FC Avpro October 2020.qxp_FC December 06 15/09/2020 11:00 Page 1
Volume 24 Issue 10 2020
™
ACTIONABLE INTELLIGENCE FOR BUSINESS AVIATION
THIS MONTH Jets Comparison: Bombardier Learjet 75 vs Gulfstream G100 proudly presents
2004 Dassault Falcon 2000EX EASy Serial Number 42 | D - B M V V See page 11 for further details
The Eight Steps to Evaluate a Business Aircraft The Evolving Business Aircraft Flight Deck www.AVBUYER.com
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Editor Welcome.qxp_JMesingerNov06 15/09/2020 10:18 Page 1
Guest Editor’s VIEWPOINT Ed Bolen
Industry's COVID Moment Highlights Need for Sustainability mong the many effects from the COVID-19 pandemic has been a noticeable reduction in greenhouse gas (GHG) emissions around the globe, as international travel restrictions and regional lockdown efforts stifle demand across all modes of air, land and sea transport.
A
That hasn't gone unnoticed. While global Business Aviation operations represent but a tiny fraction of overall CO2 emissions, the National Business Aviation Association (NBAA) and others in our industry are working proactively along several fronts to reduce that already-low carbon footprint in the years ahead. One of the most promising and accessible means to lower business aircraft carbon emissions is sustainable aviation fuel (SAF). This cleaner-burning alternative to straight petroleumbased Jet-A can be derived from any number of renewable feedstocks and offers the potential for reducing net lifecycle carbon emissions by at least 50%, while still meeting ASTM D1655 standards.
More to be Done…
Although we've made inroads to promote SAF, more work needs to be done to increase availability and access to the fuel and to educate operators about its use as a true drop-in replacement for conventional Jet-A. Earlier this year, the Business Aviation Coalition for Sustainable Aviation Fuel (the SAF Coalition) released its updated and enhanced SAF ‘guide’ for our industry. Titled ‘Fueling the Future’ and available at futureofsustainablefuel.com, the revised guide details the practicalities of SAF development, industry adoption and pending expansion of supply and use. The guide builds upon other recent efforts by NBAA and other members of the SAF Coalition to build enthusiasm and support for sustainable fuels, including a first-ever SAF-focused event in January 2019 at California's Van Nuys Airport, followed four months later by a similar event at Europe's Farnborough Airport. Soon after, 23 SAF-fueled business aircraft flew to Geneva for the European Business Aviation Convention & Exhibition (EBACE). And at the 2019 Business Aviation Convention & Exhibition
(NBAA-BACE) in Las Vegas, every refueling turbine aircraft on display departed from Henderson Executive Airport powered by SAF. Earlier this year, SAF was also made available at Zurich Airport for those traveling to the World Economic Forum in Davos, further emphasizing how sustainability is increasingly intertwined with the global economic community. Plans were also underway for a new Business Aviation Sustainability Summit, to be held in March 2020 in Washington, DC, to accelerate the industry’s development, availability and use of the fuels. Unfortunately, COVID-19 forced the Summit's postponement, in line with the pandemic's impact on nearly all other events.
Virtual Business Aviation Sustainability Summit
Despite need for the postponement, we know that the importance of SAF as a key path toward ever greater sustainability across Business Aviation remains a message that needs to be shared, now more than ever. That's why, on September 14-15, Business Aviation stakeholders around the world convened online for a first-of-its-kind Virtual Business Aviation Sustainability Summit that brought together industry leaders, policymakers, and a host of other noted experts and officials to discuss pathways to accelerate the market for SAF. Topics addressed at the virtual summit included the importance of SAF to Business Aviation and its performance in aircraft; perspectives on near-term supply strategies and SAF transaction models; regulator, supplier and stakeholder insights on long-term solutions to encourage SAF adoption; and ways to expedite access once operators say, “I want my SAF!” Once again, Business Aviation is demonstrating its important part in the global sustainability conversation. The Virtual Business Aviation Sustainability Summit was a watershed moment for our energetic, innovative and international industry, and I encourage AvBuyer readers to explore use of SAF in your operations as we all work toward a greener, more sustainable future. More information from www.nbaa.org ❙
Ed Bolen became the president and CEO of the National Business Aviation Association (NBAA) on September 7, 2004. Prior to joining NBAA, Bolen was president and CEO of the General Aviation Manufacturers Association (GAMA) for eight years.
4 Vol 24 Issue 10 2020 AVBUYER MAGAZINE
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4
2020
14
Contents
Vol.24 Issue 10
38
Guest Editor
Ed Bolen, NBAA
Market Indicators
Trends and Observations from Leading Business Aviation Analysts
Market Insights
Dealer Broker Market Update
44
Helicopter Sales: How to Play the Current Market
48
Eight Steps to Evaluate a Business Aircraft
54
How to Compare Aircraft With Life-Cycle Costing
58
Sponsored Content
62 66 74 80 88 92 100 104
Buying & Selling
Global Jet: Strong in a Changeable Market
Ownership
Business Aviation: America’s Matchless Asset
Jet Comparison
Bombardier Learjet 75 vs Gulfstream G100
Aircraft Price Guide
Medium Jet Aircraft Values
Industry Interview
How Rolls-Royce is Shaping BizAv’s Future
Flight Department Management
Engine Upkeep: Increase Longevity & Decrease Cost Better Understanding BizAv Maintenance Tracking Software
Connectivity
Jet Connectivity: Bridging the Gap on Wi-Fi Demand
Avionics
A Guide to Your Aircraft’s Flight Panel: Cockpit Layout
110
The Evolving Business Aircraft Flight Deck
115
OEM News and Industry Appointments
118
Showcases
127
Marketplace
129
Advertisers Index
130
Aircraft for Sale Index
Community News
Next Month
• Jet Connectivity: What’s Really Necessary for Short-Haul Flights?
• Cockpit Connectivity Evolution: Planning on the Fly
• Jet Comparison: Hawker 400XP
10 Vol 24 Issue 10 2020 AVBUYER MAGAZINE
EDITORIAL Commissioning Editor Matthew Harris +44 (0)20 8939 7722
[email protected] Editorial Contributor (USA Office) Dave Higdon
[email protected] ADVERTISING Steve Champness - Publisher Americas +1 770 769 5872
[email protected] Matt Chappell - Account Manager US & Canada Aircraft & Services Sales Freephone from USA: +1- 855 425 7638
[email protected] Lise Margin - Account Manager US Aircraft Sales +1- 703 818 1024
[email protected] Maria Brabec - Account Manager EMEA & APAC Aircraft & Services Sales +420 604 224 828
[email protected] UK Head Office +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 www.AVBUYER.com
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MARKET INDICATORS
Business Aviation Market Overview Entering the final quarter of 2020, understanding who is buying business aircraft, and why, is more important than ever to dealers and brokers planning and preparing for a hoped-for year-end rush. Rollie Vincent elaborates...
Q
uarter four is upon us in ‘The Year of the Asterisk’, a time that many of us may want to forget – but cannot and will not. These are surely interesting times, given the daily water-cannons of information that we face, leaving us to tend to the never-ending task of sorting the junk from the nice-toknow; the good-to-know; and the mission-critical. For Business and General Aviation (B&GA) aircraft owners and operators, utilization levels have – thankfully – generally rebounded from the depths of the Q2 2020 quagmire, which by most accounts is now one for the history books. How do we know? Real-time aircraft
14 Vol 24 Issue 10 2020 AVBUYER MAGAZINE
tracking software and services that provide detailed reports by aircraft size category, airport, airport pair, country and region are helpful guides to gauge the speed, specifics and trajectory of our industry’s rebound (see the WingX Advance report on p16). By most accounts, aircraft flight cycles and hours have already returned to 70-80% of 2019 levels on a year-todate basis, although affixing any one data point to an industry as diverse and globally-oriented as B&GA is invariably fraught with difficulty, and is open to interpretation and, unfortunately, inevitable misinterpretation.
www.AVBUYER.com
MarketIndicators OCT20.qxp_Layout 1 15/09/2020 15:41 Page 2
AVBUYER.com With 35+ years in the aviation industry, Rolland Vincent, president, Rolland Vincent Associates (RVA) has served as a trusted consultant at Textron, Bombardier and ICAO in various roles in strategy, marketing, business development, aviation economics and aviation statistics. Identifying a need for enhanced insights into the state of the business aviation marketplace, Rolland Vincent Associates partnered with JETNET in 2010 to create JETNET iQ. Mr Vincent is chair of the Transportation Research Board’s Standing Committee on Light Commercial and General Aviation, and is president, RVA, a consultancy focused on aviation market research, strategy, and forecasting. Contact him via
[email protected]
Preparing for a Hoped-For Year-End Rush…
With numerous signs of bright spots and green shoots in aircraft utilization rates, and with surprisingly strong July 2020 pre-owned sales, there are other signals that are more sobering and thought-provoking. What are some of the mission-critical considerations on the minds of aircraft owners, operators and prospective buyers as we enter the home stretch of 2020? And how should aircraft transaction professionals prepare for the hoped-for year-end rush? Customers – the people who buy and fly in business aircraft – are invariably a subset of the top of society’s pyramid, whether measured by wealth, influence, and/or impact. Good people to know and serve, as a group they epitomize success and tend to be keenly aware of the benefits and true all-in costs of private flying. They are typically loyal to those who they have come to trust, whether a friend or professional colleague, an aircraft salesperson and their organization, or an aircraft brand. While aircraft sales and purchase agreements inevitably involve mounds of paperwork, teams of transactional experts, and dollar values with lots of zeroes, the key players in our industry understand that they represent opportunities to prove their worth and earn the right to be considered as trusted advisors for the long term. While aircraft sales professionals may be staring at their 90-day calendars and wondering how they are going to still get deals done, the fact of the matter is that any such plans should have long-ago been revised to reflect the realities of COVID-19. The coronavirus pandemic, it’s socio-economic, political, and human health shocks and aftershocks are lingering, encompassing, and dangerous. These factors far outpaced all other strategic challenges facing Business Aviation in the next 5-10 years, as identified by aircraft customers who responded to the recent Q2 2020 JETNET iQ Survey. While it is easy to dismiss these as uncontrollable issues that simply need to be factored into today’s and tomorrow’s business plans, that seems (to us) a cup-halfempty approach to what is the notorious elephant in the room that is too big to ignore and, for the hungry carnivores amongst us, far too big to eat at one sitting.
www.AVBUYER.com
The Value of the Time Machine
So, what to do? It may start with the recognition that the highly engineered, brightly painted, and beautifully appointed aircraft is actually not so much a machine as it is a positive enabler of personal autonomy and selfdetermination. While the post-WW2 promise of an airplane in every suburban driveway seems laughingly ridiculous in retrospect, the marketing idea and inspirational for it all was spot-on. With only 37,000 turbine B&GA aircraft in a world of a couple of billion households, we could easily be dismissed as an industry that has little impact on a global scale – but nothing could be further from the truth. Customers for Business Aviation are amongst the titans of society and industry: They’re savvy, connected and hyper-aware of time; the time they have left, the experiences they cherish or yearn for, the dreams they have unfulfilled, and the legacy and impacts they want to leave for the next generation. Whether stitching together their companies, properties, trusts and investments, or connecting them with families, friends and trusted advisors, the savviest amongst them know the irreplaceable value of time that a private aircraft delivers.
Keeping Perspective in Q4 2020
While prospective buyers of new and pre-owned business aircraft are fewer in number today than is typical for Q4, it is important to keep things in perspective. Other considerations they have today may seem allconsuming: De-risking and rebuilding their companies and returning them to health; shifting their investment priorities to capture rapidly emerging opportunities; and recommitting to keeping family values at the center of their lives. All of these are smartly enabled by having ready access to one or more private aircraft. While they may appear to be fewer in number and less bright on the aircraft sales radar screen, the savvy people who have already invested in B&GA aircraft are reimagining and reinventing the way they go to market, and through life, as always at high speed. Getting to know them and becoming part of their trusted network of advisors is a good plan to have. MI www.navigating360.com
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MARKET INDICATORS
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Flight Activity – Europe & North America
According to WingX Advance, European Business Aviation activity for August 2020 finished 3% above traffic levels in August 2019 (the equivalent of 1,845 additional sectors flown). By comparison, North American activity lagged 21%... The figure for July and the start of August was 18% shy of the activity for the same period in 2019 and, according to WingX, the trend hasn’t been smooth, with some relapse in the second half of July before renewed recovery at the end. Nevertheless, BizAv still looks to be in better shape than the Scheduled Airlines, which remained down by almost 60%.
was 77% down over the same period. The continued recovery in business jet and turboprop activity in Europe is coming from the stalwart markets of Germany, Switzerland and Austria, with France maintaining a YoY improvement throughout August. Turkey, and especially Russia, saw a big turnaround in flight activity during August, and were well ahead of August 2019 activity. Central European markets like the Czech Republic were well up, and Croatia stood out as the European summer hotspot for August (though flight connections faded fast since quarantines were imposed late in the month).
Europe
August was a faltering month for Business Aviation recovery in North America, and ended 21% behind August 2019 activity. However, the US domestic market performed slightly better, and was back up to 81% of normal activity for the full month. The US trend fell away in the second half of August, and the month ended with a rolling seven-day average of 7,347 flights (5% down on the traffic seen during mid-August). Weekend travel was the strongest, with activity above 90% of normal in August,
Despite the 3% increase in August activity, European flight hours were down, attesting to the shorter sector trend throughout the COVID-19 recovery. The continent saw a dip in activity during mid-month which coincided with a raft of unexpected travel quarantines. Overall, for the period from April to September European Business Aviation activity was still down by 34% compared with 2019, but that compares favourably against commercial airline traffic which
16 Vol 24 Issue 10 2020 AVBUYER MAGAZINE
North America
whereas weekday travel was stalling at 80% of usual. California and Texas were back to being the busiest US States, flying almost a third of all US sectors in August, but still lagging 16% behind their YoY activity. Flying over the entirety of August confirmed stagnant trends on the East Coast, and strong growth to getaway locations, from Utah to Wyoming (with Florida treading water 8% below). The stand-out decline for August was Hawaii where traffic levels were down by 65% YoY. “August saw the overall market edge further towards recovery, with marked variation between Europe and the US,” Richard Koe, managing director, WingX summarized. “Further ahead in the pandemic curve, European countries have substantially opened their economies, and, belatedly, tourism has been rebooted. With June and July flights concentrated into a short August window, YoY activity has consequently been higher. “The US market is still some way behind, but as the public health crisis recedes, there may now be a quicker upturn.” MI www.wingx-advance.com
page 20
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MARKET INDICATORS
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The Private Jet Charter Juxtaposition Over-exuberant talk of growth in the private charter sector could limit future financial support, according to aviation analyst Brian Foley. What’s the true picture, and why is it important to reflect it accurately? Based on the comments of a few business jet charter providers, one could be led to believe that the private charter industry is on fire as well-heeled travelers avoid the airlines. While there may be some outlier examples, the data generally does not support these claims. In fact, the unsubstantiated exuberance may be setting the industry up for exclusion from any future government aid programs. Most certainly, Business Aviation traffic has recovered much faster than the airlines. North America business jet trips are now within 20% of this time last summer, and about triple what they were in April of this year. For business jet charter flights specifically, activity remained down 12% in July from the same month last year, according to ARGUS International.
a fraction of calls from traditional private flyers. Newbie interest tends to be shortlived once they get a five- or six-figure quote. Many of their requests are for one-and-done trips, and are shopped for the lowest price, which makes any trips actually flown a low-margin proposition. Even with a return to 2019 trip activity levels the industry has been oversupplied with charter for quite some time. Despite increased interest in private charters there has been little change in overall industry pricing discipline thus far. While there are a few pockets of legitimately increased charter activity, depending on region, FAA flight data indicates it’s still off 12% year-over-year. Despite this fact, some charter operators choose to focus public announcements on the positives such as a big increase in their business since April or a new record of inquiries.
The Threat of Backfire
While perhaps beneficial from a marketing perspective, these glowing accounts of the industry could backfire should future government relief programs be considered. A regulator could assume that any further stimulus to the sector is unnecessary given the accounts of business robustness. In short, private aircraft charter has recovered significantly more than the airlines but still isn’t back to normal. While summer travel may have helped expedite that recovery, the upcoming business travel season could notably affect those gains. Driven by first-time private travelers, charter inquiries are up but are more difficult to consummate. Efforts to spin disappointing business conditions into a favorable marketing narrative could create optics which limit future financial support. MI www.brifo.com
As Summer Moves to Fall…
There is growing concern that summer may have been the high point for the aircraft charter season. Once the frolicking at the beach is over and people return home, the focus normally turns to business trips in the fall. All one needs to do to predict the strength of the upcoming business travel season is to look at their own trip calendars, which for most road warriors are pretty scant compared to last year.
Trips versus Inquiries
What some charter operators may report as booming business could in fact just be a spike in new inquiries, not trips sold. The number of first-time flyer calls is undeniably higher, but the closing rate into actual trips flown is just
More Private Charter Flights Contain Families & Pets Reflecting on the ‘rollercoaster’ period of April-June, charter company PrivateFly published its Q2 trends report revealing a rise in bookings for larger cabin private aircraft in Europe. More private jet flights are for family travel than ever before, according to a new trends report. “The April to June period really was a rollercoaster ride with activity at a historic low at 20 Vol 24 Issue 10 2020 AVBUYER MAGAZINE
the start, followed by a surprisingly strong recovery in June - when we were back to over 75% of our expected demand in Europe, and closer to 100% in the US,” said Adam Twidell, CEO of PrivateFly. He added that the trend continued into July. page 24 MI www.privatefly.com
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SPARFELL’s New Venture in the United States – A Legacy of Trust SPARFELL is creating a bridge between the United States market and the European market to offer to its clients the best of both worlds: a global solution for every need and the best-in-class service across all markets. Sparfell Aviation Group is expanding to the United States. They are opening a new branch in Washington DC, led by Brandt Boyle as the Vice President of Aircraft Trading of the group and his son J.P. Boyle as an Aircraft Sales Executive. As SPARFELL’s chairman, Philip Queffelec says: “When the decision was made to create a new SPARFELL branch in the United States of America, I naturally called upon my trusted friend Mike Boyle, with whom I have a business relationship of more than 30 years, as well as his son Brandt, and his grandson J.P. We, my son and myself, are very proud and honoured to work with the 3 generations of the Boyle family, that perfectly reflect our own family history, our passion for aviation and our spirit of loyalty towards our clients. We are delighted to embark on this new American challenge together.” With strong principles of loyalty and family spirit, both families represent three generations of aviators. The
parallels between the Queffelecs and the Boyles are undeniable, as this lays the foundation of a successful collaboration. “We are excited to join with the Queffelec family to bring the SPARFELL brand to the United States, and are honoured to be a part of their premier aviation legacy. Sparfell USA is committed to providing SPARFELL’s global clientele with personal and trustworthy representation here in the world’s largest aircraft market. The transactional brokerage services we will oversee in the US will be a great benefit to customers who are already part of the Sparfell family in our aircraft management and charter business in Europe. And for our US clients, the added reach into the European market via the local expertise of our office in Geneva will be of great value. We also look forward to introducing our US customers to the first-in-class aircraft management and charter service offered by Sparfell,” says Brandt Boyle, Vice President of Aircraft Trading.
Philip Queffelec, SPARFELL’S Chairman, with Mike Boyle
With over 22 years of experience, a strong worldwide network of contacts and numerous domestic and international transactions completed, Brandt serves his clients with the highest level of professionalism and integrity. His son J.P. follows in his footsteps, keeping up the family tradition of excellence and trustworthiness in business aviation.
Brandt Boyle, Vice President of Aircraft Trading
“We are excited to join with the Queffelec family to bring the SPARFELL brand to the United States, and are honoured to be a part of their premier aviation legacy. ” SPARFELL is very optimistic about the future of aircraft trading within the group, as its activities are built from heritage, by people who adhere to highest standards of aviation values. With a US team now on site in the United States, SPARFELL offers a wide range of opportunities to clients by relying on its international network of professionals around the world – a truly integrated and synergistic system, aimed at satisfying any client need.
+1 301 525 4380
[email protected]
WWW.SPARFELL.AERO
MarketIndicators OCT20.qxp_Layout 1 16/09/2020 09:42 Page 5
MARKET INDICATORS
AVBUYER.com
JETNET Business Aviation Market Review - H1 2020 JETNET released its review of the market for business aircraft in H1 2020 (amidst the global COVID-19 crisis). To add context to these findings, Paul Cardarelli, JETNET Vice President of Sales, made the following notes... While the market for business aircraft is undoubtedly under stress, and the COVID-19 crisis is not helping, many of the underlying reasons for the stress pre-existed the crisis. “So far this year brokers, dealers and sellers of business aircraft are showing restraint to not over-react to the negative stimuli that now surround the market,” Cardarelli explains. “They are taking a short-term position on the crisis – a temporary anomaly that can be waited out. As a result of this discipline many key market metrics have yet to turn exceedingly negative.”
Inventory
There were at the time of writing 2,264 business jets offered for sale (representing 10.07% of the in-service fleet). This is technically a buyer’s market but only just, and the market has held steady between 10.1% and 10.3% since April. While there has been an increase of aircraft coming on to market in 2020, it has not moved the market into gross oversupply, and the proportion of aircraft for sale is nowhere near the recessionary days of ten years ago when the inventory of business jets swelled to nearly 18%.
Pricing
Although softer than in 2019, there is no wholesale degradation of prices for aircraft listed for sale on JETNET in 2020.
Retail Sales
Pre-owned business jets sold and leased in the first six months January to June, YoY 2019 vs 2020, is down 19% (from 1,169 to 947). This is undoubtedly substantial. But brokers and dealers report that phones have been ringing with calls from buyers. The reduction in sales would therefore seem less about declining demand and more about sellers not yet capitulating to distressed market offers.
What Has Changed This Year?
What has changed this year is the composition of what’s selling: A bit older, a bit larger, and less expensive than last year. For January to June 2019, the composite of pre-owned
business jets sold was a 2004 model priced at $4.4m (USD) with the Light/Super Light jet category leading the market with nearly a 30% share of all pre-owned business jets sold. By comparison, in 2020 the composite is two years older - a 2002 model priced at $3.7m with Mid/Super Mid-size jets as market leader at 27.25% of all jet sales (up 2% YoY). (The Light/Super Light and Large/Long-Range categories are off in market share this year by 2.7% and 0.5% respectively.) “Bear in mind that the trajectory of the market today was in place going back to last fall, well before the coronavirus, so 2019 was itself a year in decline,” Cardarelli quantifies. “Compared to 2018, pre-owned sales were off last year by 12%, and inventory trended upward ultimately by 6% YoY. Demand softened because so much post-recession pent-up demand had been satiated in 2017 and 2018. “We launched into 2020 already facing the headwinds of a market in cool-down,” he concludes. “To that was added two former market depressants becoming relevant again. Brexit was ratified in January, and another contentious US presidential election is set for November. In this sense 2020 looks much like 2016 when inventory for sale and retail sales both trended unfavorably. MI www.jetnet.com
Summer Sales Soar for IADA Members The pace of used aircraft sales picked up sharply in June and July after April/May doldrums brought on by the COVID-19 pandemic and its economic impact, IADA reveals.... Dealers accredited by the International Aircraft Dealers Association (IADA) reported 103 closed sales transactions in July, more than three per day for every day of the month. In June the association members also had a good month, making 74 deals. Those 177 deals in June and July compare with 100 in April and May, a 77% increase. And fewer deals fell apart in June
24 Vol 24 Issue 10 2020 AVBUYER MAGAZINE
and July (27 versus 38 in April and May). August began with 87 additional aircraft under sales contracts. “Our dealers reported exceptionally brisk activity in June and July after a protracted period in March, April and May where the deals were much harder to put together,” summarized IADA Executive Director Wayne Starling. “IADA dealers also experienced a reduced percentage of deals where lowered prices were integral to completing the deal.” MI www.iada.aero
page 28
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MarketIndicators OCT20.qxp_Layout 1 16/09/2020 09:44 Page 6
MARKET INDICATORS
AVBUYER.com
Table A
Fleet Maintenance Condition
In-Service Aircraft Values & Maintenance Condition
5.40
Turboprops experienced a nominal drop in price, resulting in a YTD overall 2.5% decrease. Large Jets saw values decrease 0.4% which brought the group’s overall 2020 reduction up to 12.2%. Small Jets tumbled 2.5% in August, but are still up 6.5% during 2020.
August’s ‘for sale’ Quality Rating, at 5.329, maintained the tracked fleet’s ‘Excellent’ range figure for 2020, on Asset Insight’s scale of -2.5 to 10. Maintenance Exposure, an aircraft accumulated/embedded maintenance expense, improved (fell) a nominal 0.2% to $1.416m, signaling upcoming maintenance for the latest fleet mix would be slightly lower.
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
28 Vol 24 Issue 10 2020 AVBUYER MAGAZINE
O
N
Quality Rating
Recovering from July’s decrease, the Quality Rating for Asset Insight’s tracked fleet improved to post another 12month best (highest) figure, while the ‘for sale’ fleet mix decreased the anticipated cost for upcoming maintenance events. Asset Insight’s tracked inventory recorded the following:
•
$1.45
$1.35 $1.30
S
Inventory Fleet Maintenance Condition
•
5.329
5.10
Average Ask Price for our tracked fleet increased 2.1% in August, lowering this year’s overall value decline to 3.0%. Interestingly, the increase was perpetuated by Medium Jets, the only group to experience a monthly Ask Price increase, and the 2.8% hike lowered the group’s 2020 value loss to only 1.1%.
•
$1.50
$1.40 5.20
Aircraft Values
•
$1.42
5.30
Aircraft transactions continued their recovery and Asset Insight’s August 31, 2020 market analysis of 134 fixed-wing models showed an additional 2.1% inventory fleet decrease during August. Here’s the latest news on the tracked fleet’s values and maintenance condition… August’s results represented a second consecutive monthly fleet reduction, reducing the year-to-date (YTD) inventory increase to 4.5%. Small Jets led the way with a 4.1% decrease, followed by Medium Jets (3.0%), and Turboprops (1.0%). Large Jets were the only group to post an inventory increase (0.6%).
•
$ Million
D
J
F
M
A
Maintenance Exposure
M
J
J
A
Quality Rating Trendline
Table B G500 G650ER CL-650 Citation Latitude G650 F2000LXS Citation Sovereign + Legacy 500 F7X Global 6000 CL-350 G280 Citation CJ3+ Learjet 75 Citation X+ F2000LX Citation XLS+ (MSG3) Citation CJ4 525C Phenom 300 Boeing BBJ King Air 350i F900EX EASy F2000EX EASy Pilatus PC-12 G450 F900DX CL-605 Citation Sovereign 680 Citation Encore + Piper Meridian TBM 850 G150 Caravan 208-675 Hawker 900XP Phenom 100E G550 Global XRS Nextant 400XTi Citation CJ2+ 525A Citation CJ3 CL-300 KingAir 350 - Post-2000 F2000EX F900EX Citation Encore Global 5000 KingAir B-200 - Post-2000 Learjet 45XR Citation XLS Citation Mustang 510 Caravan 208 Caravan Grand 208B GV Phenom 100 Piaggio P-180 II Hawker 4000
1.2% 4.7% 4.8% 5.0% 5.7% 6.8% 7.8% 8.3% 8.7% 9.1% 9.2% 9.7% 10.0% 10.9% 13.1% 13.2% 13.8% 14.3% 14.6% 14.7% 16.1% 16.5% 17.3% 18.1% 18.1% 18.2% 18.5% 19.8% 20.4% 20.4% 21.4% 21.6% 22.9% 26.6% 27.2% 28.1% 28.7% 29.8% 30.0% 30.0% 31.0% 31.1% 31.2% 31.6% 32.1% 32.5% 33.3% 34.6% 35.2% 35.3% 36.2% 36.6% 36.8% 37.9% 38.2% 38.6%
Citation CJ1+ 40.0% Embraer Legacy 600 40.0% Learjet 60XR 40.8% Citation CJ2 41.0% Hawker 850XP 42.8% KingAir B-200 - Pre-2001 42.8% Citation XLS (MSG3) 43.6% KingAir 350 - Pre-2001 44.1% GIV-SP (MSG3) 44.5% F50EX 46.5% KingAir 300 48.1% Citation CJ1 50.3% F900B 50.6% Learjet 40 50.7% Citation Excel 560XL 50.7% F900 51.8% CL-604 53.2% Hawker 400XP 53.7% G200 54.2% Hawker 750 54.8% Premier 1A 56.0% G400 60.5% Citation V Ultra 63.6% Learjet 40XR 67.7% Global Express 70.1% TBM 700A 71.1% Learjet 45 w/APU 76.3% Learjet 45 79.5% Citation VII 82.6% Hawker 800XP 83.2% F2000 84.6% Hawker Beechjet 400A 86.8% Citation V 560 91.6% Premier 1 97.6% F50 98.1% Learjet 60 102.2% GIV-SP 102.8% Learjet 31A 115.2% Learjet 55C 118.2% Citation VI 119.1% Piaggio P-180 119.6% Hawker 1000A 121.6% KingAir C90 124.2% Citation ISP 124.5% G100 126.1% CL-601-3R 130.6% Hawker Beechjet 400 133.8% Citation II 144.8% Hawker 800A 158.8% GIV 171.5% Learjet 36A 185.5% CL-601-3A 185.5% Learjet 55 201.0% Learjet 31 209.8% Citation Bravo 214.7% Citation III 218.8% Learjet 35A 265.5% CL-601-1A 267.3% F20-5 299.6% Hawker 125-700A 299.7% GIII 709.0% Maintenance Exposure to Ask Price Ratio (“ETP Ratio”) as of August 31 2020
page 32
Source: JETNET (www.jetnet.com) Asset Insight, LLC (www.assetinsight.com)
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Jet HQ inventory FP October.qxp_Layout 1 15/09/2020 10:07 Page 1
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1944 BEECHCRAFT D17S STAGGERWING • Serial Number: 6874 • ADS-B In/Out • Total Aircraft Rebuild • New Interior and Paint- 1997
• 1998 EAA AirVenture Award • Winner- Outstanding Open • Cockpit Biplane Runner-Up
2000 BEECHCRAFT BEECHJET 400A • Serial Number: RK-266 • Garmin 5000 Integrated Flight Deck • New Paint and New InteriorNov 2017
• New Hawker XPR WingletsNov 2017 • AirCell ATG 2000 with Talk & Text • Fully RVSM and ADS-B Compliant
1981 KING AIR B100 • Serial Number: BE-118 • 2020 ADS-B Compliant • Executive Wings Winglets • Chelton EFIS Avionics Package
2007 LEARJET 45XR • Serial Number: 45-346 • Engines and APU Enrolled on MSP • Next Gen Avionics: ADSB-Out, TCAS 7.1
• Delivered with Recent A - D Inspections • Paint and Interior Refurbished - 2016
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• High Speed Internet • 13 Passenger Executive Configuration
1996 BEECHJET 400A • Phase 1-4 Inspections CW August 2019 • McCauley Black Mac 5 Blade Props
• Serial Number: RK-120 • Enrolled on IFA- Increased Flight Activity Program • Fresh Hot Section Inspection1,980 Hours Until Next Event
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MarketIndicators OCT20.qxp_Layout 1 15/09/2020 15:43 Page 7
MARKET INDICATORS
Large Jets
Medium Jets
Ask Price vs. Maintenance Exposure
Ask Price vs. Maintenance Exposure
$ Millions
$3.30
$3.25 $3.10
$3.00 $2.75
5.800
Jul-20
Aug-20
Jun-20
May-20
5.300 5.200
5.600
market increases, usually by more than 30%. During Q2 2020, assets whose ETP Ratio was 40% or more were listed for sale nearly 53% longer (on average) than aircraft whose Ratio was below 40% (251 versus 384 Days on Market). Asset Insight’s August analytics revealed that over 52% of its tracked models, and more than 55% of the tracked fleet posted an ETP Ratio greater than 40%. August’s fleet ETP Ratio improved (fell) to 70.9% from July’s 71.2%. For the ninth consecutive month, Turboprops posted the lowest ETP Ratio at 41.8%, unchanged from July, and also the group’s 12-month best (lowest) figure. Large Jets maintained second position, but the group’s figure worsened to 63.2% from July’s 61.4%. Medium Jets were the only group to post an improvement (to 71.7% from July’s 73.7%). Small Jets posted their worst (highest) 12-month figure at 97.4% fueled by the group’s Ask Price drop.
Market Summary
With the tracked fleet’s inventory posting its second consecutive monthly reduction, the listed fleet’s figure dropped to 10.5% from July’s 10.7%, continuing to show improvement compared to June’s 10.9% and May’s 11.3%. • Turboprops were unchanged while maintaining the lowest figure at 7.4%.
32 Vol 24 Issue 10 2020 AVBUYER MAGAZINE
•
Aug-20
Jul-20
Jun-20
May-20
Apr-20
Mar-20
Feb-20
Jan-20
Dec-19
Nov-19
Sep-19
• •
Oct-19
5.000
Aug-20
Jul-20
Jun-20
May-20
Apr-20
Mar-20
Jan-20
Dec-19
Nov-19
Oct-19
Sep-19
Feb-20
5.100
5.500
•
Apr-20
5.323
5.741
5.700
•
Mar-20
Scale -2.500 to 10.000
Scale -2.500 to 10.000
•
$1.25
Asset Quality Rating
Asset Quality Rating
•
Jan-20
$1.26
$2.50
Feb-20
$2.90
Dec-19
Aug-20
Jul-20
Jun-20
Apr-20
May-20
Mar-20
Jan-20
Feb-20
Dec-19
Nov-19
Oct-19
$3.01 Sep-19
$1.30
Nov-19
$11.0
$1.35
$3.29
Oct-19
$11.7
$12.0
$3.50
Sep-19
$13.0
$10.0
$ Millions
Large Jets were next with an improvement to 9.4%. Small Jets worsened to 10.4% but held on to third position Medium Jets listed for sale decreased to 11.9% from July’s 12.3%.
Large Jets
The tracked fleet’s Quality Rating improved to 5.741 from July’s 5.712. While below June’s 5.788 record high (best) figure, the figure moved the group further into ‘Outstanding’ territory. Ask Pricing fell another 0.4% to remain lower than the group’s 12-month average. Inventory increased by three Asset Insight analytics (www.assetinsight.com) units, with the newest fleet mix improving (lowering) Maintenance Exposure by 0.7%. Older equipment transacted primarily based on price. Newer equipment sellers should be able to command reasonable prices.
Medium Jets
It may not look like it, based on the group’s 71.7% ETP Ratio, but Medium Jet figures are quite encouraging for sellers. The tracked fleet’s inventory decreased 20 units in August and is now down 19 units for the year (the best percentage decrease of the four groups), while the Quality Rating reached 5.323 (a 12-month high/best figure that pushed the group further into the ‘Excellent’ range).
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MarketIndicators OCT20.qxp_Layout 1 16/09/2020 09:46 Page 8
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Small Jets
Turboprops
Ask Price vs. Maintenance Exposure
Ask Price vs. Maintenance Exposure
$ Millions
$1.10
$1.00
$1.00
$1.85
$1.58
$1.60
$0.60
Aug-20
Jul-20
Jun-20
Apr-20
May-20
Feb-20
Mar-20
Jan-20
$0.53 Dec-19
$1.40
$0.55
Oct-19
$0.70
$1.50
Nov-19
Jul-20
Aug-20
Jun-20
May-20
Apr-20
Mar-20
Feb-20
Jan-20
Dec-19
Oct-19
Nov-19
$0.80 Sep-19
$0.50
Asset Quality Rating
Asset Quality Rating
Scale -2.500 to(www.assetinsight.com) 10.000 Asset Insight analytics
Scale -2.500 to 10.000
5.300
5.150
5.182
5.200
5.106
5.050 4.950
5.100
4.850
Asset Insight analytics (www.assetinsight.com) Asset Insight analytics (www.assetinsight.com)
Add to that a Maintenance Exposure decrease of 0.6% to virtually equal the 12-month low/best figure, and you have the making of some value-based transaction opportunities for both buyers, provided they do their homework, as well as many sellers.
Small Jets
With an additional 28 unit decrease to the tracked Small Jet fleet, the group’s inventory is now down 46 units over the past two months. While that still represents an increase of 13 units for the year, itAsset alsoInsight demonstrates continued analytics (www.assetinsight.com) improvement. Curiously, buyers appeared to be more interested in lower quality assets during the month of August, presumably due to price, as both the Quality Rating (which Asset Insight’s grading system rates as ‘Very Good’), and Maintenance exposure figures improved, by 0.12% and 2.6%, respectively. Unfortunately, Ask Price took a 2.5% tumble, raising the ETP Ratio to a second consecutive 12-month high (worst) figure – something that is unlikely to help many sellers.
Turboprops
The tracked inventory fleet decreased by five units in August. That may not appear significant, considering the 38 unit increase for the year, but it was sufficient to push asset quality further into the ‘Very Good’ range by way of a 1.2% improvement, while Maintenance Exposure posted the
www.AVBUYER.com
Aug-20
Jul-20
Jun-20
May-20
Apr-20
Mar-20
Feb-20
Jan-20
Dec-19
Nov-19
Sep-19
Aug-20
Jun-20
May-20
Apr-20
Mar-20
Feb-20
Jan-20
Dec-19
Nov-19
Oct-19
Sep-19
Jul-20
4.750
5.000
Oct-19
$1.65
$0.65
$0.90
$1.82
$1.75
$1.70
Sep-19
$1.95
$ Millions
group’s lowest (best) 12-month figure by decreasing 0.7%. When you consider that only 7.4% of the active fleet is listed for sale, and Ask Prices are above average, and have remained stable over the past two months, conditions appear favorable for both buyers and sellers to structure transactions that generate good value for both parties. MI www.assetinsight.com ❙
Asset Quality Rating Key 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 4.500 4.749
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.
AVBUYER MAGAZINE Vol 24 Issue 10 2020
33
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Corporate Concepts October.qxp 17/09/2020 09:51 Page 1
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Market Insights 1.qxp_MARKET INSIGHTS 15/09/2020 15:10 Page 1
MARKET INSIGHTS Dave Higdon is a highly respected aviation journalist who has covered all aspects of civil aviation over the past 36 years. Based in Wichita, he has several thousand flight hours, and has piloted pretty much everything from foot-launched wings to combat jets. Contact him via
[email protected]
Dealer Broker Market Update Dave Higdon speaks with Par Avion's Janine Iannarelli along with others in the market about pre-owned aircraft sales in recent months. hat constitutes ‘up’ for today’s marketplace? Are aircraft sales ‘up’ because the phone is ringing off the hook with inquiries? Or does ‘up’ represent better business for preowned business aircraft sales and summer charter bookings? It depends who you’re listening to. However, seasoned business aircraft sales veterans polled for this story report ample examples of this debate’s opposing sides, and both hold some truth. For example, the hard data indicates that business aircraft flying remains below average, but is recovering better than that of the scheduled airlines. Nevertheless, even though the data show private charter and operator use is recovering faster than the airlines, those recovery numbers fall short of ‘normal’.
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As for influencing enquiries for pre-owned business aircraft, the phones are ringing, dealers, brokers and analysts report. “We have lots and lots of interest in the aircraft we have for sale,” notes Janine Iannarelli, founder and president of Par Avion Ltd. “We get a lot of inquiries, but the inquiry we want to focus on is the one demonstrating not only the desire but the wherewithal to move forward [with a transaction].”
The ‘Could-be’ Buyer
As passengers fled the airlines for fear of contracting COVID-19, many with the need to travel found a solution in Business Aviation. Preowned brokers and dealers heard from new prospects, while old prospects have returned to shop the market in the months that have ensued. www.AVBUYER.com
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To paraphrase several brokers, however, the interests of these market newcomers proves shortlived once they get a seven- or eight-figure quote for the purchase of an airworthy pre-owned business aircraft. But there have been beneficiaries among the fractional operators, and companies such as Wheels Up, where the lower level of investment needed, and the lower overall costs and flexibility, combine to bridge the gap between the ‘could-be’ buyers’ needs and budgets and the available aircraft. Meanwhile, there are genuine buyers calling up to purchase an aircraft as quickly as brokers can locate suitable candidates and help navigate the buyer through the steps leading to a deal closing. Some of the mechanics of shopping, selling, signing and closing a deal have changed, and www.AVBUYER.com
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dealers and brokers previously unfamiliar with ‘Go to Meeting’ and ‘Zoom’ have become fans of these internet-based meeting options. One broker speaking to AvBuyer reckoned these tools shave time and money off the cost of selling an aircraft, whereas another cautioned that the virtual process can only take the effort so far.
Focus of Market Interest
With no shortage of calls being received by the industry’s brokers and dealers, what is the focus of the interest today? “The greatest demand is still in the Small Jet category,” Iannarelli notes. There's sporadic interest in the larger jets, and these callers tend to follow through, she continues with a caveat: “If I had nothing but Bombardier Globals and Gulfstreams, I don't know that my activity would be as great as it [currently] is.
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”For existing operators, brokers suggest that now is a good time to consider stepping up to a more useful aircraft.” "We receive quite a few calls at the lower end of the price point spectrum, but not a lot at the upper end. I think the sales activity level one experiences is very much tied to how many listings you have and the popularity of that particular make/model,” she suggests. “If you have 15 listings and they're popular, in-demand models, you get a lot of calls.”
Looking Ahead: Status Quo?
So, what does this all mean for the pre-owned business aircraft marketplace? Supplies are ample, without being excessive. But in the final accounting, Iannarelli stresses, “Closings are what count. We're a little behind compared to this point last year.” The two quarters that tend to serve as good bellwethers – the second and the fourth. “We lost the second quarter, so I'm hoping for a big fourth quarter,” Iannarelli shares, adding that currently “sales are harder to get over the finish line – the deals are taking longer to get to closing, but the conversations are getting closer towards making decisions.” The oddity of 2020 has had its effects, and those
ad re Re Mo
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oddities will continue with a US Presidential election looming. “If anybody's waiting on the election to decide [whether to buy] that doesn’t leave a lot of time to get the work done and close in 2020,” Iannarelli warns. Meanwhile, the current supply level on the market helps contribute to price stability and affordability, with little to no demand for premium prices on popular business aircraft models. For existing operators, brokers suggest that now is a good time to consider stepping up to a more useful aircraft without the threat of price escalation for the more in-demand models. As operators do so, those transactions will feed some premium pre-owned aircraft back into the market, with many years of useful life remaining. With so many other businesses struggling to generate cash flow, finding competitive finance terms is the easiest it’s been in years. Interest rates mirror the low rates found in the mortgage industry. Taken together, these factors add up to solid opportunities for existing and ‘could-be’ operators. T
MARKET INSIGHTS
at AVBUYER.com
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Elliott Jets September.qxp_Layout 1 18/08/2020 09:18 Page 1
Freestream October.qxp 16/09/2020 11:10 Page 1
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Market Insights 2.qxp_MARKET INSIGHTS 15/09/2020 09:58 Page 1
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Rebecca Applegarth is an Aviation Journalist on the AvBuyer team.
Helicopter Sales: How to Play the Current Market Though the fixed-wing market hasn’t been flooded with panicked sellers to date, can the same be said of the helicopter market? How should buyers and sellers approach the market today? Rebecca Applegarth asks Mark Clancy and Michael Roberts… viation analyst Rollie Vincent recently suggested that aircraft owners are choosing to ride out the COVID-19 environment. Instead of being pressed into a panic sale that feeds a pool of buyers seeking out distressed sale opportunities, they are choosing to hit the ‘Great Big Pause’ button. That has particularly applied to the owners of fixed-wing business aircraft. But is the situation similar for the helicopter marketplace? “It all depends on the type of owner you’re referring to,” Mark Clancy, president & CEO, Helicopter Buyer suggests. “There are so many helicopter sectors [corporate, charter, HEMS, offshore, law enforcement, utility, tourism and more] than in the business jet market. Each
A
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helicopter sector is having its own economic challenges, and some are more severe than others. “There are some good helicopter deals available, but it depends on what a buyer is looking for, how much effort they want to go to during the COVID-19 pandemic, and having the right connections to first identify, acquire, and finally deliver the helicopter.” For those looking to sell a helicopter at this time, it’s the “bread and butter” models that will fare best on the market, according to Michael Roberts, founder & CEO, JETVEND; in other words those “with good availability of parts and numerous nearby shops and mechanics with specific model expertise.” In particular, Clancy says, “Legacy [i.e. out of
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“There are so many helicopter sectors [corporate, charter, HEMS, offshore, law enforcement, utility, tourism and more] than in the business jet market. Each helicopter sector is having its own economic challenges...” production] offshore, HEMS and utility helicopters offer unique values to buyers at this time,” but he adds that there’s also a variety of late-model helicopters in the tourism, corporate, charter and utility sectors which are under-utilized, and some of which “have been idle for several months.” To buyers, Roberts suggests, “It is now more important than ever to evaluate the helicopter model you plan to buy, with the help of the maintenance facility you will primarily use.”
Lining your Ducks in a Row
Even at a time of uncertainty, “Now is a great time to set up your own corporate, personal and family transportation to the extent that you are able to,” Roberts continues. “As one great corporate helicopter client once told me, ‘control the variables’. Owning your own machine gives an incomparable level of control over your schedule and transportation.” Even where the helicopter market is slower, there are things that buyers can be proactive with, making sure they have all of their ducks in a row ready to move quickly on the right helicopter when it comes on the market. “The best strategy would be to identify the make/model that best serves 46 Vol 24 Issue 10 2020 AVBUYER MAGAZINE
your interests and needs,” Clancy says. “Make a comparison of the available helicopters that can be acquired and utilized in their current condition, or with some level of Maintenance Repair and Overhaul (MRO), refurbishment, or reconfiguration. “Select an experienced helicopter agent and MRO service center that specializes in that make/model. They will be able to guide you to acquiring and delivering the best helicopter available on the market.” According to Clancy, while financing is available to qualified private and commercial buyers, insurance may be more of a challenge for private buyers currently. “This is a good time to think about the utility you will get from your helicopter, or the doors it will open in terms of commercial opportunities if that is your concern,” Roberts concludes, “rather than trying to predict the future resale value. “It's all about having the tool, and its ongoing costs in relation to its benefits to you.” More information from www.helicopterbuyer.com or www.jetvend.com T www.AVBUYER.com
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Buying&Selling 1 OCT20.qxp_Finance 15/09/2020 11:12 Page 1
BUYING & SELLING AIRCRAFT
Eight Steps to Evaluate a Business Aircraft What should you know when buying your next business aircraft? René Armas Maes discusses the ‘eight steps’ methodology for professionally evaluating a purchase to ensure you get the right jet. uying a business aircraft can be a daunting task. Each OEM will come up with its own unique comparison matrices and metrics; some aircraft dealers or brokers may try to push their own pre-owned inventory; fractional operators may press home the advantages of their program, even for users flying over 200 hours per year; and so on. Finding an independent Business Aviation
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consulting firm can provide you with an objective opinion and help you avoid paying more than necessary or, worse, being negatively impacted by the hidden costs of aircraft ownership and residual value. The following eight steps will help define the business aircraft acquisition process and clarify your personal, business, and operational requirements to guarantee client satisfaction. www.AVBUYER.com
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AVBUYER.com René Armas Maes is Vice-President, Commercial at Jet Link International LLC and an international consultant with a broad experience in business aircraft sales. He has developed multiple analyses and studies for a number of US Fortune 500 companies and Venture Capital firms, and participated as keynote speaker at a number of business aircraft conferences.
“When evaluating the right business aircraft for your needs, resist the urge to make a decision based on emotion.” Step 1: Define the Mission Need
It is crucial to define your typical aircraft mission requirement before looking at aircraft for sale, including: • Range • Most regular destinations • Number of flight segments • Frequency of flights • The need: non-stop vs. one or multiple stops to pick up business team members • Operating base location • Average number of passengers • Number of hours • Capital expenditure • Luggage requirements • Cabin size, and • New vs. pre-owned (as well as any cabin layout preferences and flight deck specifications). Having a clear idea of these requirements will help sharpen your focus when you do begin shopping the market.
Step 2: What Segment are You Shopping?
Second – and based on Step 1 – which potential jet segments should be considered? There can be subtle differences that have implications for the cost www.AVBUYER.com
of ownership. For the purpose of illustration, we will focus our article on the Super Mid-size and Large Cabin Jet segments….
Step 3: Establish a Preliminary Shortlist of Target Aircraft
Next, illustrated in Figure A (overleaf), identify an initial list of target aircraft and proceed to eliminate the options that don’t meet the required specifications. Once you have a list of no more than five potential aircraft (ideally fewer), you have your preliminary list ready. You are now ready to thoroughly analyze all aircraft on the shortlist to identify the best option that either meets or exceeds expectations.
Step 4: Compare Your Preliminary Shortlist Aircraft
Using a number of metrics, compare the preliminary shortlist aircraft against each other. What is the hourly fuel burn versus range capability of each? (Fuel is the largest operating cost, and can account for more than 50% of an aircraft’s cost per hour). Moreover, you should compare an aircraft’s price against its productivity index (depicted in Figure B, overleaf). For the purpose of this article, Figure B shows the best Super Mid-size jet from our shortlist is
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BUYING & SELLING AIRCRAFT FIGURE A: Initial Aircraft Target List vs. Preliminary Shortlist
‘Aircraft A4’, and from the Large Cabin Jet segment ‘Aircraft A1’ is better, since both rank higher on the productivity index. The following metrics should also be used to compare the aircraft options on your preliminary shortlist:
ready to summarize mission profile vs. aircraft capability and identify the two options on your preliminary shortlist that meet or exceed your needs. As demonstrated in Figure B, for our case study ‘Aircraft A1’ and ‘Aircraft A4’ are the aircraft that progress through to the final evaluation stage.
• • • • • •
Step 6: Consider Costs, Cash Flows and Net Present Values
Payload vs. Range Capability Year 1 Hourly DOC vs. Range Capability Year 1 DOC per Seat Mile vs. Range Capability Price vs. Range Capability Passenger Cabin Volume vs. Range Capability Residual Value.
Step 5: Narrow Shortlist to Two Candidate Aircraft
After some thorough comparisons, you should be
Execute an exhaustive aircraft comparison that includes costs, cash flows and Net Present Values (NPV) of the two aircraft options. Several assumptions will need to be made to carry out a fiveyear cash flow analysis, including: • •
Financing rate and timeline Inflation rate
FIGURE B: Price vs. Speed x Range x Cabin Size Comparison
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BUYING & SELLING AIRCRAFT FIGURE C: Consultant Analysis (numbers - US$m)
• • • • • • •
Depreciation method Flight and cabin crew requirements Fuel cost per gallon Tax implications Aircraft utilization Asset disposal timeline, and Estimated aircraft residual value.
Step 7: Make your Selection, Based on Lowest Overall Cost and NPV
Pick the option representing the lowest overall cost and lowest Net Present Value. Figure C (above) shows that from our example case study ‘Aircraft A4’ would generate greater value and a higher return on our invested capital. But don’t forget to also consider the residual values, which represent the largest hidden cost of aircraft ownership.
Step 8: Optimize Your Business Case
If you want to improve your business case, add any headcount savings and labor productivity enhancements that are associated with operating a business aircraft. Essentially, business jets are time machines. It is estimated that commercial fliers lose many unproductive business hours on every leg of a journey they travel that would not be lost if they flew on a business aircraft. Corporate aircraft help executives to be in multiple places on the same day, and return home for dinner (helping optimize professional and personal lives). Moreover, some of the cost of aircraft ownership can be offset by choosing a Part 135 company to
Find
operate the aircraft in a charter program, lowering your fixed costs while covering variable hourly costs.
Additional Thought (When Buying New)…
Finally, if you are planning to buy a new jet, negotiating a number of key items with the OEM could change the balance over other options. A list price discount of 1% on a $30m jet would equal $300k. Moreover, you should: • • •
Factor the financing rate and package adjustments (0.5% lower interest rate equals an estimated savings of $500K), Consider the additional OEM and non-OEM service support incentives, and Negotiate a larger minimum critical stock at no additional cost, and extended warranty terms and conditions.
There are other factors, too, such as lower spare parts cost and engine plan rates; additional initial training courses in Year 1 (in case of pilot turnover, as you may want to be protected from any additional training-associated costs); free recurrent training for two pilots in Year 2; and guaranteed residual values.
In Summary…
When evaluating the right business aircraft for your needs, resist the urge to make a decision based on emotion. This can be costly in the end. By using this eight-step guide, you can professionally compare your options and arrive at the aircraft that makes the best financial sense. ❙
AIRCRAFT DEALERS & BROKERS
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at AVBUYER.com
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The Private Jet Company October.qxp_Layout 1 15/09/2020 11:39 Page 1
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Buying&Selling 2 OCT20.qxp_Finance 15/09/2020 10:55 Page 1
BUYING & SELLING AIRCRAFT
David Wyndham is executive sales director and acquisition specialist with Par Avion Ltd. He is a highly respected industry veteran having built up more than 36 years of aviation experience, including as president and co-founder of Conklin & de Decker.
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How to Compare Aircraft with Life-Cycle Costing
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What does a Life-Cycle Cost analysis include, how can you ensure you’re
getting a fair measure when comparing business aircraft for sale, and how far
should it inform your buying decision? David Wyndham offers tips…
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hen evaluating business aircraft that meet your mission need, economics is one of the most important aspects to consider. Combining mission capability with cost yields value. Sometimes this is obvious (i.e. when comparing two different aircraft makes/models side-by-side). Yet, even if the choice is between different aircraft of the same type, the total costs to own and operate still need to be compared through a life-cycle cost analysis.
What Does a Life-Cycle Cost Analysis Include?
When evaluating business aircraft ownership, you should be concerned with more than just the acquisition cost. You should also factor: • • • • • •
Operating costs (variable and fixed) Amortization Interest Depreciation Taxes, and The Cost of Capital.
A life-cycle cost analysis also looks at the aircraft market value after a period of ownership to arrive at the total cost to both own and operate the aircraft.
BizAv Life-Cycle Cost Analysis Case Study
A client I worked with was evaluating two Light Jets. They were assessing two models of the same pre-owned aircraft type. One was selling for $4.8m while the other had an asking price of $4.3m. At first glance, that should be enough for making a choice – but a Life-Cycle Cost analysis reveals there is more to consider. While both serial numbers had similar equipment specifications, both had their engines enrolled on a guaranteed hourly maintenance plan, and each was essentially ‘turn-key’ as they could be placed into flight operations immediately after closing, the aircraft with the lower price had higher total hours. A major inspection would be due on that aircraft in approximately 18 months, whereas the higher-priced aircraft had recently completed that same inspection, and also had undergone a paint and interior refurbishment when it had that inspection. The basic comparison of operating costs would have accruals for the maintenance costs and, thus, the average cost per hour would be equal between the two. However, a life-cycle cost analysis would give more granularity into when those costs accrue.
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BUYING & SELLING AIRCRAFT
“Combining mission capability with cost yields value.” In the above case, a five-year costing revealed the lower priced option had higher maintenance costs over the next five years to the extent that the total cost difference between the two Light Jets was negligible. Moreover, assuming the aircraft would be used primarily for business, post-tax benefits such as depreciation may also reveal savings that change the total costs of owning the aircraft.
Tips for a Proper Life-Cycle Costing
Timeframe: Comparisons should cover the same period of time and utilization, ensuring an apples-toapples comparison is provided. You should cover enough time to get a good sense of the costs, and use a time-span that seems reasonable to you. Utilization: Use miles if the aircraft is flying pointto-point and convert each aircraft to hours based on their speed. To have an accurate comparison, you will need to measure performance using the same criteria. Different aircraft fly at different speeds. Using a mile-based measurement accounts for the speed differences between aircraft. Benefits Analysis: Don’t omit the benefits analysis when comparing different makes/models. One aircraft may have higher total Life-Cycle Costs, but also have a roomier cabin or more range than the alternative. What is the cost of those additional benefits (assuming that all the alternatives have first met your mission requirements)?
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Net Present Value: In addition to what those costs are, you should also consider when the costs occur. A Net Present Value (NPV) analysis accounts for the time-value of money. Using NPV enables the differing cash flows from two or more options to be compared and analyzed from a fair and complete perspective. The NPV analysis considers when costs and revenues occur, as well as income and expense cash flows, type of depreciation, tax consequences and residual value of the various options. When an expense (or revenue) occurs can be as important as the amount of that item. This is useful in the comparison of Buy vs Lease vs Finance options for the same aircraft. Comparing these costs requires basic spreadsheet skills, and the Net Present Value analysis requires the use of financial formulae. If you, personally, are uncomfortable with these, someone in your company CFO’s office should help, or you may hire a consultant to prepare the costs analyses.
Life-Cycle Cost Analysis in Summary…
A Life-Cycle Cost analysis is an important decisionmaking tool, but it is not the answer all by itself. I like to use the term ‘Best Value’ in combining both the capabilities and the costs of the various options analyzed. Run the numbers and use them in your decision. Remember, though, never to let a spreadsheet make the decision for you. ❙
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GLOBAL JET.qxp_Finance 16/09/2020 11:10 Page 1
SPONSORED ARTICLE
GLOBAL JET Keeping Strong in a Changeable Market
58 Vol 24 Issue 10 2020 AVBUYER MAGAZINE
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Rebecca Applegarth is an Aviation Journalist on the AvBuyer team.
A focus on quality has helped Global Jet ride out the storm presented by coronavirus, the company tells Rebecca Applegarth. his year began with sense of optimism at Global Jet, based on the momentum of 2019 – a year in which the company successfully closed several milestone business aircraft transactions. However, at the start of the COVID-19 pandemic buyer interest receded and was unsurprisingly minimal for a time. “There followed a period in which opportunists searched the market for distressed sellers, and now Global Jet is seeing serious buyers with a genuine need for business aircraft (both from a safety and logistical perspective) reenter the marketplace,” Hardy Sohanpal, head of aircraft sales, says. From a seller’s perspective, the company notes that the situation created by COVID-19 is definitely not a repeat of the 1980s financial crisis, with sellers today more willing to wait for buyers to make a fair offer. The company also says that many aircraft owners feel prices and demand will become firmer, in line with the reduction in commercial airline capacity. However, it cautions that this is also dependent on the general macroeconomic outlook. “The current market works well for Global Jet since the ability to successfully work with buyers and sellers requires a high level of skilled collaboration,” notes Sohanpal. “Being a ‘niche’ service provider for the past 20 years means there are no pressures to meet targets or force transactions. This is a time for both sellers and buyers to work together, to be transparent so that solutions can be developed mutually.”
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Quality Focus
According to Global Jet, it does not compete on price, with quality being its main priority. “The company caters to only the most discerning of clientele, which requires continuous innovation,” Abner Tato, Vice President, Marketing & Inflight Quality elaborates, adding this is why Global Jet was one of the first companies in the world to apply 3D virtual tour technology in aircraft sales. “We are also one of the few curating interior cabins for VIP visits, professionally photographing aircraft, and with the internal resources to provide in-house technical support. “Our proprietary databases, which we’ve carefully nurtured over the past two decades, provide opportunities
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for sellers to discreetly offer their aircraft for sale offmarket,” Sohanpal adds. “We expect these types of sales to grow as sellers choose to sell to meet the demands of public perception during any ensuing economic downturn.” Global Jet’s culture of building long-term trust and relationships has seen the number of aircraft sales and acquisitions grow year-on-year, the company says. As well as having close ties with the end-user (either through aircraft sales and acquisitions, aircraft management, or charter activity), Global Jet has developed strategic links with some of the leading sales brokers and/or advisors across the world. “These companies expect and appreciate a certain level of quality from an aircraft under the management of Global Jet,” Edouard Lehembre, Vice President Aircraft Management says. “Our extensive experience and conversion rates further demonstrate the level of effort required to close a transaction, typically involving a high level of technical, legal and commercial expertise.”
Healthy Aircraft Charter Activity
As alluded to above, however, there is more to Global Jet’s portfolio than aircraft sales, and charter is a significant service offering. The company has been busy adding to, and refurbishing, its fleet that currently has bases in Europe and China. In the company’s Geneva office, a new Dassault Falcon 8X joined the charter fleet earlier in 2020, while a Falcon 2000LX underwent a complete refurbishment. And in the Paris office (located at Le Bourget), “we’ve added three aircraft so far this year, including a new Bombardier Challenger 350, a Dassault Falcon 7X and a Dassault Falcon 2000S, bringing the Paris-based fleet to seven jets,” Stéphane Cassifour, France & Benelux Director, explains. The new Paris-based Challenger 350 replaces a Cessna Citation CJ4 that the company had under management and then sold for the owner, while the Falcon 7X joins from another management company. Meanwhile, joining the Madrid-based charter fleet early in 2020 were a completely refurbished Gulfstream G200 and a Cessna Citation Latitude. “These markets are characterized by large, professional corporations and a vibrant entrepreneurial culture, and both are creating solid demand for our one-stop-shop offering,
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from charter, to management, as well as a brokering,” Bjorn Naberhuis, Vice President for Business Development continues. According to Michael Han, who oversees Global Jet’s China office, “The charter business was up 20% in 2019 and surged through early 2020 as HNWIs and companies increasingly chartered aircraft due to the pandemic. “Business jet travel is already picking up again, and private jets are seen not only as a better and quicker way to fly, but also as a safer one.” Rounding out the Charter wing of the company is an office in Monaco which manages a fleet of aircraft for local owners. The company recently developed a new landing page where clients can request quotes online (https://booking.globaljetconcept.com/).
Added Value in Aircraft Management
As of the first half of 2020, there were more than 70 aircraft under Global Jet management, and another 10 aircraft in the pipeline (including an Airbus A330, Gulfstream G650ER, Dassault Falcon 8X and 2000LX, and a brand-new Cessna Citation Latitude.) “With over 35 different aircraft types, we face complexities in our everyday management and operations that others may not be equipped to handle,” Lehembre says. “We have an asset management approach to preserve the value of the aircraft entrusted to us.” Added value also comes to owners of managed aircraft in the form of volume discounts – from fuel to maintenance, from handling to catering. “These are automatically passed on to our clients. With a fleet as large and diverse as ours, those cost savings are substantial,” Lehembre adds. Meanwhile, Global Jet’s reporting app for management clients provides a 24/7 ‘x-ray view’ of any costs and operations related to their asset, including all supplier invoices. 60 Vol 24 Issue 10 2020 AVBUYER MAGAZINE
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Design & Completion
From the outset, bespoke design and completion has been part of Global Jet’s core activities. “In the twenty years since our first Boeing BBJ VIP we’ve been entrusted with over 40 projects,” Nicolas Jaccard, Airbus & Boeing Technical Sales Consultant explains. These have included Airbus A340s, A320s, A319s, A318s, Boeing 767s and BBJ2s, and more. The completions also extended beyond the company’s managed fleet, too. “Our success in this area comes from working with the best designers and completion centers in the world, and from an ability to orchestrate very complex projects – a skill honed over two decades that can only be acquired through relationships built on trust,” Jaccard says. Currently, there are two Boeing 787s undergoing completion with Global Jet in 2020 (both with VVIP interiors), and an Airbus A320, also with a VVIP cabin.
20 Years of Successful Operations
As Global Jet celebrates 20 years of successful operation, it can look back proudly on the operation that began with only a handful of employees and one aircraft, and reflect on how far it has come. Today, Global Jet is one of the largest privatelyowned operators in the world with over 70 managed/operated aircraft, 11 international offices, and more than 700 employees. “The company retains the spirit of supreme service, luxury, independence, good reputation and constant innovation,” De Kalbermatten summarizes. “Global Jet is known for providing services to a specific market segment – a niche of clients who share our vision, tradition and philosophy,” she concludes. More information from www.globaljetconcept.com
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Ownership 1.qxp_Finance 15/09/2020 10:05 Page 1
OWNERSHIP
Business Aviation: America's Matchless Asset
62 Vol 24 Issue 10 2020 AVBUYER MAGAZINE
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Dave Higdon is a highly respected aviation journalist who has covered all aspects of civil aviation over the past 36 years. Based in Wichita, he has several thousand flight hours, and has piloted pretty much everything from foot-launched wings to combat jets. Contact him via
[email protected]
Dave Higdon explores with Ed Bolen and Janine Iannarelli why Business Aviation is great, both for those who use it and the communities it touches throughout America...
usiness Aviation is already spearheading a stricken nation's effort to recover from the impacts of the coronavirus and its effect on America's economy (although this in itself is nothing new)… Standing among America's premier industries and business activities, “Business Aviation is one of America's great industries for a lot of reasons,” says Ed Bolen, President and CEO of the National Business Aviation Association (NBAA). “It's an important industry; one that provides good careers to its workers, and benefits everywhere that it touches communities.” Employment – “good jobs with good incomes,” says Bolen – is one aspect of how Business Aviation helps America. “Between the manufacturing and flight operations, maintenance, insurance and finance, we employ more than a million people.” Business Aviation is “a big deal from an operational standpoint, too,” Bolen continues. “When you look at the nation's small communities, Business Aviation helps connect small towns to the wider world. “And with the coronavirus there's a new focus on the benefits because of those communities connected via General Aviation. Humanitarian flights (organ transplant flights, disaster response, returning combat veterans to their families, bringing home wounded veterans), the impact is one of Business Aviation's strong suits.” Indeed, the contributions of Business and
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General Aviation seldom shines brighter than it has in the midst of 2020's challenges. After bottoming out in June, operators of all stripes in Business and General Aviation started returning to America's not-so-secret success weapon to support the nation's recovery from the debilitation of coronavirus. While the commercial carriers continued to feel the brunt of a near-stop in airline operations nationally and globally, private aviation adapted relatively quickly, adopting new cleaning and monitoring techniques and other safety steps, and incorporating them relatively easily into the day-today operations of a business already adaptable, flexible and nimble. Since it became established as a segment, Janine Iannarelli, founder and president, Par Avion notes, Business Aviation has thrived, and “continues to grow today, standing as one of the country's most valuable assets.”
Wide Range of Tools Opening Up Communities
Access is everything for many communities, and to some, that access is available only via Business and General Aviation operators. “When you look at the nation's small communities, Business Aviation helps connect small towns to the wider world,” Bolen notes. “Now, with the coronavirus there's a new focus on the benefits because of those communities connected through General Aviation.”
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OWNERSHIP
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“It continues to innovate and evolve, just as American business never stops improving,” Bolen concludes. “That trait is a key to our success as a nation.” Business Aviation's ability to access more than 10 times the number of airports as the scheduled carriers remains a vital element in its success and popularity. Operators range from one-person companies flying single-engine piston aircraft up to multi-national conglomerates flying airliner-size hardware with VVIP interiors. Business Aviation employs aircraft that are capable of landing on unimproved strips in remote corners of the world, providing food, medicine and transportation to remote populations, and also employs large, purpose-built business jets capable of traveling half way around the globe, non-stop, to land on the same runways used by the scheduled carriers. It's this diversity and flexibility that provides the key to Business Aviation fulfilling the travel needs of companies and corporations as diverse and varied as America itself. If a business has the need, there's an aircraft capable of fulfilling the mission. “So many communities would be isolated without their airports – and we have almost 5,000 airports we can use to access rural areas in a crisis and in normal times,” Iannarelli says.
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Moving Up and Moving On...
If there's a blank spot in the history of Business Aviation it's found in the realm of speed – but even now visionaries are seeking to fill in that requirement as they develop solutions for the supersonic business aircraft market. Thanks to new powerplant technology and advanced aerodynamics, when the first of these efforts succeeds, Business Aviation proponents will be standing by to put these new aircraft to use for their businesses. And when they do, Business Aviation will grow a little bit faster, once again helping shrink access to the world. America and its citizens will reap the fruits of Business Aviation, free of the constraints and limitations found in other parts of the world: No travel permits, no permission slips, no hassles. And Business Aviation will add further to the strength and flexibility of the US, making the nation better. “It continues to innovate and evolve, just as American business never stops improving,” Bolen concludes. “That trait is a key to our success as a nation.” T
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AirCompAnalysis OCT20.qxp_ACAn 15/09/2020 15:17 Page 1
JET COMPARISON
GULFSTREAM G100
BOMBARDIER LEARJET 75
Jet Comparison: Bombardier Learjet 75 vs Gulfstream G100 How do the Learjet 75 and the Gulfstream G100 compare side-by-side? What are the advantages offered by each model? Mike Chase analyses the performance and productivity parameters. ver the following paragraphs we’ll consider key productivity parameters for the Learjet 75 and Gulfstream G100 (including payload, range, speed, and cabin size) to establish which Mid-size Jet provides the better value. Does cabin size and speed drive a decision to buy an aircraft over acquiring one with greater range? It is hoped that the following jet comparison will help provide some answers.
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Learjet 75
Bombardier received FAA certification for the Learjet 75 on November 14, 2013. The aircraft is the newest derivative of the popular Learjet 45. Compared to the Learjet 45XR, the Learjet 75 offers improved avionics, redesigned winglets (yielding better fuel efficiency), and upgraded engines. A new Learjet 75 model is planned imminently, named the Learjet 75 Liberty. The Liberty is a lower-cost version of the Learjet 75, and is priced new at $9.9m (compared to a new
66 Vol 24 Issue 10 2020 AVBUYER MAGAZINE
Learjet 75 which costs $13.8m). The Liberty replaces two seats in the forward cabin with two-fold down ottomans and fold-out tables, thereby creating an "executive suite" and an aft club layout. Other features that are standard on the Learjet 75 are options on the Learjet 75 Liberty, including the APU and external lights. At the time of writing, there were 126 wholly-owned Learjet 75s in operation worldwide, an additional eight in fractional ownership, and one is in shared ownership, giving a total global fleet of 135 Learjet 75s.
Gulfstream G100
At serial number 137, the Astra 1125 SPX was re-named the Gulfstream G100 after General Dynamics, parent company of Gulfstream Aerospace, acquired Galaxy Aerospace Company which completed and distributed the Astra 1125 SP and 1125 SPX. The 1125 SPX was a continuation of the 1125 SP design www.AVBUYER.com
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www.AVBUYER.com HOW MANY
EXECUTIVE
SEATS
BOMBARDIER Learjet 75
8
$4.5 Million
(Manufactured between 2013-Present)
(2013 Model)
vs.
GULFSTREAM G100
7
$2.4 Million
(Manufactured between 2002-2006)
(2006 Model)
WHICH OF THESE Medium JETS WILL COME OUT ON TOP? HOW MUCH
RUNWAY
Learjet 75
DO I NEED?
G100
(Landing Distance ft)
2000
HOW FAR
CAN WE GO?
Full Fuel with 4 Pax (nm) Learjet 75
6,000 2500
3000
3500
5,920 4000
PAYLOAD CAN WE TAKE?
2,790
G100
(Lbs)
2,450 2,365
HOW MANY
HOW MANY
OPERATION?
EACH MONTH?
UNITS IN 21
NEW/USED SOLD