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Asset Insight. Tony Kioussis

  • NAFA Administrator posted an article
    Used Aircraft Maintenance & Marketability Analysis – December 2020 see more

    NAFA member, Tony Kioussis, President & CEO of Asset Insight, shares the latest Used Aircraft Maintenance & Marketability Analysis.

    Although 2020 had its challenges, the year closed with strong sales activity, and pre-owned inventory ended the year substantially below the June peak. Lower Ask Prices reflected the sellers’ desire to close deals before year-end, but which models were impacted the most? Tony Kioussis explores.

    Asset Insight’s December 31, 2020 market analysis of 134 fixed-wing models, and 1,912 aircraft listed for sale revealed the sixth consecutive monthly contraction (9.4%) of Asset Insight’s tracked inventory fleet. Which models were impacted the most, though...?

    While the statistics were mixed for the jet groups, ongoing buyer focus on lower quality assets (aircraft with more, and more costly, upcoming maintenance events) was evident for Turboprops.

    The overall Quality Rating came down from November’s 12-month 5.371 high (best) figure to 5.348, but ensured the inventory stayed within the ‘Excellent’ range for the entirety of 2020 (per Asset Insight’s scale of -2.5 to 10).

    December’s Aircraft Value Trends

    The tracked fleet’s average Ask Price decreased for a second consecutive month, after increasing three months in a row. The 4.7% December decrease equated to a 2.4% value reduction for Q4, and a 3.9% decrease for the calendar year. By aircraft group:

    • Large Jet average Ask Prices increased 0.8% during December, and 1.8% during Q4. However, the group’s Ask Price was down 11.9% for the calendar year.
    • Mid-Size Jet prices fell another 8.4% in December; 10.4% in Q4; and 6.4% for 2020.
    • Light Jet ask prices decreased 1.5% in December and 5.4% for Q4, but was the one group to post a gain for the year at 3.0%.
    • Turboprop ask prices lost another 0.7% in December, and, although up 0.6% during Q4, lost 1.5% during 2020 calendar year.

    December’s Fleet for Sale Trends

    Following its peak in June, Asset Insight’s tracked fleet has posted six consecutive monthly availability decreases (-63 units in December), and, Year-to-Date (YTD), inventory was down by 12.4% (270 units) compared with December 2019.

    • Large Jets: Inventory decreased 12.9% (64 units), ending the year with the exact same inventory figure as for December 2019.
    • Mid-Size Jets: Recorded a 10.8% decrease (63 units), ending 2020 with a 20.9% decrease (138 units).
    • Light Jets: Inventory decreased for the sixth consecutive month, this time 6.6% (39 units), leading to a YTD inventory decrease of 13.9% (89 units).
    • Turboprop: Through its fifth consecutive monthly decrease, the group’s inventory decreased 7.5% in December (33 units), resulting in a YTD decrease of 9.6% (43 units).

    December’s Maintenance Exposure Trends

    Buyer focus on jets with lower levels of Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) raised/worsened figures for the remaining inventory. Meanwhile, turboprop buyers clearly focused on lower Quality assets, possibly due to their price. The resulting figures, by group, were as follows…

    • Large Jets: Worsened/increased 1.2% during December to a figure slightly worse than the 12-month average (as well as 3.7% YoY).
    • Mid-Size Jets: Rose 0.5% to a figure only slightly better/lower than the 12-month high/worst value, although the group’s YoY figure improved by 4.0%.
    • Light Jets: Worsened/increased another 2.5% to post the group’s 12-month worst/highest value, while concurrently worsening the YoY figure by a massive 46.4%.
    • Turboprops: Improved an additional 1.9% to post the group’s third consecutive 12-month low/best figure, while recording a Maintenance Exposure decrease/improvement of 17.7% during the year.

    December’s ETP Ratio Trend

    The overall tracked inventory’s ETP Ratio worsened/increased to 72.8%, only one point better than the 12-month worst/high figure. It compares negatively with October’s 69.8% and November’s 70.1% lower figures.

    The ETP Ratio calculates an aircraft's Maintenance Exposure as it relates to the Ask Price. This is achieved by dividing an aircraft's Maintenance Exposure (the financial liability accrued with respect to future scheduled maintenance events) by the aircraft's Ask Price.

    As the ETP Ratio decreases, the asset's value increases (in relation to the aircraft's price). ‘Days on Market’ analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s Days on the Market (DoM) increases, in many cases by more than 30%.

    During Q4 2020, aircraft whose ETP Ratio was 40% or greater were listed for sale 64% longer than assets with an ETP Ratio below 40% (277 days versus 454 days). How did each group fare during December?

    • Turboprops: For the past 13 months, Turboprops have registered the best/lowest ETP Ratio. In December, the group’s 39.5% (its fourth consecutive best 12-month Ratio) represented the first time in years that any group posted a figure below the 40% excessive Maintenance Exposure point.
    • Large Jets: Maintaining second position with an ETP Ratio of 61.0% – yet again better/lower than the group’s 12-month average – the Large Jets’ ETP Ratio was, nevertheless, worse than November’s 59.4%.
    • Mid-Size Jets: Posting a better-than-average figure, the Mid-Size Jets’ ETP still rose/worsened to 71.8% from October’s 12-month low/best 68.9% and November’s 69.0%.
    • Light Jets: Continued making history by registering a second consecutive record high/worst figure, this time 106.8%, compared to November’s 102%.

    Excluding models whose ETP Ratio was over 200% during one of the previous two months (considered outliers), following is a breakdown of the business jet and turboprop models that fared the best and worst during December 2020.

    Click here to read the full report.

    This report was originally published by AvBuyer on January 20, 2021.