Pre-owned Market: Challenger 300 &350 – Asian Sky Quarterly 2022 Q1

HISTORY AND MODEL INTRODUCTION

During the late 1990s there were arguably only three categories of business jets: Small, Mid-size and Large. However, over the past 20 years this has changed, as manufacturers looked to fill in the gaps in-between the categories. These we have Heavy, extra large, corporate airliners, Ultra-long-range and the longer-than Ultra-long-range categories introduced to the market.

But when the Bombardier Continental, as the Challenger 300 was originally known, was first introduced in 1999 it had a larger cabin than the existing Mid-size cabin aircraft, but with and airframe and weight that did not fit into the “Large” category. Not wanting to class it as a Mid-size, Bombardier decided to call the aircraft “Super Mid-size”, as a way to differentiate it from smaller Mid-size aircraft.

The Challenger 300 has a large and beautiful flat floor cabin, with a rear baggage compartment that is accessible in-flight. In its normal configuration the Challenger 300 carries eight passengers, which makes it ideal for both corporate and family use. Its cruise range is around 3,100 nautical miles (5,741 kilometers) at a speed of Mach 0.8. At launch it was priced at USD$18 million – which was around the same price as its competitors.

The Challenger 300 is powered by a pair of Honeywell HTF7000 engines, which have high thrust power. This gives the aircraft a significant advantage with the distance that it needs to takeoff or land, which has been welcomed by many travelers (and their pilots) as the Challenger 300 can access airports with smaller runways.

The Honeywell MSP maintenance program that is offered with the aircraft has proven to be a cost-effective factor, as it reduces the aircraft’s operating costs, maintenance downtime and helps preserve the residual value. Having the aircraft enrolled on the MSP program has made a big difference to the resale value of the Challenger 300.

The updated Challenger 350 was first revealed in 2013. Compared to the 300, the Challenger 350 has a longer wingspan, larger cabin windows, and an upgraded avionics suite. The engines have also been upgraded and feature a higher thrust rating for better fuel efficiency. This increases the 350s maximum takeoff weight and adds a further 100nm in range over the 300.

FLEET DISTRIBUTION

The Challenger 300 and its successor the Challenger 350 are amongst the best-selling, and most loved business jets. Its competitive operational costs and robust design make it perfect for US domestic coast-to-coast flights, and a good proportion have also found homes with operators in Europe.

There was a smooth transition in deliveries when the 350 took over from the 300. A total of 70 Challenger 350s were delivered in 2015 when the 300 model was phased out of production and delivery. The average age since delivery for a Challenger 300 is around 13 years old. For a younger 350, it is about 5 years old.

According to Amstat, as of May 2022, NetJets had 85 Challenger 350s in operation, making it the single largest Challenger 350 operator in the world. VistaJet currently has 21 Challenger 350s in operation. Flexjet, as the Challenger 300’s launch operator, has a total of 69 Challenger 300/350s. Between them, NetJets, VistaJet and Flexjet operate around a quarter of all Challenger 300s built.

In the Asia-Pacific market, the Challenger 300 received a lukewarm reception, as we have seen few operators favor it in the region. In the Asia-Pacific Business Jet Fleet Report YE2021, there are only two Challenger 300/350, out of 99 Bombardier aircraft in mainland China. Across the region there are only eight Challenger 300/350s in operation – in comparison, there are 54 Global 6000 in the region – coast-to-coast travel has not become a common concept amongst Asian travelers, but we expect the demand for this size category to pick up in the future as we see demand for shorter range travel increasing.

MARKET CONDITION

In early 2015 the market inventory value (asking price x total listed fleet for sale) for the Challenger 300 crept above USD$400 million, with more than 40 aircraft on sale. By January 2019, merely four years later, the inventory value dropped 60% to USD$150 million with less than 20 aircraft available on the pre-owned market. On average there were between three to five transactions each month, which in many brokers’ eyes was a good sign of recovery in the market at the time.

Pricing-wise, before COVID-19, the market supply for the Challenger 300 series was quite active. The average asking price for a Challenger 300 before COVID-19 was stable at around USD$10 million, with lots of aircraft in the five-to-ten year range available.

The pandemic certainly stimulated the pre-owned market, as it has brought awareness to wealthy and corporate users about the benefits of flying on business jets, especially as travel restrictions have helped stimulate very healthy charter demand, as well as the current frenzy in the pre-owned market.

Given the Challenger 300s characteristics and market reserve, it has easily become one of the most pursued models on the pre owned market. Although the original Challenger 300 is now out of production and has an aging fleet, the average asking price has still increased since mid-2020 due to high market demand. The same also happened to the Challenger 350. It was very hard to find an available Challenger 350 between Q4 2021 to Q1 2022.

The percentage of the Challenger 300 fleet for sale has dropped to just ten aircraft, equivalent to around 2% of all Challenger 300s produced. In a balanced market the percentage available would be around 8-10%, so it would be fair to say that the Challenger 300 series is very well favored in the market.

Bombardier has announced a further upgrade called the Challenger 3500. With the original Challenger 300 series doing so well it’s hard to see how the 3500 will not be a big seller. Having said that, it is hard to go wrong with either a pre-owned or a brand-new aircraft, since for the Challenger 300 series, it is truly an icon of the industry.