JetBrokers Market Update
JetBrokers Jet and TurboProp Index Market Report
By Jeremy R.C. Cox
It is all about the number of retail sales.
A rise during the past 6 months, is indicated for two reasons:
- The Percentage of Aircraft For Sale has gone down by 42 percentage points, overall (1% = 100 points), but the ‘Percentage for Sale’ of the Aircraft used to create this Market Composite Index, has dropped by 59 percentage points.
- The Dow Jones Industrial Average continues its upward march.
A better way of illustrating the current health of the used Business Jet, and Turboprop market, is by analyzing the number of ‘Used’ Retail-to-Retail, Sales Transactions, by Quarter, since the economic plunge that was the Global Financial Crisis (GFC), to-date:
As you can see from this graph, the data shows that we are currently (Q2, 2017) less than 10% away from the low-point of least sales transactions seen in Q1, 2009. Basically, I believe the reasoning behind this significant data is because: In Q1, 2009, as a large number of business aircraft owners were still realizing the full consequence of the cliff-drop (GFC) that happened in October 2007. Everything, including aircraft changes; either ‘step-up’, ‘downsizing’, or ‘getting out’ of their business aircraft was firmly on hold, hence the significant reduction in Quarterly Sales Transactions during that period. Now today, the same is true on the mindset regarding aircraft changes. But instead of getting to grips with GFC; today a large number of business aircraft owners are sitting still while they await the course of history to provide a readable, and actionable trend, for the following questions: i.e. Is the Trump Administration ‘Making America Great Again?’, or is it piloting the country into a ‘death-dive?’; Is Islamic Extremism going to take over the World, while millions are annihilated in the name of religion?; Is Climate Change a real threat to our planet, or just invented science that uses skewed data?; are we on the brink of the ‘mother’ of all GFC’s?
Here are the rest of the Market Report graphs:
Aircraft used to create the Market Composite Index: Socata TBM850, Pilatus PC12, Beechcraft King Air B200, Beechcraft King Air 350i, Cessna Citation Mustang, Cessna Citation Jet, Cessna Citation Bravo, Hawker Beechcraft 400A, Bombardier Learjet 45, Bombardier Learjet 60, Hawker 800XP, Cessna Citation Excel, Dassault Falcon 50EX, Cessna Citation Sovereign, Gulfstream G200, Bombardier Challenger 604, Gulfstream GIVSP, Dassault Falcon 900B, Dassault Falcon 7X, Gulfstream GV, Bombardier Global Express, Gulfstream G550.
2016 Year-End Round-Up, JetBrokers Market Update
A Busy End to 2016! Q4 accounted for more than half of JetBrokers’ transactions in 2016. We closed 32 tranasctions including 24 jets, 6 piston aircraft and 2 turboprops.
JetBrokers heads into 2017 with thirty-one aircraft for sale including twenty-one jets, six turboprops, two helicopters, and several piston airplanes for sale. Our activity remains steady and our phones are ringing with buyers searching for the perfect airplane and owners looking to sell their existing airplane and move into that bigger, faster, newer model as their needs grow.
Avionics: Valuing 'FANS' & Other Issues
Presentation by Jeremy R.C. Cox for NAAA (National Aircraft Appraisers Association)
Senior Certified Aircraft Appraiser Jeremy Cox shares a NAAA presentation - Avionics: Valuing 'FANS' & other issues. Topics include: File Servers, ADS-B (two Systems), CPDLC (printer/FMS), Communications (FM Immunity/8.33 KHz Spacing/SATCOM), EFIS (CRT to LCD), AHRS - Issues of Obsolescence and Costs & Values.
What’s Your Business Aircraft Worth Today?
Points of Value specific to used Bombardier Globals and Challenger Jets 'For Sale' BY JEREMY R.C. COX
Senior Certified Aircraft Appraiser Jeremy Cox continues his a new series spotlighting aircraft makes and models and their value points. This month, the focus is on used Bombardier Global and Challenger Jets.
Reviewing the value of used Bombardier business jets begins by considering the specifics of certain models. For example, at the top end of the Bombardier product line is the Large Cabin & Ultra Long Range Global 6000, which is currently projected by Aircraft Bluebook to accumulate 500 flight hours annually.
The current used Global 6000 market shows there are eight aircraft (from a fleet of 228) ‘For Sale’, offering an average TTAF of 952 hours and an average of 341 landing cycles. That’s an average ratio of just over two flight-hours, 47 minutes per landing. The average Year of Manufacture of the Global 6000 ‘For Sale’ is 2013.
Meanwhile, the Large Cabin Bombardier Challenger 605 is projected by Aircraft Bluebook to accumulate 490 flight hours annually. Currently there are 25 Challenger 605s from a fleet of 288 ‘For Sale’.
These show an Average TTAF of 2,486 and have an average 712 landing cycles, giving it an average ratio of approximately three hours, 29 minutes flight time per landing. The average Year of Manufacture of the ‘For Sale’ Challenger 605 is 2009 (eight years old.)
In the Super-Mid-Size category is the Bombardier Challenger 300 which Aircraft Bluebook projects to accumulate 490 flight hours annually. Currently there are 39 aircraft ‘For Sale’ from a fleet of 453.
The current Challenger 300 ‘For Sale’ average shows a TTAF of 2,841 hours, versus an average of 1,521 hours landing cycles, giving an average ratio of approximately one flight-hour, 52 minutes per landing. The average Year of Manufacture of the ‘For Sale’ aircraft is 2007 (10 years old).
Using an older example of used Bombardier jets ‘For Sale’, the Challenger 601-3A/3R is projected by the Aircraft Bluebook to accumulate 425 flight hours annually.
The current 601-3A/3R Market shows 30 aircraft ‘For Sale’ from a fleet of 190, with an average TTAF of 7,780 hours. That’s in comparison to 4,169 landing cycles, which gives an average ratio of just over one flight-hour, 52 minutes per landing. The average Year of Manufacture of the ‘For Sale’ aircraft is 1991 (26 years old).
Avionics Issues Faced by Bombardier Models Today
Buyers and sellers of Bombardier Challenger aircraft need to be aware that FANS 1/1A, and ADS-B still pose issues for some of the older models. For some, it is just not economically feasible to accomplish the necessary upgrade, and asking/selling prices are reflecting this fact.
The same value conundrum can also arise out of the 10-year landing gear overhaul coming due on some models.
Obsolescence, and lack of support for CRT EFIS avionics systems also requires costly ($750k to $1m) Liquid Crystal Display retrofits, especially in the Global Express series.
Residual Values of Used Challengers & Globals
Since January of 2010 to Present, there have been 39 sales transactions on 29 Challenger 600 aircraft, and out of these, eight have resulted in a Part-Out/Write-Off of the subject aircraft.
The value of a 1983 model Challenger 600 is currently about 9% of its List Price in 1983 ($9m), with a retail value today of $800,000. Mechanical cockpit Challenger 601-1A models are often sold at below $800k. The Challenger 600 will sell down into the ~$200k range.
By comparison, the residual value of a 1987 Challenger 601-3A is currently about 14% of its list price when new, and a 1996 Challenger 601-3R is currently about 15% of its list price when new.
Residual value of a 2007 Challenger 604, meanwhile, is currently about 29% of its list price when new. Today, a fully FANS 1/1A-compliant Challenger 604 will sell in the high $3m range, and might even break $6.5m. Values for the Challenger 605 can range from $8,500,000 to >$13,000,000 in today’s market.
Into the Super-Mid-size category of Challenger jets, the residual value of a 2003 Challenger 300 is currently at about 35% of its new price, but depending on age and condition, this model’s value will range from $5,700,000 up to >$12,000,000.
Looking at the Global family, the residual value of a 2004 Global Express currently stands at about 31% of its new value. The first Global Express aircraft are now 18 years old, and for some the selling prices are below $7m, which equates to a residual value of only 18% (the 1999 new price was $38.02m).
Values for used Global 5000s range from $13-30m, depending on year of manufacture/delivery, whereas the Global 6000 normally trades anywhere between $27-41m, even though the available year-models only vary by 2-3 years.
Following is a list of Appraised Value Add-Ons for each Bombardier model (note: these are my numbers, not the numbers from the value guides):
- Challenger 601-1A/3A Extended Range Tank (ER) - $200,000
- Challenger 604 No Auto-Throttle ($250,000 Deduction)
- FANS 1/1A - $190,000; Heads-Up Display - $300,000
- Challenger 605 Heads-Up Display - $300,000
- Challenger 300 Proline 21 Advanced (Block Upgrade) $350,000; Dual IFIS $150,000
- Global Express Heads-Up Display - $300,000; Batch 3 Avionics - $450,000; Primus Elite 875 LCD EFIS upgrade - $650,000
Respective Bombardier model manufacture and fleet numbers
- Challenger 600: 1980-1983; 85 total built (70 currently active)
- Challenger 601-1A: 1983-1987; 66 total built (47 currently active)
- Challenger 601-3A/3R: 1987-1996; 195 total built (190 currently active)
- Challenger 601-SE: 1993-2004; 14 total built (8 currently active)
- Challenger 604: 1996-2007; 365 total built (360 currently active)
- Challenger 605: 2006-2015; 288 total built (288 currently active)
- Challenger 650: 2014-Present; 38 total built (38 currently active)
- Challenger 300: 2003-2014; 456 total built (453 currently active)
- Challenger 350: 2013-Present; 169 total built (167 currently active)
- Global Express: 1996-2004; 148 total built (145 currently active)
- Global Express XRS: 2005-2012; 168 total built (165 currently active)
- Global 5000: 2005- Present; 217 total built (210 currently active)
- Global 6000: 2010-Present; 257 total built (228 currently active)
- Global 7000: In-Certification
Total Active Bombardier Challenger/Global Fleet = 2,369 Aircraft
Jeremy Cox is experienced in presenting his expertise at aviation meetings, seminars and conferences. If you have an upcoming event and would like to discuss having Jeremy present, you can contact him via firstname.lastname@example.org.
What’s Your Business Aircraft Worth Today?
BY JEREMY R.C. COX, VICE PRESIDENT
Original article written for AVBUYER magazine
Senior Certified Aircraft Appraiser Jeremy Cox begins a new series spotlighting aircraft makes and models and their value points. This month, the focus is on used Gulfstreams.
Reviewing the value of used Gulfstream business aircraft begins by considering the specifics of certain models. For example, in the Large Cabin & Long Range category, the average G550 is projected by the Aircraft Bluebook to accumulate 425 flight hours annually.
Looking at the current G550 ‘For Sale’ market, there are 39 aircraft available from a fleet total of 529. The average TTAF (total time on the airframe) of those jets ‘For Sale’ is 2,865 hours, and their landing cycles average 937. Those statistics equate to a ratio of just over three flight-hours per landing.
The average Year of Manufacture of the ‘For Sale’ G550 is 2007 (10 years old). Meanwhile, the average GIV-SP is currently projected by Bluebook to accumulate 410 hours annually.
The current GIV-SP ‘For Sale’ market (38 aircraft out of a fleet of 293) shows an Average TTAF of 6,513 hours and an average of 2,823 landing cycles. These data equate to an average of approximately 2 hours and 20 minutes flight time per landing). The average Year of Manufacture of the ‘For Sale’ GIVSP is 1998 (19 years old).
Looking at the Mid-Size Cabin jets, the average G200 is projected by Bluebook to accumulate 380 hours annually, and the 34 aircraft ‘For Sale’ out of a fleet of 245 yield an Average TTAF of 3,411 hours and an average of 2,091 landing cycles. That’s a ratio of approximately 1 hour, 40 minutes flight-time per landing. The average Year of Manufacture of the ‘For Sale’ G200 is 2006 (11 years old).
Finally, the G150 is projected by Aircraft Bluebook to accumulate 390 hours annually. The current G150 ‘For Sale’ market (eight aircraft from a fleet of 123) shows an Average TTAF of 2,541 hours and an average of 1,643 landing cycles (an average of just over 1 hour, 30 minutes flight time per landing). The average Year of Manufacture of the ‘For Sale’ G150 is 2007 (10 years old).
Used Gulfstream Model Challenges Legacy Gulfstreams powered by Rolls-Royce Spey engines must be equipped with a Stage-III compliant hush-kit; a factor that has severely diminished the fleet in service. Thus, almost 50% of the original GII and GIII fleet have been retired, with many being ‘culled’ in the last three years as a direct result of the Stage-III noise compliance mandate that went into effect on 01/01/16.
A further issue exists within the market for used Spey engines, in that most of the ‘as-removed’ engines from parted-out aircraft have now reached their 10-year corrosion life-limit, thereby restricting the previously ready supply of engines that provided an alternative to spending on overhauls.
The cost of those overhauls amount to more than what the subject aircraft is probably worth. The residual value of a 1987 Gulfstream GIII is currently around 8% of its original value, based upon a list price of US$13.0m when purchased new in 1987.
Aircraft take a ‘hit’ when production of that model is either ceased or is superseded by a newer model. Having ceased production in 2002, the residual value of a 2002 model Gulfstream GIV-SP is around 23% of its new value. Further examples include the G200, replaced by the G280. The residual value of a 2002 model Gulfstream G200 is about 18% of new.
Finally, FANS 1/1A and ADS-B still pose issues for some of the older large-cabin Gulfstream models. Even though the avionics industry warns that owners should be acting now because shop openings and solution kits are both in short supply, I personally believe that waiting may still be the right approach for some. I see prices continue dropping as more and more ADS-B solutions are being brought to market.
New Paradigms of Used Jet Values Since January 2010 there have only been 34 transactions on 26 Gulfstream GI aircraft. Of these, more than a third led to a Part-Out or Write-Off of the subject aircraft.
Further, without a Stage III Hush-kit, all GII, GIIB, and GIII aircraft struggle to break $100,000 for part-out value. With a Stage III Hush-kit and all maintenance up-to-date, however, these aircraft often trade in the $300k to $700k range. Sometimes a late model GIII might break $1.0m, but that is a very rare occurrence.
Straight GIV jets without the ASC 190 -SP modification (which is fairly rare today) will usually trade at well below $4.0m. A good GIV-SP enrolled with Rolls-Royce CorporateCare and with decent time remaining before its 5,000 hour landing inspection and other similarly expensive events, will still fetch a price in the $6.0m range.
The early GV models are now 22 years old. For some, the selling prices are below $10.0m, which equates to a residual value of about 24% of new. Of the more recent Gulfstream models:
- G150 values range typically between $4.5 - 7.0m
- G200 jets range from $3.0 - 6.0m
- G280s trade in a narrow band between $14.0 - 18.0m
- G450s fetch between $13.0 - 21.0m
- The G550 plumbs new depths, with the latest asking prices ranging from the low-teens to the high-$30m bracket. A 2003 Gulfstream G550 is valued at about 36% of its new value.
- Non ‘ER’ G650s have dipped below $50.0m for the first time and continue to fall.
Following is a list of Appraised Value Add-Ons for each Gulfstream model (numbers per my evaluation, not the value guides):
- Gulfstream G100 (Astra SPX) APU - $130,000
- Gulfstream G150/G200 Auto Throttles - $150,000
- Gulfstream GII/IIB Aviation Partner Winglets - $150,000; Stage III Hush-kit - $400,000 (downward variable value)
- Gulfstream GIV/IVSP ASC 190 - $300,000; FANS 1/1A - $180k to $300k
- Gulfstream G350/G450 FANS 1/1A - $180k to $300k
- Gulfstream GV No Forward Lavatory - ($250,000 Deduction); FANS 1/1A - $180k to $300k • Gulfstream G550 Aft Galley - ($500,000 Deduction); No Crew Rest Area - ($250,000 Deduction) • Gulfstream G650 ‘ER’ Modification - $1,000,000.
Respective Gulfstream model manufacture and fleet numbers:
- Gulfstream I: 1958-1969; 196 total built (56 currently active)
- Gulfstream II/B/SP: 1967-1979; 300 total built (144 currently active)
- Gulfstream III: 1979-1987; 202 total built (163 currently active)
- Astra/SP/SPX: 1985-2001; 130 total built (121 currently active)
- Gulfstream IV/IV-SP: 1986-2002; 500 total built (475 currently active)
- Gulfstream V: 1995-2002; 194 total built (187 currently active)
- Gulfstream G100: 2001-2006; 22 total built (22 currently active)
- Gulfstream G150: 2006-2016; 125 total built (123 currently active)
- Gulfstream G200: 1997-2011; 248 total built (245 currently active)
- Gulfstream G280: 2009-Present; 114 total built (108 currently active)
- Gulfstream G300: 2003-2004; 13 total built (13 currently active)
- Gulfstream G350: 2004-2007; 11 total built (11 currently active)
- Gulfstream G400: 2003-2004; 23 total built (21 currently active)
- Gulfstream G450: 2003-2015; 359 total built (342 currently active)
- Gulfstream G500: 2003-2008; 9 total built (9 currently active)
- Gulfstream G550: 2003-Present; 551 total built (521 currently active)
- Gulfstream G650/ER: 2010-Present; 275 total built (244 currently active)
Total Active Gulfstream Fleet = 2,805 Aircraft
Comps Live!! Why Comps Still Matter
BY TIM KEENEY, V.P. SALES
“Comps” is short for “comparables” which alludes to the practice of estimating the current retail value of an airplane (or house, car, boat, etc.) by analyzing recent sales of similar airplanes and adjusting for such differences as year model, total time, engine time, cosmetic condition, equipment, and other factors.
I ran across recent blog post asserting that “comps” are dead, meaning that recent selling prices are not as important a data point as in years past. I respectfully disagree. While I agree that there are numerous factors to consider in valuing an airplane than just the airplane itself (market trend, inventory level, activity level, number of shoppers), I believe the “comps” data is still the basis of valuing any airplane.
I believe market forces still work, it’s still a supply & demand game, and an airplane that’s priced right will sell (one of my boss’ favorite mantras). Is it harder to figure out than “the old days” when we could buy at retail, mark it up, and then sell it for a profit? Absolutely. It’s called volatility. It means we have to think not just about adjusting a comparable sale for differences from our listing but also about the pricing trend, market segment activity (or lack thereof), looming expensive regulatory upgrades that will drive values and even ancillary support factors like whether bank financing is available (hint: if it’s going to have to be a cash deal, there won’t be much cash involved).
I’ve tracked airplane values a long time – over 20 years. Before what some folks call the GFC (Global Financial Crisis), my own proprietary analysis could predict the value of a particular airplane within a 3% margin of error; that’s what I mean by easy. At the height of the GFC when volatility was peaking, my margin of error climbed to 10% or a little more. It’s hard to be accurate valuing a $5,000,000 piece of equipment when the range swings that wide. We have to look really hard at those less tangible factors when the market is that crazy. These days my margin of error is back down to about 6% in most cases.
Still not easy but, contrary to the assertion that “comps” are dead, the rules of the game have not changed. It’s still supply and demand and doing the hard work to parse out the material differences from one plane to another so that we can give our clients accurate advice what their airplane is likely to bring in the current market.
One new factor that has noticeably changed the game recently is that we deal in a much more global market than even ten years ago. The mere location of an airplane and whether it meets certain countries’ equipment requirements or age restrictions will have a material effect on the airplane’s value.
Even if we now have to consider factors that we didn’t before, the benchmark is still derived from the selling price of similar airplanes; otherwise, we’re just guessing. Do your homework, educate your customer, and you’ll sell the airplane.
Aircraft Financing, JetBrokers Market Update
BY JEREMY R.C. COX, VICE PRESIDENT
The core business of a banking corporation is to loan money. If a bank doesn’t make loans to borrowers, then it doesn’t make any money. Since January of 2014, the banks have slowly come back into the aviation marketplace to lend money…some aggressively.
Even though here in the United States, the Federal Reserve sets the tone for bank lending rates (current rate is 0.25%), most banks that offer aviation lending prefer to use the London Inter-Bank Overnight Rate (LIBOR) to base their lending rates on (current 12 month rate is 0.77775%); example: Libor + 4%. LIBOR is the average interbank interest rate at which a selection of banks on the London money market are prepared to lend to one another. LIBOR comes in 7 maturities (from overnight to 12 months) and in 5 different currencies.
Most aviation lenders are nervous about older aircraft, and therefore the ideal aircraft from a banking standpoint, is one that is within 10-years of its date of manufacture, i.e. Anything built after, or younger than 2005.
Smaller and more aggressive banks are willing to lend outside of this boxed-in age limit, but the number of willing lenders drop-off considerably once an borrower presents an aircraft that is older than 1995 (20 years.)
Before the Global Financial Crisis in 2007/2008, most banks were willing to make ‘asset-based’ or ‘non-recourse’ loans, which used the value of the aircraft as the collateral for the loan. Non-recourse loans are ALMOST non-existent in today’s aviation marketplace. Instead, expect that you will be required to provide all of the following to the bank, prior to receiving approval for your loan:
- Completed-Signed Loan Application
- Must be a U.S. Citizen
- 2 Years Signed Federal Tax Returns (either personal, or for your corporation)
- 2 years of W-2 Forms and Current Pay Stub or bank/brokerage statements (for a personal loan), or 2 years of financials and current accounts receivables and statement of debts (for a corporate loan)
The approval process usually takes 2-3 weeks, but is entirely variable depending on the extent of the borrower’s financial status and situation. Remember that banks prefer to lend money to individuals and corporations that do not necessarily need to borrow the money, but do so for tax or liquidity purposes.
Example loans vary, but generally follow coordinates similar to these:
25% of aircraft value paid up-front to the lender (deposit.) 5.25% loan rate over a 3 to 7 year term, and 5 to 15 year amortization
$2,000,000 Aircraft Purchase Loan. 20% to 30% ($400,000 to $600,000) down-payment. 10 year, 12 year, or 15 year Amortization. 4.5% to 5.5% Fixed Interest Rate (can do 3.5% to 4.5% for a 36 month Term) 42 to 60 month Term with a ‘Balloon’ at the end. $2,500 costs, rolled into the loan