News From the NAAA

From Brian Jacobson, Operations Director of the NAAA (with minor editing): 

It has been interesting to see how the market has reacted this year to the increased cost of fuel and the new technology aircraft and avionics that has everyone drooling.  At Sun n Fun and Oshkosh aircraft manufacturers showed concept aircraft or products new to the market.  The avionics manufacturers were doing the same, and there was no shortage of pilots and aircraft owners to inspect and learn about the latest gear for the cockpit.

In the meantime the values on piston engine aircraft continue to decline, for the most part.  Aircraft that meet the basic requirement for today’s purchaser sell very quickly, but there are few of those.  Buyers in today’s market want it all.  They expect low time engines, good paint and interior, and of course upgraded avionics.  Aircraft that are not so equipped will be a long time selling. 

Pricing an aircraft to sell in this environment is tough for an owner.  Many have put off spending money on their craft figuring they would sell before the engine overhaul was due.  And they decided that they’d let the next owner do the paint and interior because they would want their own scheme and colors.  And avionics?  Well, what was installed was good enough for the present owner so why shouldn’t it be for the next one? 

I talk to people regularly who say they don’t need the fancy new equipment to get from place to place.  Of course those people are sellers who don’t want to recognize what it is going to take to sell their aircraft.

A friend of mine who is a CPA says that no matter what someone wants to sell if it is priced for the market someone will buy it.  It seems, though, for many aircraft on today’s market the sellers have not found the right price.  Many of them need our help.

Late model turbine aircraft are still moving along.  We have seen an increase in turbine appraisals over the last 12 months.

Cessna Sets Life Limit on Conquest; Airplanes Grounded in Australia

From AVweb:

Operators of Cessna 441 Conquest II twin turboprops must comply with a life limit of 22,500 flying hours, Cessna has said, and several of the aircraft have been grounded. "As part of the continuing product safety process, Cessna looks at data from test articles and from field reports regarding the structural integrity of its aircraft," Cessna spokeswoman Pia Bergqvist told AVweb. Based on test and field data, Cessna has issued a Supplemental Inspection Document recommending the life limit for the aircraft. While most of the Conquests operating around the world are well below this limit, according to Bergqvist, several aircraft in Australia are beyond it, and those aircraft have been grounded. Australia's Civil Aviation Safety Authority has allowed one year for alternatives to be explored that could extend the safe operation of the Conquest beyond the current life limit. It's not known if any Conquests in the U.S. will be immediately affected, industry groups are looking into it.

AOPA spokesman Chris Dancy told AVweb his organization has been in contact with the Cessna Pilots Association but discussions are preliminary. The 441, a pressurized version of the 404, was first delivered in 1977. General-aviation aircraft certified under FAR Part 23 must have a life limit set by the manufacturer on critical structures such as wing spars, but an overall life limit is not required.

Eclipse 500 VLJ Draws $1.8 Million Bid on eBay

Eclipse Aviation CEO Vern Raburn announced at Oshkosh that one Eclipse 500 jet would be auctioned off on eBay and the owner could take it home right away, without having to wait until 2009 for their turn to come up. "We'll let the market decide what that could be worth," Raburn said, and this week, the company announced the results of its auction. Morten Wagner of Denmark placed the winning bid of $1,833,945 at 2 a.m. local time on August 11, outbidding five other contenders. Wagner plans to accept his Eclipse 500 in Albuquerque this week, the company said. "I was just sitting there, holding my breath, watching the auction run out," said Wagner. "When I saw I had won, I was delirious; I woke up the whole house and told everyone I just bought an aircraft on Eclipse's private marketplace."

Wagner, a 35-year-old internet entrepreneur, plans to use the jet for business travel throughout Europe, and to travel between his homes in London, Spain, and Denmark. Wagner is a pilot and currently flies a Cirrus SR22. "The fact that we can sell an early Eclipse 500 on an open market for more than $1.8 million demonstrates the enormous demand for very light jets," said Raburn.

VLJ Market Looking Brighter, According to Analyst

From AVweb:

A European company that has studied the emerging very light jet market says it's painting a rosier outlook for the sector than it has in the past but there are more caveats than a law library in his assessment. Phillip Butterworth-Hayes, of PMI Media, told AVweb Sunday in a podcast interview to be released on Friday that interest in VLJs seems to be sustained and new market possibilities are opening up but (and there are several of them) the next 12 months will likely be the harbinger of things to come, especially in the air taxi business." A lot will depend on just how robust the aircraft are," Butterworth-Hayes, author of the report, said. He said they're going to be called upon to fly far more hours in more rugged conditions than business jets are normally flown and many are far less expensive than the low-end business jets.

He said the other significant factor will be the world economy. Traditionally, companies buy jets when times are good. He said all indicators point to a downturn and that will likely mean the red-hot market for jets will soften. Butterworth-Hayes maintains that the models most likely to fly out of the uncertainty and market saturation that's looming will come from companies that already build, certify and support fleets of jets.

Risk Management - Are you ready?

The recent cut in interest rates will most like result in new business for the bank either in aircraft purchases or refinancing opportunities for existing owners.  Is your bank ready?  If refinancing, do you understand how the value of the collateral has changed over time?  Is this collateral properly documented now?  Many times a bank will rely on information from a published guide or consult with the selling broker/dealer to tell them what the aircraft is worth but in those situations, who is the evaluation expert and who will stand behind those numbers both now and in the future?   Does your bank need more than just a simple evaluation without any details to support the analysis?

When using any published source to determine an aircraft's value, the user can be faced with issues they are not prepared to address.  For example if the aircraft has missing log books or damage history, the typical user of the published guide will not know how to address this with any degree of confidence.  Most published guides shy away from calculating damage history or addressing missing log books but the reality is that those situations do occur more frequently that you may realize.  One of the advantages of belonging to a national aircraft appraisal organization such as the NAAA is that members are made aware of changes in the marketplace that can impact the final result.  Missing log books and damage history are good examples here.  While the existing fleet of aircraft continues to age (on average), those aircraft with previous damage history are not viewed as negatively as they once were.  A missing log book on the other hand is not as easily forgiven and tends to carry a more serious impact to the overall value than it did in the past.  Each situation is different and there is no flat percentage deduction that can or should be applied.

If you are getting ready to refinance and have an NAAA Certified Appraisal Report on file, your bank is in good shape and you may not need another report.  On the other hand, if there is no Certified Appraisal Report on file and there is no evidence that anyone has ever physically examined the aircraft and records then your bank needs assistance.  Regardless, Plane Data, Inc. is here to help you.

Banking customers look to their bank to provide professional assistance and service.  I'm not sure that a quick analysis based on a small number parameters provides that appearance.  Some banks also support relationship banking and are less focused on the collateral but if this is truly the case, would a bank consider NOT filing a lien on the aircraft? 

Most bankers simply don't understand the complexities of evaluating and documenting aircraft and most individuals who own or buy aircraft don't either.  Plane Data's objective is to help our clients better understand the aircraft in question so that they can make informed lending and purchase decisions. 

When you need and expert, call an expert.  Plane Data, Inc. can make sure you are ready to help your customers.