Growing Fleet Of Aging Bizjets Sits Idle

By: Matt Thurber
Aviation International News - September 2012

         What one expert calls an “overhang of unsold aircraft” is afflicting the business jet ecosystem. “These old business jets are not going to sell,” says Rollie Vincent, president of Rolland Vincent Associates. “Take a Hawker 700 with mega hours… There appears to be no market for it and it’s time to say goodbye.” This overhang, he adds, “is like a freight train coming.”

         The glut of old jets is a problem for many reasons, according to Vincent. At some point these jets have zero trade-in value. As jets age, the supply chain that formed to manufacture all the parts, avionics and complex components is gone. Another factor is the jets’ engines: “If the engines are getting close to overhaul, you’re looking at very little value,” says Vincent. “I’ve seen Falcon 20s with no engines. Those aircraft will never fly again, and at some point they get scrapped.”

         It used to be that third-world countries welcomed old business jets, but that is no longer the case. Many countries now limit the age of imported used jets. And, says Vincent, “emerging markets bring in new aircraft; they’ve been able to afford it.” Financing is elusive for buyers of older jets. “Most bankers won’t touch them anymore,” says Vincent. It’s also getting harder to find maintainers who know how to troubleshoot and repair old jets and who have the necessary equipment and parts. Vincent expects to see about 2,200 business jets taken out of service in the next 10 years.

Never Selling

         JetNet pulled some statistics on older business jets from its database for AIN. (See pie chart below.) Some models, stubbornly remaining unsold, are headed for the scrap heap. Lear 24s, for example, have no pulse, languishing on the market for an average of 2,605 average days– more than seven years.

         According to JetNet, 1,818 business jets have been retired from service since 1957. (These numbers include some aircraft that were likely registered with the FAA as preproduction prototypes, such as three Adam A700s–an airplane was never certified.)

         Logically enough, the majority of retired jets hail from earlier eras (see bar chart at right). Many aircraft delivered in the 1960s have been retired, as well as 1970s-delivered jets. Retirements of jets delivered in the 1980s taper down, and aircraft delivered in the 1990s have seen few retirements, according to JetNet. The bottom line is that in the next 10 years, if Vincent’s prediction is correct, the aviation industry will see about 2,200 business jets retiring from the fleet, which is 400 more than the number that retired during the first five decades of business jet manufacturing. Two thousand two hundred is a lot of jets to dispose of, especially when compressed into a period of 10 years rather than 50.

Where Do They Go?

         The high number of soon-to-beretired and already-retired jets poses a challenge for manufacturers of new jets. A Gulfstream III, for example, could be gold-plated with new avionics, paint, interior and a digital-age entertainment system, for less than the cost of a used GIV and far less than the cost of a new Gulfstream. The GIII is a perfectly good airplane, other than the fact that it faces a Stage III noise ban beginning Dec. 31, 2015. Two Stage III noise-reduction kits– from Hubbard Aviation and Quiet Technology Aerospace–are available for the GII and GIII, so the types may yet have some life left. Conversely, GIVs selling for around $5 million could swiftly kill off the GII/III market.

         Would it make sense for manufacturers simply to buy old jets and recycle them? Vincent doesn’t expect this to happen: “They have other fish to fry, including active research and development plans and new product development. They’re going to wait for somebody else to do it.”

         As for what owners should do with jets that no longer have any value, Vincent advises, “People need to know what they’re looking at. They’re looking at nothing. Just write it off.”

Broker Action

         Jeff Carrithers used to be an aircraft broker, but in 1995 the brand new World Wide Web beckoned and he launched Globalair.com, an aircraft sales listing service that includes airport and fuel pricing information and a proprietary system for aircraft brokers called BrokerNet. From his perspective, many older jets linger on the market because the owner can’t afford to sell at today’s lower prices and because there simply isn’t any demand. He sees Citation IIs, Falcon 10s and Westwinds as examples of types that are dying in the marketplace. “A lot of the problem for these owners is that they bought aircraft in the 2007-2008 heyday, and we’ll never see that kind of activity ever again. With the economic conditions today, operators will just park the aircraft.”  

Parked Airplanes

         Most of the airports in the Southwest U.S. that store unneeded and obsolete airplanes are repositories for airliners. At Kingman Airport in Arizona, Kingman Airline Services has just one business jet, a GII that will soon be dismantled, according to a spokesman. The company is currently storing 50 EMB-135s, forty 727s, 20 MD-80s, eight DC-8s and 20 CRJ200s. Some of these airplanes are headed for recycling, while others will fly again, and Kingman Airline Services can handle either destiny. Airplanes that will fly again are kept on life support–the required storage maintenance processes outlined by manufacturers. For airplanes that will never again charge down a runway, some parts are still worth salvaging, especially the engines. The remaining airframe is then dismantled by another company, which hauls away the metal for recycling.

         Norm Hill Aviation at California City Airport in the Mojave Desert opened in 2008, and since then founder Norm Hill’s company has parted out 21 Gulfstreams. He thinks there is still plenty of life left in old Gulfstream airframes and thus a steady demand for parts that he can supply.

         With the upcoming Stage III deadline banning non-hushkitted GIIs and GIIIs from flying in the U.S., Hill expects to see as many as 85 older Gulfstreams parted out in the next few years. But there are also plenty of airframes with relatively low hours and cycles that can keep flying, if hushkitted. “What I’m doing is going to be good for quite a while,” says Hill, adding that his technicians dismantle the airplanes carefully, not with a chainsaw but rivet by rivet when necessary, to preserve as many good components as possible. “We’re stocking all those parts with traceability data all the way back to birth.”

         One factor that accelerates the decision for owners to give up on their older jets is the cost of upcoming heavy maintenance events. This includes older Gulfstreams that are due for a 72-month inspection and a 5,000-landing event. “That’s $500,000 to $600,000,” according to Hill. Add to that the cost of overhauling the Rolls-Royce Spey engines, and that’s another $400,000 for the midlife service and $800,000 for overhaul, for each engine. “This perfect storm is there and people are falling into it,” he said.

         Hill currently has eight GIIs and two GIIIs in California and one GIII being dismantled in Opa-Locka, Fla. Hill says his company is providing a service to the used airplane community, because, he says, an owner can get more from selling a decent jet to Hill than from dumping it on the used market. And if Hill can extract more value by selling good parts, he says he shares that with the seller.

         Companies like Dodson International Aircraft Parts have long specialized in what CEO JR Dodson calls “demanufacturing” of obsolete aircraft. “The last three years we’ve been buying a lot of older business jets,” he said. Most of these are jets coming up on major maintenance events or overhauls and some are bank repossessions that can’t be sold. “There’s more supply than demand right now.” Dodson International also carefully removes valuable parts, and the leftover carcass is either stored at the company’s 120 acres in Rantoul, Kan., or sent to the smelter for recycling. The company has parted out more than 3,000 aircraft since opening in 1980. There are currently about 1,000 gutted airframes at the facility, which parts out about 100 aircraft every year, ranging from turbine helicopters to business turboprops and jets to Boeing 747s.

Serial Number 10

         And then there are the hopeless cases, such as a GII and Hawker 700 parked on the Western Jet ramp at Van Nuys Airport in Southern California. The buyer of the GII thought he was getting a great deal when he purchased the airplane–S/N 10, one of the last GIIs built at the Grumman facilities in Long Island, N.Y. He bought the airplane in Panama, and the seller promised to send the logbooks, but they never arrived. Western Jet founder Jim Hansen finally told the owner that to bring the GII up to safe and legal standards would take about $5 million, because all components would need overhauling, given the lack of documentation. “I’ll have to chop it up,” Hansen said sadly. “It’s not worth the parts.”

         A Hawker 700 parked next to the GII is also in a sorry state. The owner, perhaps unknowingly, let the jet sit at another maintenance facility for more than two years without covers on the engines or application of any preservation processes. “There is no value,” Hansen said.