Aviation Business Daily: Oct 16, 2018
When the Market is Low It’s Important to Keep Your Aircraft’s Value High — The Engine Assurance Program (EAP) Can Help
Low used aircraft inventories mean the demand for pre-owned business jets is high. On average, Falcon 50s and 900Bs for sale without an engine program tend to sit on the market longer and capture below wholesale pricing when they do sell. Maintaining engines using EAP’s hourly maintenance program helps retain the value of the aircraft and ensures the equity in the engines is passed on to the next owner.
Jetnet, the aggregator and analyst of industry data, recently issued its market update for the first half of 2018. The report
states that June 2018 was the lowest ‘for-sale’ percentage (9.1 percent) for business jets since the great recession began. The key to maintaining an aircraft’s value is to maintain its enginesusing an hourly maintenance program. This is especially true for older aircraft.
The most expensive part of any aircraft is the engines, a maxim becoming truer as the aircraft age and the airframes depreciate. Taking an older aircraft off an engine program almost certainly seals its fate, guaranteeing that it will be parted out when the engines are due for a heavy inspection. If they are not enrolled on an engine program, then there is very little value left in the aircraft when one, two or all three engines are due for a major inspection or shop visit.
EAP has saved three Falcon 50s from being parted out in the last 4 months by offering a high-quality alternative to engine coverage for the older engine platforms. When EAP keeps an aircraft flying for six or eight more years, there is an entire revenue stream/trickle-down effect that feeds the whole industry and benefits all — pilots, parts resellers, maintenance companies, fuel resellers, engine shops, avionics shops and on and on. When all the equity is removed from the engines, the aircraft slip into a salvage value category making them much easier to classify as ‘beyond economic repair.’
Even high-pedigree, single-owner Falcon 900Bs are not immune. Two recent 900Bs that were parted out also were not on an engine program. In fact, Falcon 50s and 900Bs are 75 percent more likely to be taken out of service and parted out if they do not have an engine program when the engines come due for heavy inspections. Here is a standard example: a 1988 model year Falcon 900B that would be worth $3.5 million if on an engine program is now worth $1.8 million because it is not on an engine program and has engines coming due for MPIs or CZIs. The aircraft also has a C check due and needs paint, interior and avionics upgrades. When everything is added up, the inspections and modifications will cost more than the airplane is currently worth. Therefore, the decision is made to part it out. If it had been enrolled on an engine program, however, it would have made sense to make the investment and keep the aircraft flying.
In this scenario, an asset that may have kept flying for another 8 to 10 years is now irreversibly taken out of service for preventable economic reasons. That means one less aircraft needing pilots, maintenance, fuel, parts, avionics and interiors upgrades. There is one less aircraft to keep a mechanic busy and fewer engines to keep engine shops busy. Tenured pilots will even sometimes retire when their aircraft gets parted out. Every time an aircraft leaves the fleet, the revenue stream associated with it dries up, too.
This is especially sad considering that Falcon 50s are now being operated more economically than ever before. When you consider how much parts pricing has dropped to support these aircraft and combine the savings from having the engines on EAP, there has never been a better time to own and operate one. For example: a main cabin door on a Falcon 50 cost $180,000 5 years ago; 2 years ago one sold for $80,000, and 7 months ago one sold for $16,000. Much has changed on the cost equation to operate these aircraft, making them an excellent value.
EAP’s full-service engine program provides comprehensive coverage for up to 30 percent less on TFE731-powered EAP aircraft than other engine programs while using the same high-quality engine MRO shops as the competing programs. With EAP’s lower costs and full service, aging aircraft can stay in the air longer, giving life to these still highly versatile airframes.
EAP provides a high-quality alternative for engine coverage on older JT15Dand TFE731-powered aircraft by offering Comprehensive Engine Coverage. It covers scheduled and unscheduled engine maintenance, including life-limited parts, LRUs, R&R, shipping, rentals, line maintenance and 24/7 access to Engine Assurance Program's AOG assistance. Catastrophic coverage is also included. Operators get full coverage with only 75 hours as the yearly minimum.
The Engine Assurance Program (EAP) was formed to provide an affordable hourly engine maintenance program option for operators of TFE731-2, TFE731-3, TFE731-5, JT15D-4 and JT15D-5 -powered aircraft. The Honeywell TFE731 and Pratt and Whitney JT15D power more than 3,000 business jets. Using EAP’s oversight, the engines can be operated more economically. EAP is headquartered in Dallas, Texas.
For more information, contact Sean Lynch by email or call +1.214.350.0877.