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From Brian Jacobson, Operations Director at the National Aircraft Appraisers Association: The market has been fairly steady since last month with no major changes observed. Older aircraft (piston and turbine alike) are continuing to experience downward price pressures as aircraft buyers opt for the latest avionics and features. Individuals looking to get into the piston market are facing a variety of obstacles that include high fuel prices, increasing maintenance costs and looming User Fees just to name a few. Individuals who thought about owning simply to fly on weekends or the occasional get-away are finding the costs of owning an aircraft more difficult to justify. Many of the older aircraft simply have not upgraded to newer avionics and buyers who are hunting simply pass the older aircraft by creating more downward pricing pressure and it is unlikely these older aircraft will recover anytime soon. Businesses who own their own aircraft have no problems with ownership costs as they are simply absorbed as an ongoing expense of operating their aircraft. In the turbine market, buyers are simply wanting newer equipment and newer avionics. "Glass panels" have created a discontinuity in the marketplace (in both piston and turbine aircraft) and newer pilots who have trained on this equipment want nothing to do with the older "steam gauge" panels. Wide Area Augmentation System or WAAS has also been an improvement in GPS navigation and buyers who have the money are willing to pay for aircraft with updated equipment. With newer bizjets coming on the market, the older jets may be acquired at bargain prices.
Propeller Overhauler Convicted of Fraud From Avweb: An Arkansas man who runs Mena Aircraft Propellers Inc. in Mena, Ark., has been convicted of fraud and making false statements concerning aircraft parts in connection with activities at his former business, Millennium Propeller Systems Inc. at Lancaster Airport near Dallas. According to bizjournals.com, John Wentzell Downs lost the FAA certification for his former business but kept on repairing and rebuilding propellers without letting customers know he was no longer certified. Downs also backdated maintenance records before he lost his FAA qualifications, although he testified that he didn't do that intentionally. One customer was billed $2,250 for work Downs was not legally qualified to perform. Downs will be sentenced on Sept. 21 and could face up to 10 years in prison and a $250,000 fine. He started Mena Aircraft Propellers in August 2006, but it's not known if that shop has proper certification. The report did not specify why Downs lost certification for his former business.
San Antonio Bizjet Manufacturer Facing Closure From Aero News: A Taiwan-US executive business jet company based in San Antonio, TX may be forced to close its doors soon, because it's apparently not attractive to investors anymore. The Taiwan Economic Daily News (EDN) said Monday the Taiwanese government had failed in its last two attempts to secure new investors for the Sino Swearingen Aircraft Corporation (SSAC), once in October 2006 and the second this past May. The government is making one last attempt to gain investors. SSAC produces the $5.5 million, 7-seat, twin-engine SJ30-2. It was certified by the Federal Aviation Administration in October 2005 and received Approved Production Inspection System approval in December of that year. The company is a joint venture between the Swearingen Aircraft Corporation and Taiwan's Sino Aerospace Investment Corporation and was founded in 1995 with backing from US Senator Jay Rockefeller. Components for the executive business jets are built in West Virginia, and assembled in San Antonio. SSAC has reportedly lost $20 billion since it opened its doors and Taiwan's parliament has forbidden the Taiwanese government from financing the company, according to the Deutsche Presse-Agentur. The SJ30-2 business jet is a high-performance twinjet aircraft with a range of over 2,500 nautical miles and the highest cruise speed in the light jet industry of Mach .83 (560 mph). This single pilot certified jet operates at altitudes to 49,000 feet and maintains a "Sea Level Cabin" pressure through 41,000 ft. The future of the company rests in Taiwan's economic ministry's last attempt to locate suitable investors. The first delivery is scheduled for next month.
Bidding War for Piper Heats Up From Avweb: Indian River County and the city of Vero Beach, Fla., have upped the ante to keep Piper Aircraft in Vero Beach and that presumably has kept the company's current home town in the running for an increasingly high-stakes competition for the storied planemaker. According to TCPalm.com The civic governments have approved a package that includes the purchase of the existing factory for $23 million and construction of a new facility for manufacturing the PiperJet at a cost of $17 million, which would be leased back to Piper rent-free for eight years. The state is also chipping in $20 million. In the ninth year of the lease, Piper would pay $2.5 million in rent and in year 10 it would go up to $3.4 million, after which increases would be based on the consumer price index. Piper announced last week that it had dropped Tallahassee, Fla., and Columbia, S.C., from its list of potential sites and now Vero Beach, Albuquerque, N.M., and Oklahoma City, Okla., are the only places in the running. Albuquerque and New Mexico are reportedly offering about $70 million in incentives and Oklahoma about $35 million -- in cash. After the jet plant is operational, Piper will employ more than 1,500 workers.
A banker recently asked me to appraise a twin engine piston aircraft. Unfortunately, the aircraft was undergoing an annual inspection as part of the purchase process and would not be available for several weeks making the physical examination of the aircraft and records difficult. To complicate matters further, the new owner wanted to close the deal the following week. In order to help the bank and their customer meet the scheduled closing date, I offered to provide a Market Analysis based only on the information from the advertisement and my experience looking at these aircraft. This type of report could be accomplished quickly but the Market Analysis is not a signed report and is not intended to be used as a Certified Appraisal as the intent is to assist the bank in their lending decision only. However, the Market Analysis will use current market data to approximate the aircraft's value presuming that all details and presumptions are correct and accurate. In our Market Analysis reports there is normally more detail about the aircraft in question than most signed reports from competitors (non NAAA Certified Appraisers), however the results are based on information provided to me which may or may not be correct. The bank was happy with the Market Analysis and did not see the need to have the aircraft appraised. Although I could have simply billed them for this work and moved on to the next assignment, I would like to think that NAAA members hold themselves to a higher standard than our competitors and the Market Analysis is not a document that helps the bank or the customer in the end. Even though the bank was involved in relationship lending with this high net worth individual, they needed a legal document in their records detailing the contents and condition of the aircraft at a specific point in time signed by a professional who physically examined the aircraft and records and who is not related to the deal whatsoever. The bank's customer may have a need for this type of report in the future as well (resolution of insurance issues comes to mind). As stated earlier, the Market Analysis report uses information from the sales ad and these ads focus on the "positives" of an aircraft only and factors such as damage history, missing log books and the avionics installed in the aircraft may be omitted and these items will have an impact on the final value. In the few aircraft repossessions I have been involved with, the aircraft is worth only a small fraction of the original loan amount due to missing log books or avionics which were removed. In these situations, the bank is in a poor position to prove that these items were there from day one and its fair to say that the individual who defaulted on the loan was a "good customer" at the time. In one extreme case, the aircraft was initially purchased and financed with several log books missing and the bank had little more than a number on the back of an envelope to justify the original loan amount. Needless to say, there were tough questions asked by the executives in the bank once my report detailed all of these issues. Customers change over time and the bank needs to ensure they understand the collateral they are lending against - regardless of the present relationship they have with a particular customer. The collateral is important enough for the bank to file a lien against it. This is bank policy and it represents responsible lending practices. Failure to document the collateral for the bank and the customer indicates that there is no value in having an independent evaluation and this "lack of value" may be due to the reliability of appraisal reporting in general. One key reason appraisal reports vary so widely on the same property can be linked back to the "desk top appraisal" report which is analogous to our Market Analysis report although the desk top appraisals are signed. I have written about the issues and risks associated with using desk top evaluations but the problem runs much deeper. Financial institutions who support desk top evaluations as legitimate appraisals propagate the perception that "you can get an appraiser to write a report with any number you want" because essentially that is the function of these reports. Manage your risks properly by having a trained professional examine the aircraft and its records. You should also obtain a report that will hold up in the court room if needed.
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