NAFA member, Anthony Kioussis, President of Asset Insight, shares report on In-Service Aircraft Values and Maintenance Condition.
Asset Insight’s market analysis on December 31, 2018 (covering 94 fixed-wing models and 1,591 aircraft listed for sale) revealed a 4.3% decrease to the tracked inventory fleet (71 units), with all four groups contributing to the reduction...
Small Jets led the way with a 6% decrease, Medium Jets were next at 5.1%, Turboprops decreased 4.3%, while Large Jets posted the smallest inventory fleet decrease at 2.8%.
Sales transactions put a serious dent in the inventory fleet during the last month of 2018. Large Jets won the 2018 value competition, while Medium Jet sellers absorbed the largest value loss. Small Jets and Turboprops experienced a minor value change – the former an improvement and the latter a decline.
Inventory Fleet Maintenance Condition
Fleet asset quality remained steady as 2018 closed. Large Jet transactions focused on lower quality, and higher priced assets (presumably due to good values) while the asset quality of Medium Jets sold was mixed.
Higher quality assets traded among the Small Jet group, while Turboprop inventory quality recorded a 12-month best with respect to the number of upcoming maintenance events for the remaining fleet, although these will, on average, be more expensive to complete. Overall, the tracked inventory posted the following:
The Quality Rating remained in the ‘Excellent’ range, although it decreased a bit to 5.300 on Asset Insight’s scale of -2.5 to 10.
The year ended with Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) remaining virtually unchanged since November and, at $1.415m, the figure was slightly better (lower) than the 12-month average.
Maintenance Exposure to Ask Price (ETP) Ratio
The ETP Ratio is a useful indicator of an aircraft’s marketability. It is computed by dividing the asset's Maintenance Exposure (the financial liability accrued with respect to future scheduled maintenance events) by its Ask Price.
‘Days on Market’ analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s time on the market increases, usually by more than 30% and, during Q4 2018, assets whose ETP Ratio was 40% or more were listed for sale over 57% longer on average than aircraft whose Ratio was below 40% (246 versus 386 Days on Market).
December’s analysis revealed that nearly 53% of all tracked models and over 62% of the tracked fleet posted an ETP Ratio above 40%. The tracked fleet’s ETP Ratio worsened slightly to finish 2018, increasing to 65.6% from November’s 65.1%.
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This article was originally published in AvBuyer, Vol. 23, Issue 2 2019, p. 22.
