS-B Out,” says Oliver Stone, managing director, Colibri. He predicts that many of these models will be broken up and sold for parts to maintenance companies as it “will become even harder for these owners to sell their aircraft in one piece.”

Why are Medium Jets so Hot Right Now?

Avinode has revealed a strengthening in the Medium Jet sector with charter inquires up by 39% in the US and by 29% in Europe. According to a company spokesman, “as we travel around, we’ve been hearing a lot of excited talk about the Medium Jet sector (Mid-size, Super Mid-size and Heavy). We couldn’t stop ourselves from investigating. Are Medium Jets on a high right now and, if so, why?” Following are some of Avinode’s conclusions. •

MI www.colibriaircraft.com

•

Avionics Q3 2018: Robust YoY Sales Increase The Aircraft Electronics Association released its Q3 2018 Avionics Market Report and total worldwide Business and General Aviation avionics sales amounted to more than $2bn. The figure represented a 15.5% increase in YoY sales compared to the first nine months of 2017 amount of $1.73bn. Sales during Q3 2018 were $679.8m, a 15.6% increase compared to Q3 2017 ($587.9m). YTD, both the retrofit and forward-fit markets have seen double-digit increases in sales compared to the first nine months of 2017. The forward-fit 24
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AVBUYER MAGAZINE

market was up 16.6%, while the retrofit market was up 14.7%. "With robust growth in sales during the first nine months of 2018, industry is on pace to produce the largest dollar amount of year-end avionics sales since the reporting process began back in 2012," said AEA President Paula Derks. "We have now seen seven-straight quarters of positive YoY sales growth dating back to the end of 2016, and it's an encouraging sign for the industry that sales are strong in both the forward-fit and retrofit markets." MI www.aea.net

•

•

Medium Jets fit the US perfectly. In key areas such as range and cabin size, they’re ideal for the vital US domestic market. You can easily find a Medium Jet for coast-to-coast travel (over 2,000nm) or for a popular East Coast route such as New York-Miami. Unlike many Small Jets, a Medium Jet can comfortably carry a C-suite team of seven passengers or more. The numbers prove the point. For the year November 1, 2017 to October 31, 2018, there were 100,209 trips (meaning journeys sourced, not necessarily booked, through Avinode) for Medium Jets for domestic US flights. That’s a very impressive 39% increase on the previous 12 months (72,262 trips). By comparison, Small Jet demand is only growing at 32% (up to 76,314 trips) YoY. Medium Jets are very popular in Europe too. There were 176,848 trips for Medium Jet flights originating in Europe between November 1, 2017 and October 31, 2018, up 29% YoY. New is always exciting. Embraer plans to bring us the Super Mid-size Praetor 600 in Q2 2019 and the Mid-size Praetor 500 in Q3 2019. Meanwhile, Textron promises imminent certification of the company’s Super Mid-size Cessna Citation Longitude.

“To say Medium Jets are enjoying a revival would be misleading, they’ve never been away,” Avinode summarized. “…Medium Jets are at the heart of the modern Business Aviation industry.” MI www.avinode.com page 26

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www.AVBUYER.com

Hatt & Associates January.qxp_Layout 1 17/12/2018 15:22 Page 1

2007 Falcon 2000EX EASy II S/N: N331HA Reg: 117 5,435.35 hours since new Engines enrolled on ESP Gold, APU enrolled on MSP Gold Next Gen Avionics FANS 1/A, CPDLC, ADSB-Out, TCAS 7.1

Refurb being completed E, F, Interior and G Insp. Completed by West Star - by Grand Junction in September2016 Standard Aero Asking $11,395,000 Teflon Coating completed in 2017

Unique in Experience, Global in Scope. 1999 Hawker 800XP S/N: 258436. Reg: N114BA Asking $1,295,000 11,761.6 hours since new ATG-5000 High Speed Internet Enrolled on MSP Program ADS-B Out installed April 2018

2008 King Air 350 S/N: C-GCEU. Reg: FL-580 Asking $3,950,000

1-(303) 790-1050 hattaviation.com

2,612.8 hours since new ADS-B (V2) Out Synthetic Vision System Engines enrolled on ESP Avionics enrolled on CASP

2012 Nextant 400XT S/N: RK-334. Reg: N590TM 11,338.2 Hours since New Remanufactured Nextant in 2012 Collins Pro Line 21 Avionics Suite Aircell Axxess (Dual Iridium SAT Phone, Internet & Wifi) A,B,C, D inspection being completed at Hawker Beechcraft Tampa Production Unit #20

Hatt & Associates: Global Aviation Sales Acquisitions

Brokerages

Consulting

Pre-Buy Management

Contract/Legal Services

Scottsdale | Denver | Breckenridge | Wichita | Dubai | Calgary | Miami

MarketIndicators Jan19.qxp_Layout 1 18/12/2018 11:58 Page 4

MARKET INDICATORS

AVBUYER.com

Flight Activity - North America NOVEMBER 2018 vs NOVEMBER 2017 North America Flight Activity

PART 91

PART 135

FRACTIONAL

ALL

TURBOPROP

-2.3%

-4.9%

-5.1%

-3.4%

LIGHT JET

0.5%

-8.0%

3.1%

-2.3%

MID-SIZE JET

2.3%

-3.0%

10.6%

2.3%

LARGE CABIN JET

-1.4%

5.2%

-18.0%

-1.0%

ALL

-0.4%

-3.7%

3.5%

-1.2%

NOVEMBER 2018 vs OCTOBER 2018 North America Flight Activity

PART 91

PART 135

FRACTIONAL

ALL

TURBOPROP

-10.9%

-7.5%

-12.9%

-9.6%

LIGHT JET

-9.2%

-3.5%

-8.7%

-7.2%

MID-SIZE JET

-6.7%

-4.9%

-3.1%

-5.2%

LARGE CABIN JET

-4.6%

1.8%

7.8%

-1.3%

ALL

-8.5%

-4.6%

-4.2%

-6.6%

TRAQPak’s review of Year-over-Year (YoY) North America flight activity (November 2018 vs. November 2017) indicates an expected decrease of 1.2%. Month-over-Month (MoM) also saw the anticipated decrease, versus October’s activity... The YoY results by operational category were mixed, with Fractional activity posting the only yearly increase and Part 135 activity, declining for a sixth consecutive month, representing the largest decrease in November. By aircraft category, Mid-size Jets posted the only increase YoY over 2017, while the worst decrease came from the Turboprops category.

Month-over-Month

November Business Aviation flight activity by operational category were all down in November 2018, versus October 2018, with the Part 91 segment posting the largest monthly decrease. Aircraft categories were all negative, too, with Turboprops again posting the largest decrease.

December Forecast

Looking ahead, TRAQPak analysts estimate there will be a 0.8% increase in overall flight activity YoY in December 2018. MI www.argus.aero

Flight Activity – Europe

According to WingX, Europe saw a big drop off from the tail-end of the summer’s business jet activity with 62,726 Business Aviation departures in Europe during November. Down 1% YoY, as of November Business Aviation activity in Europe had a rolling 12-month trend of +2%. Growth was seen in France during November, and fairly strong increases were reported in YoY activity in Germany and Spain too. But Business Aviation departures were off more than 5% YoY from the UK, Italy and Switzerland. (Domestic UK activity fell by 9% YoY.) YTD growth, after the first 11 months of 2018, was still up in all top six markets, but only substantially so in Germany and Spain. Elsewhere, the Netherlands, Finland, Portugal, Greece and Hungary have strong trends this year, but substantial declines were recorded in Turkey for 2018 YTD. Large Jet activity was up 1% in November, with solid 4% gains from the UK, Italy, Germany, and 8% growth in France. Small and Mid-size Jet activity declined 2.5% overall, and as much as 8% in the UK. Flights to North America from Europe were robustly up in November, although transatlantic flights into Europe were down. Middle East arrivals continued to decline around 10% YoY, while flights to Africa are up by 8% YTD. AOC/Charter and Private flights were equally flat. “Flight activity trends in November reflect widespread anecdotal evidence that the market has seen a substantial slowdown, which may be just a seasonal drop-off but may also hint at growing economic concerns in the European region,” Richard Koe, managing director, WingX Advance remarked. “The overall trends, which are flat YoY, camouflage the underlying fall in business jet demand, clearly faltering in the Charter market. There are exceptions, most notably the comeback in demand for Medium-size Jets.” page 28 MI www.wingx-advance.com

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Understanding the Business Aviation Market - with AvBuyer

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EAGLE AVIATION +1 803.822.5520 [email protected] EAGLE-AVIATION.COM

2009 CITATION CJ3 • 525B-0319

2005 CITATION CJ3 • 525B-0028

1997 CITATION CJ • 525-0218

2000 LEARJET 31A • 31A-204

2002 DORNIER 328JET • 3205

2000 SOCATA TBM-700B • 180

2008 CIRRUS SR22 G3 GTS • 3121

2005 CIRRUS SR20 G2 GTS • 1591

2005 CESSNA T182T • T18208376

1999 CESSNA 182S • 18280570

MarketIndicators Jan19.qxp_Layout 1 18/12/2018 12:26 Page 5

MARKET INDICATORS

AVBUYER.com

In-Service Aircraft Values & Maintenance Condition Asset Insight’s market analysis on November 30, 2018 covering 93 fixed-wing models and 1,662 aircraft listed for sale, revealed a 4.6% increase to the tracked inventory fleet (73 units), with all four groups contributing to the increase… Large Jets led the way with an 8.9% increase in inventory, Small Jets were next at 5%, Medium Jets increased 3%, while Turboprops posted the lowest rise at 1.8%. At yearend, sellers appeared bullish with respect to ask prices. While a price escalation argument can continue to be made for certain Large Jets (due to the limited inventory of younger models), Medium Jet sellers are presumably betting on their aircraft’s maintenance status to justify higher pricing. As the Asset Quality Rating for Small Jets lost ground, so did their pricing, while many Turboprop sellers will likely find it difficult to obtain a higher price if their asset’s maintenance status is the basis for their increase.

Inventory Fleet Maintenance Condition

Changes to the Large Jet inventory fleet has led to assets with generally fewer upcoming maintenance events, albeit more expensive ones. The Medium jet inventory pool, on the other hand, showed more upcoming events, but ones that are likely to cost less than those for the average aircraft listed in October. Asset Quality worsened for both Small Jets and Turboprops. Overall, the Quality Rating stayed within Asset Insight’s ‘Excellent’ range, although it decreased slightly to 5.321 on a scale of -2.5 to 10. In concert with the inventory’s latest Quality Rating, Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) worsened by 2.2%. However, at $1.413m the figure is better (lower) than the 12-month average.

Maintenance Exposure to Ask Price (ETP) Ratio

The ETP Ratio is a useful indicator of an aircraft’s marketability. It is computed by dividing the asset's Maintenance Exposure (the financial liability accrued with respect to future scheduled maintenance events) by its Ask Price. ‘Days on Market’ analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s time on the market increases, usually by more than 30% and, during Q3 2018, assets whose ETP Ratio was 40% or more were listed for sale nearly 58% longer (on average) than aircraft whose Ratio was below 40% (280 versus 374 Days on Market). November’s analysis revealed that more than 51% of all tracked models and nearly 63% of the tracked fleet posted an ETP Ratio above 40%. The tracked fleet’s ETP Ratio remained unchanged at 65.1%. Turboprops led the way, posting the lowest ETP Ratio (50.4%); Large Jets followed (60.2%); Small Jets registered a figure of 66.1%; and Medium Jets improved for the third consecutive month, albeit to an unimpressive 75.6%.

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Table A

Fleet Maintenance Condition

$ Million

5.35

5.321

$1.50 $1.45

5.25 $1.41

5.15

$1.40 $1.35

D

J

F

Quality Rating

M

A

M

J

J

Maintenance Exposure

A

S

O

N

Quality Rating Trendline

Table B LOW RISK AIRCRAFT MODEL ETP RATIO

HIGH RISK AIRCRAFT MODEL ETP RATIO

Boeing BBJ 3.7% G650 3.9% Falcon 2000LX 10.0% Phenom 300 10.3% Citation CJ4 525C 10.3% CL-605 12.6% Citation Encore + 14.4% Falcon 900EX EASy 15.2% Pilatus PC-12 15.5% Falcon 2000EX EASy 16.1% Citation CJ4 525C (MSG3) 16.5% Citation Sovereign 680 17.3% Citation CJ3 18.8% Falcon 900DX 19.2% Piper Meridian 21.0% G 450 21.0% KingAir 350 - Post-2000 21.2% Embraer Legacy 600 21.4% Hawker 900XP 21.7% G550 22.4% G150 22.7% 23.7% Citation CJ2+ 525A 24.1% Citation XLS Learjet 45XR 25.1% Global XRS 25.8% Citation Encore 26.3% Challenger 300 26.3% Citation Mustang 510 27.4% Falcon 900EX 27.8% Global 5000 28.1% Phenom 100 28.2% KingAir B-200 - Post-2000 29.0% Hawker 850XP 29.2% Citation CJ2 29.3% KingAir 350 - Pre-2001 31.7% Falcon 50EX 33.9% Falcon 900B 35.3% Learjet 60XR 36.1% Citation CJ1+ 37.6%

Citation Bravo 41.7% KingAir B-200 - Pre-2001 42.4% Premier 1A 43.7% GV 44.2% 44.6% Citation Excel 560XL CL-604 45.1% G200 46.5% Hawker 400XP 47.6% Falcon 900 48.2% Hawker Beechjet 400A 50.3% Piaggio P-180 II 50.8% KingAir 300 52.0% Learjet 45 w/APU 56.4% Falcon 2000 59.6% Hawker 800XP 64.6% Citation V Ultra 65.1% Learjet 45 66.6% Citation V 560 67.9% Piaggio P-180 74.7% GIV-SP (MSG3) 75.4% Premier 1 76.8% Citation ISP 85.4% GIV-SP 85.8% Falcon 50 91.5% Hawker 1000A 93.0% Global Express 97.3% 99.1% Citation VI Learjet 60 100.8% KingAir C90 110.3% Citation II 113.5% CL-601-3R 136.2% Hawker Beechjet 400 141.7% Learjet 31 151.2% Learjet 35A 154.5% G100 156.7% GIV 158.3% Hawker 800A 158.6% CL-601-3A 161.2% Learjet 55 199.4% CL-601-1A 329.0% Falcon 20-5 380.0%

Maintenance Exposure to Ask Price Ratio (“ETP Ratio”) as of November 30 2018 Source: AMSTAT (www.amstatcorp.com) Asset Insight, LLC (www.assetinsight.com)

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MarketIndicators Jan19.qxp_Layout 1 18/12/2018 12:03 Page 6

MARKET INDICATORS

Large Jets Ask Price vs. Maintenance Exposure *

Asset Quality Rating

$ Millions

Market Summary

Overall inventory asset quality remains better than average, as does Maintenance Exposure, which should allow sellers and buyers the opportunity to close transactions. For some sellers, it will be difficult to justify their Ask Price, but their deal-making opportunities could improve through an understanding of their asset’s standing relative to competitive aircraft. Large Jets: The inventory fleet expanded by 29 units leading to an improvement in the group’s Quality Rating, but upcoming maintenance events are going to cost buyers a bit more. Ask Price is just below the highest figure posted during the past twelve months, helping decrease the ETP Ratio for the second consecutive month.

Nov-18

Oct-18

Sep-18

Aug-18

Jul-18

5.200

Jun-18

$3.10

5.300

Dec-17

Nov-18

Oct-18

Sep-18

Jul-18

Aug-18

Jun-18

Apr-18

May-18

Feb-18

Mar-18

Jan-18

$3.20 Dec-17

$10.5

$3.30

5.400

May-18

$12.2

$11.5

5.456

Apr-18

$3.40

5.500

Mar-18

$12.5

$3.50

Feb-18

$3.49

Jan-18

$13.5

Scale -2.500 to 10.000

Assuming they understand the asset they are selling or buying, sellers had the opportunity to close out 2018 at a good price – relatively speaking – while buyers should have been able to identify some good values. Medium Jets: The tracked fleet’s inventory increased by another 15 units during the past month, but this is good news for buyers as the new fleet mix is comprised of higher Asset Quality aircraft carrying lower Maintenance Exposure. Ask price also rose 2.1% helping improve the ETP Ratio. Based on competition to sell before year-end, Asset Insight is not convinced that pricing is likely to hold, but many sellers have the facts in their favour (assuming they know them), potentially justifying their higher pricing logic.

Medium Jets Ask Price vs. Maintenance Exposure *

Asset Quality Rating

$ Millions

30
January 2019
AVBUYER MAGAZINE

Nov-18

Sep-18

Aug-18

Jul-18

Jun-18

5.000 May-18

$1.05

5.100

Apr-18

Nov-18

Oct-18

Sep-18

Aug-18

Jul-18

Jun-18

May-18

Apr-18

Mar-18

Feb-18

Jan-18

$2.44 Dec-17

$2.30

$1.10

Mar-18

$1.15

$2.50

5.200

Feb-18

$1.20

$2.70

5.252

$1.25

Jan-18

$1.23

$2.90

5.300

Oct-18

$1.30

Dec-17

$3.10

Scale -2.500 to 10.000

www.AVBUYER.com

MarketIndicators Jan19.qxp_Layout 1 18/12/2018 12:05 Page 7

AVBUYER.com Tony Kioussis is president of Asset Insight. The company provides audit and valuation services and has developed a standardized Asset Grading System scale that evaluates an aircraft’s maintenance condition.

Small Jets Ask Price vs. Maintenance Exposure *

Asset Quality Rating

$ Millions

$2.00

$0.85

Small Jets: Inventory increased by 24 units, following October’s addition of 25 assets to the inventory fleet, and the latest additions are generally of lower asset quality, leading to worsening Quality Rating and Maintenance Exposure figures. Ask Prices are down 4.4%, month over month, and while that has led to an ETP Ratio increase, the Ratio is better than the 12-month average, giving some sellers reasonable hope they can achieve a decent transaction price during 2018.

Oct-18

Sep-18

Aug-18

Jul-18

Jun-18

The 2.9% increase in Ask Price will be challenging for sellers to achieve but it is quite possible, given this group’s high level of market activity and the maintenance condition of many listed assets.

MI www.assetinsight.com T

Asset Quality Rating Key

Asset Insight analytics (www.assetinsight.com)

Turboprops: The for sale fleet increased by five units during the past month, and while the Quality Rating improved 2.5%, (www.assetinsight.com) Maintenance Exposure Asset Insight analytics worsened 8.5%, as upcoming events, although fewer, will be more expensive.

May-18

5.100 Apr-18

$0.65

Mar-18

Nov-18

Oct-18

Sep-18

Jul-18

Aug-18

Jun-18

Apr-18

May-18

Feb-18

Mar-18

Jan-18

Dec-17

$0.73

5.300

Feb-18

$1.70

Jan-18

$0.75

5.450

Dec-17

$1.80

5.500

Nov-18

$1.82

$1.90

$1.60

Scale -2.500 to 10.000

Outstanding Excellent 5.500 5.250 or to Greater 5.499

Very Good 5.000 to 5.249

Good 4.750 to 4.999

Below Average Average 4.500 Less to than 4.749 4.500

Turboprops Ask Price vs. Maintenance Exposure *

Asset Quality Rating

$ Millions

$0.65

$1.50

$0.60

$1.45

$0.55

5.000

4.900

Nov-18

Oct-18

Sep-18

Aug-18

Jul-18

Jun-18

May-18

Apr-18

4.700 Mar-18

$0.50

Feb-18

Nov-18

Oct-18

Sep-18

Jul-18

Aug-18

Jun-18

May-18

Apr-18

Feb-18

Mar-18

Jan-18

Dec-17

5.063

5.100

4.800

$0.58 $1.40

5.200

Jan-18

$1.52

Dec-17

$1.55

Scale -2.500 to 10.000

Ask Price Source: Amstat Asset Insight Analytics * The accrued cost of future scheduled maintenance

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BUYING & SELLING AIRCRAFT

Business Jet & Turboprop Market Reflections Dave Higdon reviews the thoughts and projections of used jet and turboprop dealers and brokers along with aviation analysts and economists. Will the positive trends seen in 2018 continue into 2019? ptimism. It's a state of mind directly influenced by our perceptions of the wider world around us. And for the bulk of 2018, within Business Aviation that state of mind was trending upward. Compared to the low-point for market optimism of 2016, today's market for used business jets and turboprops continues to ‘sail along’, thanks to a medley of factors. A strong, somewhat volatile market for stocks

O

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helps. So do the new tax breaks from the Tax Cuts and Jobs Act of 2017. While interest rates edged up through 2018, the incremental rate increases by the Federal Reserve failed to dampen industrial and business transactions. And then there’s the increase in flying, particularly in Europe and (to a lesser degree) North America. From all appearances 2018's bullish market for used jets and turboprops appeared to be heading for a strong finish. www.AVBUYER.com

w

Buying&Selling 3 Jan19.qxp_Finance 17/12/2018 11:21 Page 2

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As of this writing, barely 9% of the total business jet fleet was actively for sale, which is lower than at any other time since the great recession of 2008. That dwindling pool of available aircraft was putting pressure on prices (particularly for the Midsize and Large-Cabin Jets in high demand). The Light Jet segment, according to a variety of sources, remains the most moribund with prices slowly depreciating as a result. But overall the scarcity of popular jets continues into 2019 with the result reflecting in higher ask prices within some of the markets. Brokers, dealers and attorneys all note the continuing optimism heading into the New Year, and analysts say the used market morphed into a solid seller's market in the latter half of 2018. Dealers and brokers expect a continuation of the seller's market into 2019 and possibly beyond. The seller's market has certainly complicated the process of shopping for a desirable used business aircraft, particularly for jets aged less than 10 years old. The optimism and revived demand have even influenced pricing for new business aircraft, with OEMs reporting firm (or improving) pricing despite some still sitting on some unsold inventory. While total utilization increased in Europe and North America, brokers note that individual use declined slightly, with the growing utilization attributable to the continued expansion of the total business turbine aircraft fleet.

US Market Drives Growth

In the marketplace for used business jets and turboprops, the US remains the biggest player. About three-quarters of all transactions were sales of US-based aircraft, mirroring around 60% of new aircraft deliveries that are going to the US, according to JETNET. The strength of the US economy and the increased profits outlook merge with a forecast for 2.9% growth in gross domestic product (GDP) to energize the current level of optimism. That growth coupled with over $2tn in corporate profits and the new tax code help buoy this optimism. Reports show US consumer confidence near an all-time high while unemployment in the US dropped to about 3.8%, a level unseen in decades.

Disruption on the Horizon?

Regardless of today's optimism, however, analysts see potential for some disruption in the coming years. Some economists project the global economy is heading towards a slowdown in 2019 as the top economies react to new pressures. Those key economies (the US, Europe, China, www.AVBUYER.com

Canada and Australia) account for a combined total of 80% of the global business jet fleet. There’s plenty of potential for disruption, ranging from trade tensions emanating from the ongoing tariffs battles to currencies weakening compared to the US dollar, to ongoing uncertainty surrounding the UK's withdrawal from the EU. Concerns over higher US inflation and interest rates have yet to materialize into tangible effects. If there are factors likely to act as a brake on business aircraft sales it’s just as likely to be from the personnel side. Operators are already struggling to fill pilot slots and positions for maintenance technicians. Avionics technicians are also in short supply. The airlines are absorbing nearly 60 new singleaisle airliners per month, helping keep ATPs in high demand, and the growth in the business jet fleet adds another layer of demand.

2018: A Growth Year, Despite the Challenges

From the trend shown by the new jet and turboprop deliveries reported by the General Aviation Manufacturers Association, 2018 appeared to be heading toward higher deliveries than in 2017 and 2016. Pre-owned transactions also appeared to be in the ascendency, as evidenced by the declining pool of aircraft available in the market. Another positive sign was seen in the avionics sales figures released by the Aircraft Electronics Association, which are also ahead of last year and indicate increased use of avionics upgrades on existing aircraft. As one southeastern US broker noted, “some prospective buyers of newer used aircraft find they can obtain the improvements they want by upgrading avionics on their existing airplane, spending far less company money in the process. These upgrades also help increase the useful load of the updated aircraft and its residual value.” But, as several brokers stressed, the world's politics and challenges could still send the market in a southerly direction. Barring any major blowups or deepening trade tensions, however, they remain guardedly upbeat – optimistic about the future, but cautious about each step forward they contemplate. Q4 2018 was shaping up to be the best of the year, according to the dealers, brokers and attorneys handling closings. Overall, and with a little luck, the Business Aviation community could see the consensus forecasts from the NBAA convention hold true for several more years before the predicted dip in 2022 to 2024 materializes. The year ahead could be very good indeed! ❙

AVBUYER MAGAZINE
January 2019


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Buying&Selling Jan19.qxp_Finance 17/12/2018 11:03 Page 1

BUYING & SELLING AIRCRAFT

Where is Business Aviation Heading in 2019? OGARAJETS’ Johnny Foster spoke with AvBuyer’s Rebecca Applegarth to discuss some of the current trends in the Business Aviation marketplace and offer insights on where the aircraft sales market could be heading in 2019… ohnny Foster, president and CEO, OGARAJETS grew up around Business Aviation. His father, John Foster III, known as the ‘World’s Greatest Fighter Pilot’, retired from the US Navy in 1973 and moved directly into Business Aviation. Johnny and his brother David have many early memories of playing around aircraft in the hangars and flying as their father’s co-pilot on both business and personal trips. John Foster III formed O’Gara Aviation Company in 1980 with a Naval squadron mate Ed O’Gara, and Johnny joined the team in 1991 just after the company had purchased three Gulfstream GIIs, and the outbreak of the Gulf War.

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January 2019
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Those were challenging times for a small family business, but tenacity and commitment saw it emerge through recession with its head above water and grow from Turboprop and Light Jet sales into heavy aircraft. With almost 30 years in the industry, Johnny has experienced up and down cycles in aircraft sales, was appointed president of the company in 2006 and oversaw the rebranding of his business as OGARAJETS in 2013. At a time that he notes a lack of transparency in the industry (with back-to-back deals and ‘flip’ structures), Johnny points to his father’s vision which has never faltered: “Family values, www.AVBUYER.com

w

Buying&Selling Jan19.qxp_Finance 17/12/2018 11:04 Page 2

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does this tell you about that market, and how do you see this scenario playing out as we move into 2019?

unquestioned integrity, personal relationships, and roll-your-sleeves-up hard work remain at the cornerstone of our commitment to clients and assurance of continued success.” Since its formation, OGARAJETS has completed roughly 1,100 transactions in over 60 countries, totalling more than $5bn in market value. Services offered by OGARAJETS range from sales, brokerage and acquisition to management, leasing and flight operation services. Tapping in to his vast experience of the preowned business jet marketplace, AvBuyer spoke with Johnny to get his perspectives on where the market is, and where it’s going as 2019 gets underway... AvBuyer: A review of AMSTAT data released in October representing used aircraft sales between January and August shows the percentage of Heavy/Large Jets for resale to be at its lowest since 1998. Notably the biggest improvement in turn-over YTD was in the Large Jet ‘mid-age’ segment. What www.AVBUYER.com

Foster: More than anything, I believe the positive statistics of the pre-owned space reflects a high level of confidence that remains in the market, and that today’s prices (which largely have been compressed over the previous eight-plus years) represent unimaginable values. As for the Large Jet segment, a quality turnkey aircraft, fully programed and capable of flying 5,000-plus miles, for less than $10m? Wow! There are some tremendous transportation values in this space across all makes and models, especially those aged under 20 years. The OEMs have largely remained disciplined in their new jet production, which has helped to strengthen the jets aged less than five years-old. This is one of the few segments we have actually seen prices rise over the previous 12 months. This thinning supply and strengthening of prices is now opening the door to ‘recovery’ for the six-to-15year-old space, as AMSTAT is reporting. While the transaction pace remains feverish, and good quality aircraft that are priced appropriately are selling quickly, the value opportunities remain. Buyers in today’s market must be prepared to move quickly when the right opportunity presents itself. There could never be a more appropriate time to engage a trusted professional to guide purchase efforts and success. Let’s not overlook that the ‘Tax Cuts and Jobs Act’ has imparted a very measurable and positive impact on the pre-owned aircraft marketplace. We believe the market will continue to enjoy a boost into 2019 and beyond. AvBuyer: At the other end of the market, AMSTAT says the Light Jet fleet for sale is at 10.8%, down 0.7% from the previous year. Can you see a point in the next year or so where the Light Jet market actually moves into traditional sellers’ market territory (?>=:;>-?=?955=:?:>.3:=:?:>9=5>?)=53>9?716