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Key Items to Note

03-15-2011

Free Webinar Scheduled for 3/25/11.  Make Money Financing Aircraft While Managing the Risk and Collateral.

REGISTER TODAY!

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Call 800-895-1382 for more information or to see how Plane Data, Inc. can help you.

Market Summary

There appears to be a higher than normal amount of interest in financing aircraft and the NAAA reports that many small banks are contacting members for assistance.  My opinion is that these banks are looking for revenue opportunities and aircraft financing is one consideration.  I have already set up a free webinar on this topic for those banks who are thinking about getting into aircraft financing or who finance occasionally and would like to know more.  Registration is required but if you would like to know more or you did not get the announcement, please let me know. 

The FAA recently forecast that General Aviation is expected to grow by an average of 0.9% each year for the next 20 years.  The largest share of this growth is forecast to be in turbine aircraft and helicopters.  Piston aircraft are expected to grow by about 0.7% per year over this period.  The FAA also forecasts that there will be an overall 2.2% increase in hours flown each year.  Again the largest increases are in the turbine and helicopter segments. 

If the bank's business model is based on financing aircraft less than 10 years old AND excellent credit ratings, then business growth will most likely be limited (single digit percent growth or less) unless the bank does something different.  It is clear that there will be an increase in the use of General Aviation aircraft and older aircraft are not going away just because new ones are being built.  How will your bank take advantage of this opportunity AND manage the risk and the collateral effectively?

In regards to the market, the general opinion is that the market has once again been "flat" over the past month but this is not really a bad situation.  As always, there are "puts and takes" to aircraft values from month to month but with the exception of a few models, prices and values are not declining at the sharp rate they once were and several pieces of good news were noted regarding overseas sales for aircraft manufacturers.  Although fuel prices may impact the decision to buy on the piston end, the businesses who elect to purchase and operate turbine aircraft will continue to do so and roll the increased fuel prices into their cost of operation.  Generally, this continues to be a buyer's market.

JetNet's report of piston twins shows a fairly stable inventory which is consistent with the overall market.  Average asking prices appear to be declining while the average number of days these aircraft are on the market continues to increase.  It also appears that there were no repossessions of piston twins in the past month.

The JetNet report of all business jets continues to show a slight decrease (less than 2%).  Average asking prices showed a slight increase while the average number of days these aircraft are on the market decreased slightly.  Only two aircraft were foreclosed on during the past month which is a decrease from eight the previous month.

A review the more popular turboprops shows a slight decrease in the inventory (less than 0.5%) from the past month.  Asking prices remained steady and the average number of days these aircraft are on the market increased slightly.  JetNet reports NO foreclosures on the models of turboprops reviewed over the past month.

Of course, each make and model is different and unique.  Any attempt to attach a broad overview to a specific make or model would be incorrect as some of these aircraft are doing better in the market than others.  If you have a specific question about the trend for a specific make, model or year, you will need to call 800-895-1382 for additional information.

NAAA Institutes Reporting changes

The objective of the appraisal is to REPORT the value of the aircraft.  Therefore, when changes occur in the marketplace impacting aircraft values or how aircraft are evaluated, these need to be incorporated into our reports and the reporting process.  As a result, clients should expect to see changes in the report itself and how aircraft are evaluated in the April/May timeframe.  These changes are a result of research by the NAAA staff on actual selling prices of aircraft in the marketplace.  These types of updates and adjustments are somewhat automatic but it is another advantage of using a trained professional to document and evaluate aircraft instead of methods that use only one data source and do not involve a physical examination of the aircraft and records.

The industry change to aircraft registrations and the need to re-register aircraft will now be identified more prominently in the report.  Damage history, especially an aircraft with multiple incidents of "serious" damage will be calculated differently as a result of observed penalties the market places on aircraft with those attributes.

If you have an appraisal on file that was completed recently, it does not mean that the result or the report was incorrect.  Appraisal reports are a snapshot of the aircraft, its configuration and its value at a specific point in time.  However, if it has been over a year since the aircraft was appraised then you may want to consider having it reappraised to keep the bank's records up to date and valued against the current market and current parameters.

A Question for the Appraiser

Q:  Why are "new" aircraft not in the NAAA database of values?

A:  It has to do with statistical accuracy.  The NAAA database is based on sales data.  As a result, rare aircraft or new aircraft may not be captured in the NAAA database of values until sales reach a specific threshold and the "degree of error" - statistically speaking - is relatively small.  This does not mean that the aircraft cannot be appraised but in some situations the professional appraiser will need to develop their own method of evaluating aircraft and establishing an opinion of value when aircraft fall into this category.  It is a rare event for a typical request to involve an aircraft less than two years old or the aircraft is so unique that it is not captured in the NAAA database of values as the database contains information on thousands of makes and models but this type of situation happens from time to time.

Normally, it takes new aircraft about two years of market exposure before they appear in the NAAA database or the aircraft's population in the U.S. exceeds about 200 units . 

Key Items to Note

03-15-2011

Free Webinar Scheduled for 3/25/11.  Make Money Financing Aircraft While Managing the Risk and Collateral.

REGISTER TODAY!

other information

Call 800-895-1382 for more information or to see how Plane Data, Inc. can help you.