Aircraft Sales - Page 7 Aviation Articles

2014 Business Jet Traveler Survey says...

Business Jet Traveler magazine's fourth annual Reader's Choice survey is in their recent issue. They had over 1,200 readers respond, a new record for them. The big take-away from the survey is that things should continue to improve for business aviation. While about half stated their flying would remain at current levels, almost 40% stated they would fly a bit more or much more in the next year. Less than 10% said they would fly less in 2015.

The survey is to be posted online at bjtonline.com/2014survey. if you don't have access to the magazine. Here are my observations of that survey.

Why people fly privately doesn't really change. It saves time and general aviation serves many more airports than the airlines. The most important features people are looking for are range, economics, and cabin.  I see that in my consulting. What was interesting in that group was that cabin amenities, product support and baggage were at the bottom of the important features list. I think it is because product support is generally good and everyone expects the cabin amenities to be about the same within categories. Baggage is likely a tertiary item, especially since seats are rarely filled on many trips. Safety is important with over half stating they only fly with operators that have passed a safety audit (I think it should be 100%).

Of the non-owned methods of flying, fractional, jet cards, and charter, all three rated very good to excellent in customer service and cleanliness of aircraft.  Concerning choices of aircraft and age of aircraft, fractional and jet cards rated better than did charter. I was surprised at the charter choice of aircraft rating below the others. 

When it came to value for the price paid, fractional and charter rated better than jet cards. I think jet cards took a hit there as they also took a lower rating for transparency/explanation of charges.

For the owned aircraft category, BJT separated fixed-wing and helicopters. Since people valued range, economics, and cabin, I looked at those related ratings from the owned group. 

For the fixed wing: With respect to cost of maintenance, Embraer came out with the best ratings at 75.1% rating them excellent or very good. None of the other aircraft manufacturers listed had greater than 60% excellent or very good. Gulfstream rated over 99% excellent or very good for reliability. Everyone rated over 90% for reliability. Regarding cabin amenities, both Dassault and Gulfstream rated the best of the group. As both concentrate mostly on the large cabin jets, it makes sense that owners would be please with the offerings of the large cabin aircraft. Overall satisfaction was very good for everyone, but Dassault, Embraer and Gulfstream did rate a bit higher then the others. 

It looks like there were not a lot of responses from helicopter operators as only Airbus Helicopters (nee Eurocopter) and Bell were represented. Other than reliability, the helicopter manufacturers did not get as favorable ratings as did the fixed-wing. Cost of maintenance was a big knock against the helicopters with no one rating Airbus as excellent and Bell getting only 17.1% excellent ratings for their maintenance costs. I wonder if it is due to generally more complex maintenance requirements of a helicopter versus an airplane, especially with respect to time and cycle-limits on a helicopter's many components. 

BJT did ask its reader's that if they could get a year of complimentary flying, which aircraft would it be for various categories of aircraft? Read the article to see what folks favored. For me, they didn't list a P51 Mustang nor an amphibious Twin Otter so my top choices were not there. 

I'm hopeful that the BJT reader's interest in flying more in 2015 is representative of business flying in general. We shall see.

The New Normal For Used Business Jet Values?

Since there is lots of new aircraft news coming out of Oshkosh, I though I'd tackle used aircraft.

As part of our aircraft cost database updates, we do keep a close watch on market values of used aircraft. We use residual value data from The Aircraft Bluebook Price Digest, Vref Aircraft Value Reference, and HeliValue$.  Many times those publications agree, but there is enough differences that we are not relying on a sole source for the numbers. I think the residual values have made a significant change since 2008. Of course 2008 to 2010 saw a significant recession and along with it, aircraft values plummeted. But since then we have entered a global recovery.  We are seeing a different market for used aircraft prices than pre-2008, especially among business jets.

The new normal is quite an adjustment. While aircraft still hold their values better than most other capital assets, the previous norm of appreciating values in a good economy followed by a correction in a down economy does not appear to be the norm any more. While the US is still the single largest market for turbine business aircraft sales, the percentage of global sales within the US has been close to or below 50% even pre-recession. New aircraft are showing up in numbers all over the world, and the market for used aircraft is also seeing a bigger global market. Buyers are smarter than ever, and no longer is a buyer going to by the aircraft just because it is US N-registered. They are looking for and getting great prices. Here is what we are finding is the new normal:

  • 2008 to 2010 saw an unprecedented drop in used aircraft values.
  • From 2010 to today, we have seen values continue to decline, but at a much lesser rate.
  • We are in an economic recovery, but aircraft values remain low.
  • Today, more than ever, requires buyers to know the individual model’s residual value history. 

Aircraft values are behaving more and more like stocks. While the stock market may be up, not all stocks are performing so good. What we are seeing is that different aircraft, again, especially among business jets, with vastly different market depreciation rates. Almost all are seeing declines, but there are differences between models. So while our cost database residual value curve represents an average, that average is based on a group of aircraft types. Within that group are significant variations. So we caution you to use our residual value data as a benchmark, but do additional due diligence when evaluating specific models. Much like the stock market, individual aircraft (stocks) will behave differently than the market as a whole.

Many thanks to Vref Aircraft Value Reference for the following charts.

This chart is one that Vref calls their Late Model/Mid-Size Jet Index. It is comprised of 2008 models of the Challenger 300, Challenger 605, Citation XLS+, Citation Sovereign and Gulfstream G150. These are all popular aircraft with good sales histories. From 2008Q1 to 2014Q1, that index dropped 50.5%. Look at the curve and while 2008-2010 saw the biggest drop, that past two years (in a recovery) are not seeing values of this group correcting back or leveling off significantly. 

Looking at Vref's market indices for the business jets shows this group fared pretty well by comparison:

  • Light Jets dropped 83% over six years.
  • Midsize jets dropped 73.5% over six years.
  • Large Jets dropped 74% over six years.
  • The Late Model Midsize Jets dropped 50.5% over six years.

Looking at one model, the Challenger 300, shows much more of a bifurcated curve.

The 2008 Challenger 300 dropped 50% since late 2007, slightly better than its index. But its value curve has a hockey stick shape. The 2008 CL300 dropped over 36% in the first two years of the recession. It has plateaued off since then and several brokers have mentioned this aircraft as a good value with a good future ahead of it. This aircraft has done quite well. 

Not to embarrass any models, but I've seen 75% to 85% drops in other 2008 business jets from 2008 to today. There are many excellent used aircraft selling for great prices. But among individual models there are significant variances. Two take-aways here:

  1. Don't plan on your used aircraft appreciating. A model here or there may be the rare exception, but don't plan on it.
  2. Looking at the general market is not the same as the market for your specific make/model/model-year. 

You need to know the macroeconomics of course, but also need the guidance of someone who knows the microeconomic climate for your aircraft. Despite all the great information available on the Internet and in the aviation news, you still need good advice from knowledgable professionals. 


 

 

Landmark Aviation Expands Charter Fleet with Seven Aircraft

 

 

(Houston, TX – June 24, 2014) Landmark Aviation’s Aircraft Management & Charter division has expanded its managed fleet with the addition of seven aircraft. These aircraft include a Premier 1A, Falcon 50, Falcon 900EX, Hawker 900XP, Lear 36, and two Lear 60s.

“We are excited to announce the expansion of our charter fleet and particularly the long range options now available to our charter clients in the Northwest market,” President of Aircraft Management & Charter Ben Murray explained. “The explosive fleet growth Landmark is experiencing across the board is a true testament to the commitment we have made to our managed and charter clients.”

The new fleet additions will be based in the eastern and western United States. Five aircraft have been added at Boeing Field/King County International Airport (BFI) in Seattle including a Falcon 50 with seating for eight passengers, a Falcon 900EX with seating for 12 passengers, a Hawker 900XP with seating for eight passengers, a Lear 60 with seating for seven passengers, and a Lear 36 that is available for air ambulance service.

Additionally, a Lear 60 with seating for eight passengers has been added at Westchester County Airport (HPN) in New York, while a Premier 1A with seating for seven passengers has been added at Mercer County Airport (BLF) in Bluefield, West Virginia.

These aircraft are currently available for charter.

About Landmark Aviation

Headquartered in Houston, Texas, Landmark Aviation operates a network of fixed base operations located throughout the U.S., Canada and Western Europe. The Company offers a wide range of services, including FBO, MRO, aircraft management & charter. Landmark is a portfolio company of the Carlyle Group. For more information, visit www.landmarkaviation.com.

ABACE 2014 Highlights: Gulfstream Dominates, Airbus Unveils New Interior


Photo Courtesy: Gulfstream

The Asian Business Aviation Conference & Exhibition (ABACE) is underway in Shanghai and so far, it seems like Gulfstream has dominated the show. This year, Asia's largest business aviation event is hosting almost 200 exhibitors and over 35 static aircraft displays. Here are the ABACE 2014 highlights so far:

G280 Speed Records (...again):
By now we know that Gulfstream doesn't like to fly anywhere without breaking a record. And they've done it again - this time, with the G280. The super-midsize, long-range jet had already set 45 city-pair speed records before it set two more on the way to ABACE this year, making stops in Germany, Dubai and Hong Kong before flying to Shanghai.

"The G280 flew 2,751 nautical miles/5,094 kilometers from Friedrichshafen Airport in Germany to Dubai International Airport in the United Arab Emirates at an average speed of Mach 0.84 for a total flight time of 5 hours and 49 minutes," Gulfstream said in a statement on April 14th.

From Dubai, the G280 made the 3,449 mile flight to Honk Kong International Airport with a time of 7 hours and 7 minutes at Mach .82.

Minsheng Orders 60 Aircraft from Gulfstream:
In one of the largest business aviation deals ever, Minsheng Financial Leasing Company Ltd. ordered 60 aircraft from Gulfstream Aerospace Corp. The deal was made in the last part of 2013, but the partnership was announced and celebrated at ABACE on Tuesday, according to a statement by Gulfstream on Tuesday.

The order reportedly includes 40 firm orders and 20 options - totaling over $2.6 billion, according to AIN- and includes aircraft from across the Gulfstream product line, including the G280, G450, G550 and G650.

ACJ319 Interior Change:
While Gulfstream stole the show with speed records and heavy orders, Airbus announced a new version of the company's ACJ319 corporate jet called the ACJ319 Elegance.

The ACJ319 Elegance has a newly designed interior, giving customers more options when it comes to customizing their aircraft. In addition, the new design allows for a smooth transition in the event that a customer wants to upgrade to a new cabin in the future, according to Airbus.

The Elegance design offers different module choices for lounge, office, conference or dining needs. It has a bathroom and galley up front, and a bedroom with a bathroom in the back.

Business Aviation Growth in China:
ABACE 2014 headlines also include the general outlook of business aviation in Asia, which is strong according to the deputy administrator for the Civil Aviation Administration of China (CAAC).

Asian Sky Group (ASG) announced its 2013 Greater China Business Jet and Civil Helicopter Fleet Report at ABACE on Tuesday. According to the report, Gulfstream is dominating the general aviation market in China with almost 40 percent market share. Bombardier follows at 30 percent.


Image © Asian Sky Group

In 2013, the business jet market in China grew by 21 percent, with the largest growth seen by Embraer, Dassault Falcon and Hawker. The G-550 and G-450 are the most popular business jets in China, according to the report.

Finally, between 2007 and 2013, the business jet market in Greater China has grown at a rate of 34 percent, significantly higher than the global rate of five percent.

The Business Mission Drives The Aircraft Mission

Image: Gulfstream G650

The Gulfstream G650 and Citation Ten vie for the world’s fastest business jet. But if you need to get an accident victim from the accident scene to a hospital fast, you most likely need a helicopter. Business jets are not designed to land beside the highway and helicopters won't do for a long cross-country flight. I'm stating the obvious, but how many aircraft choices seem to ignore this?

"To execute the corporate mission" is the answer to the business question "Why do we have an aircraft?" If the aircraft is a personal aircraft, the "why" may be "to enjoy flying." What type of flying is fun to one person can be very different from another. In the world of business aircraft, whether the business is high tech, services, hospitality, acute care, etc., the why of the aircraft must be tied into the why of the company. If it isn't, then the aircraft may be a mismatch to the company mission.

The closer the aircraft's mission can be tied into the reason for the corporation's existence, the more secure the aircraft (and aviation employees' jobs) will be. If IBM were having a tough year financially, no one would ever suggest that they get rid of all their computers! How close does the mission of your business aircraft fit into the reason your company exists? If the aircraft went away, would it have a negative impact on the ability of its users to successfully execute the company's mission?

Our own company mission is: The mission of Conklin & de Decker is to enable the general aviation industry to make more informed decisions when dealing with the purchase, operation and disposition of aircraft by furnishing objective and impartial information.

We are much too small to afford a corporate aircraft, but if/when we get there, the aircraft better directly support our ability to "enable the general aviation industry to make more informed decisions." The added value to the business from the person(s) using the corporate aircraft must exceed the costs of having that aircraft. If the leader of a corporation is worth $1 billion dollars to the corporation, and their use of the company aircraft enhances that value, then the $1 million budget for the aircraft should be easily defensible. If the mission of the health services company includes providing critical care to a large community, then the EMS helicopter should be easily defensible.

A company has a written mission statement that is used to guide its daily business. The aviation department should also have a written mission statement. That mission statement should support the mission of the corporation. The aviation department should be part of the corporate structure just as legal, human resources, IT and other departments. Your may not be making widgets, but you are making the making and selling of the widgets easier and more productive.

After that, the next step is developing the measurement criteria for the aircraft to enable management to determine how well the aircraft is at meeting its mission needs. Then, and only then, can you start the analysis of speed, range, payload, cabin, and performance needed to make a wise aircraft choice.

What you then end up with is measureable criteria that can be used to evaluate the aircraft choices. Each of those criteria stem from the assigned mission of the aircraft. The assigned mission of the aircraft is directly supporting the mission of the corporation. Thus, the answer to the question of why do we need eight seats and 2,400 NM range, is to support the corporate mission.

A caution here is that in some situations, supporting the senior leadership can be mistaken for NOT supporting the corporation. There are no easy answers to the "big boss uses company jet for private retreat" headline. But, that personal use of the corporate aircraft better be documented and reported.

Business aircraft of all types can be used to further the successful mission accomplishment of the corporation. These missions need to be in writing and clear enough so that the justification of the use of a business aircraft can easily be done.

What is your mission statement? Does your choice of transportation reflect it? Let us know in the comments section below!

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