One of the most common questions we get at Guardian Jet is “should I enroll my airplane on an engine program?” The majority of the time this question has to do with the resale of an aircraft. Will it sell faster? Does the buy-in cost really get fully recouped when it sells?
The answer, like many others in aviation, is “it depends.”
Whether or not you should enroll your aircraft is mostly based upon which aircraft model you own, and specifically how the market for this model is reacting to engine programs. Here are some of the metrics we track to help us make this determination.
- What percentage of aircraft for sale are enrolled? How does this compare with the percentage of recent sales?
- Are buyers paying a premium for engine programs? A discounted rate?
- How long have aircraft been on the market with an engine program? Without?
- For the recent sales, how long did it take to sell aircraft on an engine program? How long for no program?
As an example we will take a look at the G450 market.
Current Market Enrollment (Number for sale enrolled/total number for sale)
G450: 10/20 (50%)
The G450 market is split with half the sellers enrolled in a program, but how does this affect buyers purchasing behavior? Compare this percentage to the same calculation with recent sales.
Previous 6 Months Sales Enrollment (Number sold enrolled/Total number sold)
G450: 3/9 (33%)
In the past 6 months the market has been favoring aircraft not enrolled on a program with 6 out of the 9 last sales not enrolled in a program. While this provides an important snapshot of the current buying tendencies we don’t want to overreact to the data due to its small sample size. For example, over the past 24 months 14 G450s have sold with an engine program compared to 15 without, closely resembling the 50% market enrollment much closer.
Engine program selling at a premium or a discount?
When Guardian Jet values an aircraft the penalty for not being enrolled in an engine program is equal to the buy-in to the program. When we look at recent sales we also look to see where aircraft enrolled and aircraft not enrolled are selling in relation to their Aircraft Value Calculation (AVC).
In the previous 6 months of sales in the G450 market, aircraft on an engine program sold at 97.8% of their AVC. Aircraft not on an engine program sold at 100.8% of their AVC. Over the past 6 months aircraft not on a program have been selling a slightly higher percentage of their AVC.
Days on the Market/Days to Sell
At Guardian Jet we track two statistics when determining how long aircraft are sitting on the market. The first is how long the aircraft currently on the market have been for sale. The second, how long it took the most recent aircraft to sell.
G450 Average Days on the Market
On a Program: 302 Days
No Program: 278 Days
G450 Average Days to Sell (Past 6 Months)
On a Program: 173 Days
No Program: 134 Days
G450 Average Days to Sell (Past 24 Months)
On a Program: 221 Days
No Program: 258 Days
Recent statistics once again show an advantage to aircraft not a program with the aircraft selling in a faster period of time. Interestingly, however, when we look at 2 years of data the advantage is with aircraft on a program.
Let’s summarize our G450 market findings:
Current Market Enrollment vs. Recent Sales Enrollment:
Slight Advantage to Not Enrolled
Recent Sales Pricing:
Slight Advantage to Not Enrolled
Days on the Market/Days to Sell:
Neutral (Recent Activity favor not enrolled while Historical favors enrolled)
Right now the G450 market data suggests buyers are slightly favoring aircraft not on an engine program, but not significantly. To make a recommendation as to what to do with your aircraft we have to take into consideration a couple of other factors.
The G450 market is only one market and this is only one snapshot in time. Every market reacts differently to engine programs and they must be studied to make an informed decision.
Where your engines are in relation to overhaul can also effect our recommendation to enroll. If the engines are right up against an overhaul the majority of the time we will recommend putting them on the program. Buyers tend to penalize aircraft up against an overhaul more than just the cost of the overhaul (which will be roughly equivalent to the engine program buy-in cost). Conversely, if you have on condition engines that are past the hard time equivalent for overhaul it typically makes little sense to enroll in a program. The cost to buy in to the program becomes more expensive than the overhaul.
If the program buy-in costs seem overwhelming but you’re in a market that has an advantage to aircraft enrolled one option is to enroll at closing. The aircraft can be marketed as “delivered on an engine program.” This will satisfy buyers wanting an aircraft enrolled on a program and you can enroll at closing with the proceeds from the sale. This also gives you flexibility if you find a buyer that does not want an engine program. One downside to this approach is if something is found in pre-buy you are not covered in the program but are still going to pay the enrollment costs.
Engine programs will occasionally offer significant fleet discounts if you are willing to enroll multiple aircraft at once, especially if you are willing to enroll new replacement aircraft on the program. This can make it advantageous to buy-in at the lower cost while the market gives you the full benefit of the program.
All things being equal we still like aircraft enrolled on an engine program. Engine programs are getting more popular as time goes by. I’ve taken a significant number of calls from buyers looking for an aircraft enrolled on a program I’m still waiting for the first person to ask for an aircraft not enrolled.