1. December 2004 00:00
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There are still many great pre-owned aircraft out there and it will be about six months to a year for balance to return to the pre-owned aircraft market. Balance means an overall aircraft market that favors buyer and seller equally. A general measure of that is 10% percent of the active fleet being available for sale. To date, about 13% of the active fixed-wing turbine business aircraft fleet is for sale. Later model aircraft are seeing a tightening of the market and even some slight price increases.
One part of the market has yet to recover. Selling prices of turbine aircraft older than about 20 years of age are still "soft."
Let's look at three older generation business jets and compare them with today's replacements. The Citation 500, Lear 23/24/25 series and Hawker 700A were all popular and successful aircraft. Currently, there are 987 of them in the active fleet. About 30% of that fleet is currently for sale - definitely a buyer's market. This isn't likely to change anytime soon and here is why.
Reason number one is their age. In order to remain reliable, older aircraft require more maintenance than newer aircraft. The more time spent in maintenance, the less time the aircraft is available for flight.
Aircraft Availability is defined as the amount of time an aircraft is available for flight in a service year divided by its total service year. A service year is when the aircraft is normally required for flight. This may be five days a week or 365 days per year. Availability is expressed as a percentage.
At some point, the cost of decreased availability plus the cost of maintenance outweighs an aircraft's low acquisition price. Many buyers are reluctant to "take a chance" on an older aircraft – regardless of condition.
Reason number two is technology. Today's current generation of business jets have more fuel-efficient engines, more (and better) cockpit automation increasing safety and productivity, and better performance. You buy 30-year old technology; you get what you pay for. Upgrades can cost more than the value of the aircraft. The Citation 500, Lear 23/24/25 series and Hawker 700A are still have good support, but their follow-on models are much less costly to operate (maintenance and fuel).
Reason number three is regulatory issues. Some older aircraft have noise issues. The cost of a hush kit can be as much as the value of the aircraft. In addition, we are less than a month away from the implementation of RVSM in North America. Of our sample aircraft fleet above, less than 10% are certified for RVSM. Jet aircraft are inefficient at low altitudes and these aircraft will be restricted to operating below FL 290. Aircraft with analog digital air data computers are the most costly to upgrade with RVSM costs typically running from $100,000 to as much as $250,000. Why invest 25% of the aircraft value in RVSM?
Now let's look at the "replacement" aircraft for the Citation 500, Lear 23/24/25 series and Hawker 700A: The Citation 525/CJ1, Lear 31 and Hawker 800A. There are currently 1,009 of these aircraft active. Their size is similar to their earlier cousins. They are more fuel-efficient, cost less to operate (fuel and maintenance) and generally have superior performance to their earlier cousins.
Today, about 12% of this fleet is available for sale - much closer to a balanced market. In addition, 55% or more of this fleet is already RVSM certified and almost all the rest are capable of being certified. Given their current selling prices, investing in RVSM for these aircraft (if not already done) is economically justifiable.
I don't see this situation changing. Our general recommendation to clients is to be very cautious about purchasing aircraft older than 15 years of age. A 15-year old aircraft should yield 10+ years of reliable service, have reasonable maintenance costs when balanced with availability, and likely be worth certifying for RVSM (if not done) and also be worth upgrading with things like new avionics.
From age 15 to 20 or 25 years of age, aircraft are seeing the cost of major maintenance inspections increase. They are perhaps looking at second or third engine overhauls with life and cycle limited components in the engine coming due for replacement. Corrosion control programs tend to come into consideration as well. Aircraft in this age group, if well cared for, will still tend to see a drop off in availability.
Beyond about 25 years of age, aircraft generally start running into availability issues. We did a study for a client and showed that replacing their five age 30+ aircraft with three new aircraft would give them better availability, more utilization, and at a lower total life cycle cost.
While there is "never an always and always a never," I'd be wary of looking at older aircraft. Evaluate their condition, the availability of spares, and their ability to be fully mission-capable (RVSM, safety-enhancing avionics, etc). Perform a full life cycle cost analysis - low acquisition prices can be easily off set by higher maintenance costs and low availability can require the use of alternate aircraft - driving costs even higher. This is not to say that all older aircraft are ready to be sold for parts. Rather that (1) even well cared for aircraft will tend to have high maintenance costs and reduced availability and (2) the market for these aircraft is likely to remain soft and sellers of these aircraft will have to bear that in mind.
1. December 2004 00:00
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A Pilot's Duty To Report Alcohol Related Driving Offenses To The FAA
At this festive time of year, with Christmas parties and New Year's Eve parties, I thought it would be helpful to re-visit the obligations of an airman who is arrested for driving-while-intoxicated ("DWI")(this would include similar charges such as driving-under-the-influence ("DUI") and operating-while-intoxicated ("OWI")).
Although most people are familiar with the term "DWI", it is important to know that this term is included in what the FAA refers to as "motor vehicle actions". Under FAR 61.15(c), a motor vehicle action is (1) a violation of any Federal or State statute relating to the operation of a motor vehicle while intoxicated by alcohol or a drug, while impaired by alcohol or a drug, or while under the influence of alcohol or a drug; (2) the cancellation, suspension, or revocation of a license to operate a motor vehicle, for a cause related to the operation of a motor vehicle while intoxicated by alcohol or a drug, while impaired by alcohol or a drug, or while under the influence of alcohol or a drug; or (3) the denial of an application for a license to operate a motor vehicle for a cause related to the operation of a motor vehicle while intoxicated by alcohol or a drug, while impaired by alcohol or a drug, or while under the influence of alcohol or a drug.
A motor vehicle action triggers the reporting requirements of FAR 61.15(e). The airman is required to provide a written report to the FAA Civil Aviation Security Division within 60 days that includes: "(1) The person's name, address, date of birth, and airman certificate number; (2) The type of violation that resulted in the conviction or the administrative action; (3) The date of the conviction or administrative action; (4) The State that holds the record of conviction or administrative action; and (5) A statement of whether the motor vehicle action resulted from the same incident or arose out of the same factual circumstances related to a previously reported motor vehicle action."
FAR 61.15(f) states that failure to provide the FAA with this written report can result in (1) Denial of an application for any certificate or rating for a period of up to 1 year after the date of the arrest; or (2) Suspension or revocation of any certificate or rating. If an airman finds himself or herself in this situation, it is important to keep several things in mind in order to properly comply with FAR 61.15 and avoid the consequences of a failure to report.
First, in many states, an arrest for DWI starts a two-track process: a civil action and a criminal action. The civil action is an administrative action against the offending driver's license that typically results in immediate temporary suspension of the driver's license pending the outcome of the administrative action. The criminal action is a criminal prosecution against the driver that may or may not result in the driver actually being convicted of DWI. For example, in many instances an initial charge of DWI can be reduced to a charge of careless driving or some similar, but lesser offense.
Under FAR 61.15, both the civil action and the criminal action are considered motor vehicle actions. The immediate suspension of the driver's license pursuant to the civil action triggers the obligation to make a written report to the FAA. If the driver is later convicted of DWI, another report must be made. This multiple reporting situation makes it imperative that the driver's statement under FAR 61.15(e)(5) clearly explain that the later conviction arose out of the same factual circumstances as the civil suspension previously reported. The absence of a clear explanation can result in confusion with the FAA incorrectly believing that the driver has had two motor vehicle actions rather than just the one.
The second important and often misunderstood point is that the report required by FAR 61.15(e) is separate and distinct from the answer an airman is required to provide on an Airman Medical Application, Form 8500-8. Question 18(v) of the medical application specifically asks whether the applying airman has had any convictions or administrative actions for DWI, etc. However, the answer the airman provides on the medical application does not replace or satisfy the reporting requirement of FAR 61.15. The FAA has suspended many airmens' certificates when the airmen have incorrectly assumed that their disclosure on the medical application was sufficient.
At this time of year when opportunities abound for celebration and consumption of holiday "cheer", exercise discretion and drink responsibly. If you find yourself in the unfortunate position of being arrested for DWI remember that FAR 61.15(e) imposes added responsibilities on airmen.
As always, fly safe, fly smart and, especially during this holiday season, drive safe and drink smart.