A very high percentage of the business aircraft fleet is 20 years old or older. We as an industry keep finding ways to keep this older segment safe, efficient, reliable, and operating, which for many has become a pathway into our ownership ranks. First-time buyers have seen these price points as attractive. In some cases, operating costs may be slightly higher; however, with lower annual utilization the attractiveness of the acquisition cost outweighs the operating cost increases. Win-win.
With lower utilization comes the need for many of these owners to analyze the value of engine and APU programs, which are often 300-hour per year minimums against an actual annual utilization of what might be 150 hours or less. Paying what amounts to be twice the price for these programs no longer looks or feels like good insurance. As they approach the pre-owned market for these older aircraft, many buyers look very closely at remaining engine time before a scheduled event. Maybe even more than cosmetics or other upgrades. The aircraft with the most time remaining might win out over other aircraft with less remaining time. Many of these owners are considering their ownership to be the last for these aircraft. Investing in a long future for one of these aircraft is no longer the main criteria for selecting the right plane to buy. Residual loss rate is not always as high up in the discussions as it used to be, either.
Often, owners will buy the airplanes with a program and immediately drop the coverage rather than pay for what could be hundreds of annual hours not used. I still always fear the catastrophic failure and corresponding exorbitant cost for repair that will be borne by the owner without a plan.
Another area that is interesting and causing a more creative view of the aging aircraft is the cabin management equipment. Very often the planes of yesteryear have cabin switches or other entertainment equipment that is no longer supported by the original manufacturer. This does not mean there might not be parts around somewhere, but repair is usually no longer an option. What I am seeing happening here are upfront specific carve-outs from purchase agreements that exclude these unsupported pieces of equipment from the same delivery condition standards as the rest of the aircraft. After all, this might not be talking about a light that does not function; it may be just the switch. Solution: the chair across the aisle now becomes the new captain’s chair. Viola—creativity at work.
Throwing money at these aircraft for non-safety of flight items seems out of vogue. Keeping them relevant and important to our overall fleet and their owners is important. As we go into this new year and the fleet has another birthday, being smart and creative will be the hallmark for this segment. These aircraft may be at the end of their viability for the charter market but should still have many years of service remaining.