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  • NAFA Administrator posted an article
    Used Aircraft Maintenance Analysis – July 2020 see more

    NAFA member, Tony Kioussis, President of Asset Insight, shares Asset Insight’s July 2020 market analysis.

    Asset Insight's Juluy 31, 2020 market analysis revealed a 1.2% inventory decrease to the tracked business aircraft fleet – the first monthly reduction since January – along with an Ask Price decrease of 1.5%. Which models were impacted the most?

    As July ended, Asset Insight’s tracked fleet of 134 fixed-wing business aircraft, and 2,331 aircraft listed for sale equated to a 1.2% inventory fleet decrease compared to June, and a year-to-date (YTD) increase of 6.8%.

    The tracked fleet’s Quality Rating dipped a bit from June’s 12-month best figure, and the latest ‘for sale’ fleet mix increased the anticipated cost for upcoming maintenance events close to the 12-month high (worst) figure. However, July’s 5.293 Quality Rating kept the inventory within the ‘Excellent’ range on Asset Insight’s scale of -2.5 to 10.

    July’s Aircraft Value Trends

    Average Ask Price decreased 1.5% in July, leading to a 5.0% value decline since the start of 2020. By aircraft group, the figures were as follows:

    • Large Jets: This group fueled the loss with a reduction of 2.4%, and a total value loss during 2020 of 11.8%.
    • Medium Jets: Ask Prices increased 1.5% during July but were still down 3.7% YTD.
    • Small Jets: The group posted a 12-month high figure through a 0.3% gain in value and is now up 9.2% for the year.
    • Turboprops: Ask Prices gained 2.8% but are still off by 2.4% during 2020.

    July’s Fleet for Sale Trends

    The tracked fleet’s total number of aircraft listed for sale decreased 1.2% in July (29 units), reflecting a YTD inventory increase equating to 6.8% (149 units).

    • Large Jet Inventory: Decreased slightly by 0.4% (two units), but remains up 14.8% (64 units) YTD.
    • Medium Jet Inventory: Availability was down a substantial 2.7% (18 units) for July, bringing the YTD increase down to a single unit (0.2%).
    • Small Jet Inventory: Decreased 2.6% (18 units) in July but was still up 6.4% YTD (41 units).
    • Turboprop Inventory: The only group to post an increase, Turboprops were up 1.2% (nine units) for the month, and inventory has now grown 9.6% (43 units) YTD.

    July’s Maintenance Exposure Trends

    Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) increased (deteriorated) 3.1% in July to $1.419m, signaling upcoming maintenance for the latest fleet mix would be close to the 12-month high (worst) figure. The last time our tracked fleet posted a higher (worse) Maintenance Exposure figure was in October 2019. Individual group results were as follows:

    • Large Jets: Worsened (increased) 1.0% for the month, but the figure was better than the group’s 12-month average.
    • Medium Jets: Worsened by 0.7%, but the figure was only slightly above (worse) than last month’s 12-month best number.
    • Small Jets: Suffered greatly from the reconstituted inventory, increasing 15.3% to set a 12-month worst (high) figure.
    • Turboprops: At the other end of the spectrum, Turboprops posted a 12-month low (best) figure through a 3.6% decrease.

    July’s ETP Ratio Trend

    The inventory’s ETP Ratio rose (worsened) to 71.2%, from June’s 69.9%, following three consecutive monthly improvements (decreases), bringing our tracked fleet to just below its worst (highest) 12-month figure.

    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 Q2 2020, aircraft whose ETP Ratio was 40% or greater were listed for sale nearly 53% longer than assets with an ETP Ratio below 40% (251 days versus 384 days). How did each group fare during July?

    • Turboprops: For the eighth consecutive month, Turboprops registered the lowest ETP Ratio at 41.8%, a 12-month low (best) figure that continued earning them the top spot among the four groups.
    • Large Jets: Improved for the third straight month, this time to 61.4% from June’s 64.0%, thereby remaining in second place.
    • Medium Jets: Deteriorated (rose) slightly to 73.7% from June’s 73.4%, with the figure remaining better (lower) than the group’s 12-month average.
    • Small Jets: Made the environment for many sellers even more challenging through a Ratio increase to 96.5%, a 12-month high figure that was substantially worse than June’s 85.8%.

    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 July 2020.

    Most Improved Business Jets and Turboprops - Asset Insight July 2020

    Most Improved Models

    All six ‘Most Improved’ models posted a Maintenance Exposure decrease (improvement). Ask Price, on the other hand, was not as uniform, with the Beechcraft King Air C90, Bombardier Global Express, and Cessna Citation II, posting decreases of $5,976, $101,143, and $23,789, respectively. The remaining models experienced the following price increases:

    • Gulfstream GIV-SP (MSG3): +$2,102,500
    • Dassault Falcon 50: +$84,286
    • Beechcraft King Air B200 (pre-2001): +$9,247

    Gulfstream GIV-SP (MSG3)

    Eclipsing all models in July is the one that occupied the ‘Most Deteriorated’ spot during our June analysis. It earned the top position through a Maintenance Exposure decrease exceeding $852k, along with an Ask Price increase exceeded $2.1m. But that does not bring visibility to the full story.

    There were two aircraft listed ‘for sale’ in June carrying Ask Prices. When the asset carrying an Ask Price approximately one-third lower than the remaining one sold, the figure naturally shifted dramatically.

    Still, there’s no getting around the model’s substantial improvement in Maintenance Exposure, derived through the single July transaction and three additions to inventory. With an ETP Ratio of 55%, and with inventory at only five units (5.6% of the active fleet), sellers should have some realistic opportunities to trade their aircraft, assuming price expectations are sensible.

    Beechcraft King Air C90

    Our research uncovered two aircraft trades in July, and the 47 units comprising the latest inventory mix equated to 12.1% of the active King Air C90 fleet – hardly the stuff of legend.

    While the model’s Maintenance Exposure decrease of $71k far exceeded its Ask Price reduction, the resulting 116.6% ETP Ratio does not hold much promise for sellers. Buyers, on the other hand, have their pick of the litter.

    Dassault Falcon 50

    Two units found new owners in July. The remaining inventory of 23 aircraft equated to 12.3% of the active fleet. While the ‘for sale’ fleet saw Maintenance Exposure decrease over $33k and Ask Price increase more than $84k, the resulting ETP Ratio still exceeded 126%.

    Although statistically deserving of its spot on the ‘Most Improved’ list, it is doubtful that sellers will experience a dramatic change in fortune although, for some buyers, this may still be the perfect solution for their geographic operating environment.

    Beechcraft King Air B200 (Pre-2001 Models)

    The second King Air model to occupy a spot on this month’s ‘Most Improved’ list definitely belongs here. Four units traded in July, and the 55 aircraft listed for sale create good selection for buyers, while sellers can benefit from availability only equating to 7.1% of the active fleet.

    The model’s ETP Ratio, at 46.2%, is also a great deal more conducive to deal-making and resulted from a Maintenance Exposure drop exceeding $70k and a slight Ask Price increase.

    Bombardier Global Express

    By no means a stranger to this list, the Global Express gained its position in July following a Maintenance Exposure decrease approaching $393k that was overshadowed an Ask Price decrease exceeding $101k.

    We did not record a sale during July, and the model’s 21 listed units equate to 14.6% of the active fleet. However, with an ETP Ratio of 67%, and considering the aircraft’s capabilities and industry following, sellers should have more opportunities than sellers of many other models posting such figures.

    Cessna Citation II

    Occupying the final slot on July’s ‘Most Improved’ list is a model whose constituents range in age from 25 to 42 years, and whose 83 inventory units equate to 16.5% of the active fleet. For buyers not afraid to become the final owner of an asset within the Small Jet range, the Citation II might be worth considering, as Ask Price fell nearly $24k in July while Maintenance Exposure improved (decreased) over $55k.

    Of course, the aircraft’s actual Maintenance Exposure could make your acquisition a bit more expensive that planned, considering the ETP Ratio stood at nearly 128% when last calculated.

    Most Deteriorated Business Jets and Turboprops - Asset Insight July 2020

    Most Deteriorated Models

    All six models on July’s ‘Most Deteriorated’ list registered a Maintenance Exposure increase. The Bombardier Learjet 36A posted no Ask Price change, while the remaining models experienced the following decreases:

    • Cessna Citation ISP: -$58,192
    • Bombardier Learjet 55: -$26,071
    • Gulfstream GIV-SP: -$348,000
    • Hawker Beechjet 40: -$75,000
    • Gulfstream GIV: -$11,111

    Cessna Citation ISP

    The best aircraft among July’s ‘Most Deteriorated’ assets held the second-highest position on June’s ‘Most Improved’ list. Its dramatic change in stature came from a $7k Maintenance Exposure increase, along with a $58k drop in Ask Price.

    As if the model’s 128.5% ETP Ratio posed an insufficient challenge for sellers, inventory stood at 20% of the active fleet (55 units) as we closed out July. Three aircraft did trade last month, but this model’s fleet is aged between 35 and 43 years of age, so prospective buyers need to keep in mind that any future resale is unlikely to generate a price much above salvage value.

    Bombardier Learjet 55

    First the good news: One asset transacted last month and we did not record any additions to the Learjet 55 inventory.

    Now the bad news: The 14 units listed for sale equate to 14.6% of the active fleet for an asset whose ETP Ratio is 188% (by virtue of Maintenance Exposure increase exceeding $55k and an Ask Price decrease of more than $26k).

    Ask Prices for this model range between just below $500k to just below $1.0m. For an aircraft aged 33 to 39 years, even the low end of the pricing spectrum will be challenging for sellers to achieve, unless they can effectively monetize their aircraft’s Maintenance Equity.

    Gulfstream GIV-SP

    Three transactions took place in July proving, yet again, this model’s strong following. However, with a Maintenance Exposure increase approaching $487k, along with an Ask Price decrease of $348k, the GIV-SP, unlike those operated under MSG3 Maintenance rules (see above), found its way onto the ‘Most Deteriorated’ list.

    While the 19 aircraft listed for sale represent only 9.1% of the active fleet, the model’s 97% ETP Ratio will make selling against its MSG3 brethren challenging for most existing owners, especially if the aircraft’s engines are not enrolled on an Hourly Cost Maintenance Program.

    Hawker Beechjet 400

    This 31 to 34-year-old model joined the ‘Most Deteriorated’ list having completed no transactions during July. It did so on its Maintenance Exposure weakness which increased (worsened) over $25k, along with a $75k reduction in Ask Price.

    Only four units are listed for sale. Unfortunately for sellers, that equates to 12.1% of the active fleet, while the model’s average ETP Ratio, at over 131%, equates to a challenging selling environment.

    Gulfstream GIV

    The third Gulfstream model to make either list finds itself in the second worst position among July’s ‘Most Deteriorated’ group.

    Two aircraft transacted in July to lower the number available for sale to 21 units (12.4% of the active fleet). Unfortunately, at the ripe old age of 27 to 34 years, this superb aircraft is beginning to reach its financial obsolescence through an ETP Ratio approaching 185%, due to a Maintenance Exposure increase exceeding $477k, along with another Ask Price reduction.

    Bombardier Learjet 36A

    With an ETP Ratio approaching 185%, and units that are as much as 44 years old, it is not difficult to understand why this model occupied the most deteriorated spot on July’s list. What might be surprising is that one aircraft did trade in July, and only four are listed for sale.

    Unfortunately, those listings equate to 10.8% of the active fleet whose Maintenance Exposure increased by more that $306k by virtue of the latest inventory mix.

    While air ambulance work has kept this model flying, it, too, is staring at financial obsolescence with some units probably already at that destination.

    The Seller’s Challenge

    It is important to understand that the ETP Ratio has more to do with buyer and seller dynamics than it does with either the asset’s accrued maintenance or its price. For any aircraft, maintenance can accrue only so far before work must be completed.

    But as an aircraft’s value decreases, there will come a point when the accrued maintenance figure equates to more than 40% of the aircraft’s ask price. When a prospective buyer adjusts their offer to address this accrued maintenance, the figure is all-too-often considered unacceptable to the seller and a deal is not reached.

    It is not until an aircraft undergoes some major maintenance that a seller is sufficiently motivated to accept a lower figure, or a buyer is willing to pay a higher price and the aircraft transacts, ultimately.

    A wise seller needs to consider the potential marketability impact early maintenance might have on their aircraft, as well as its enrollment on an HCMP where more than half of their model’s in-service fleet is enrolled on one.

    Sellers also need to carefully weigh any offer from a prospective buyer against the loss in value of their aircraft for sale as the asset spends more days on the market awaiting a better offer, while simultaneously accruing a higher maintenance figure.

    More information from www.assetinsight.com.

    This article was originally published by AvBuyer on August 14, 2020.

  • NAFA Administrator posted an article
    Aircraft Share Options Explained: Fractional Jet Ownership vs. Charter vs. Jet Card see more

    NAFA member, H. Lee Rohde, III, President and CEO of Essex Aviation, discusses discusses private jet share options.  

    Flying private has long been a popular alternative to flying commercial due to the luxury, privacy, and convenience it affords — but now, in these uncertain times, flying private also provides a much-needed sense of security and peace of mind. As a result, a growing number of individuals are starting to explore private jet share options, particularly fractional ownership, charter programs, and jet card programs, each of which offer the same amenities as outright acquisition with less of a commitment.

    In this blog post, we’ll compare fractional jet ownership vs. charter program vs. jet card program to help you find the private jet share option that best meets your unique travel needs.

    Table of Contents

    • What is a Private Jet Share?
    • What is Fractional Jet Ownership?
    • When Does Fractional Jet Ownership Make Sense?
    • What is Private Jet Chartering?
    • When Does Private Jet Chartering Make Sense?
    • What Are Membership & Jet Card Programs?
    • When Do Membership & Jet Card Programs Make Sense?
    • At a Glance: Fractional Jet Ownership vs. Charter vs. Jet Card Programs
    • Fly Safer with Essex Aviation

    What is a Private Jet Share?

    As implied by its name, a private jet share refers to any private aviation program in which you own or lease a share of an aircraft rather than own it outright. There are multiple private jet share options to choose from, including fractional aircraft ownership, private jet membership or card programs and private jet chartering. How a private jet share is structured depends entirely on the program, aircraft model, and number of hours utilized.

    What is Fractional Jet Ownership?

    Those interested in fractional ownership purchase a share of a specific aircraft type and agree to an annual amount of allotted flight hours. Most fractional ownership programs require a minimum size share of 50 hours of flight time per year, though this can vary depending on the provider. The maximum share size is 800 hours of flight time per year, which is roughly equivalent to ownership of an entire aircraft.

    Fractional ownership shares are acquired from the company that operates the aircraft and that has a designed shared ownership program and services agreement in which all share owners participate. This company also employs pilots, cabin crew and flight operations coordinators, administers maintenance and covers airport and hangar fees and insurance, which can be attractive to individuals who want the benefits of aircraft ownership without the responsibility. Some fractional ownership programs even provide the option to upgrade or downgrade the size of the aircraft depending on your trip requirements.

    When Does Fractional Jet Ownership Make Sense?

    Although the total cost, including the share acquisition or lease, is more expensive than other alternatives, fractional ownership doesn’t require you to pay a “deadhead cost” — that is, any costs incurred from positioning the aircraft at your departure point. Additionally, it’s possible to sell fractional shares back to the program provider, though these shares tend to depreciate more due to their high level of annual utilization, resulting in lower residual values.

    Fractional ownership is a popular option among those who frequently travel for business-related reasons because it offers tax benefits. Frequent fliers also appreciate the consistency and continuity that fractional ownership offers. Most groups that operate fractional programs, such as NetJetsFlexJet and AirShare are highly reputable and have well-documented, standardized procedures for everything from how they vet operators to how they sanitize aircraft between one flight and the next.

    Fractional aircraft ownership is ideal for individuals who want the experience of flying with an organization with a dedicated fleet of aircraft, pilots, and crew, and who require the flexibility to avoid duty times and other restrictions.

    What is Private Jet Chartering?

    Private jet chartering is an on-demand service that enables you to compare pricing and amenities for various aircraft types and book the one that best meets your travel needs in much the same way as you’d book a seat on a commercial flight. Those interested in chartering have the option of working with either a charter operator or a charter broker, though it’s best practice to work with a private aviation consultant before considering either option.

    When Does Private Jet Chartering Make Sense?

    Of the three types of private jet share presented in article — fractional jet ownership vs. charter vs. jet card — private jet chartering requires the least commitment, both in terms of time and expense.

    In fact, chartering is the most popular private aviation option due to the fact that it doesn’t require a significant capital cost upfront or fixed costs associated with maintenance and staff salaries — all you have to pay for is the utilization of the aircraft on a trip-by-trip basis. This makes chartering ideal for anyone who wants the private aviation experience without any of the responsibility. It’s important to note, though, that what you save on chartering, you’ll make up for in terms of non-guaranteed availability in a specific aircraft type: It can sometimes be challenging to find an aircraft that meets both your specific needs and your schedule, so you may be forced to choose between one and the other.

    What Are Membership & Jet Card Programs?

    Membership and jet card programs, though often referred to interchangeably, are structurally unique. With a membership program, you agree to a fixed cost per hour at the start of the contract and are billed after each flight. You’re also typically subjected to either monthly management or annual membership fees.

    There are two types of jet card programs: a dedicated service with a predetermined number of hours on a specific aircraft type or size category, and a debit card service that enables you to fund an established travel account and select the aircraft category on a trip-by-trip basis with agreed-to hourly rates. Depending on the program, the provider will either quote you for a certain number of hours during booking and bill actual time upon completion of the trip or deduct the final total cost of the trip from your balance after it is completed.

    When Do Membership & Jet Card Programs Make Sense?

    Much like chartering, membership and jet card programs are best suited for individuals who want a short-term commitment and require a much lower investment than fractional ownership. Jet card programs, in particular, are appealing because they come at a fixed rate. There’s no need to negotiate the price for each flight — just add money to your jet card account and go. In some cases, you can even cancel your membership and get a refund for unused hours if you’re dissatisfied with your service, which makes jet card programs one of the most accessible points of entry to the private aviation market.

    Another compelling reason to consider a membership or jet card program is because most major private aviation companies offer them, making them a reliable option. When evaluating either membership or jet card programs, be sure to work with an experienced private aviation consultant who can steer you toward a reputable company and help you understand the relationship between the program provider and the aircraft you intend to utilize.

    If you’re interested in joining a membership or jet card program, keep in mind that they often come with a longer advance notice requirement to schedule an aircraft. This is less of an issue if you’re the type of traveler who books their trips well in advance but can be challenging if you frequently make last-minute travel arrangements, especially during peak periods such as holidays.

    At a Glance: Fractional Jet Ownership vs. Charter vs. Jet Card Programs

    Fly Safer with Essex Aviation

    If you’re in need of private aviation assistance, Essex Aviation Group is here for you. From private jet charter consulting to new aircraft acquisition to aircraft completion management, we offer a wide variety of services tailored to support the travel needs of each and every customer. Contact us today to let us know how we can help you find the private jet share option that’s right for you.

    This article was originally published by Essex Aviation.  

  • NAFA Administrator posted an article
    NAFA member, Adam Meredith, discusses the hidden or unexpected costs of aircraft ownership. see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, discusses the hidden or unexpected costs of aircraft ownership. 

    Major hidden costs, for example, can result when a previous owner has deferred maintenance. You’re better off buying an airplane that’s been regularly used because the owner will typically address issues as they arise in order to continue using the plane regularly.

    It’s a myth that it’s smart to look for an aircraft that’s had low flying time. Less wear and tear on the engine and the airframe? While those are important considerations, they should not be the only ones. After all, these are machines and machines are made to be run. When an aircraft sits, its problems remain hidden.

    Low flying time could mean high maintenance when it’s your time to own the airplane. That’s one reason the first annual inspection can be unusually expensive — another hidden cost. So be prepared.

    Here is a list of other hidden costs associated with aircraft ownership:

    • Expenses incurred when an airplane is tied down outside (as opposed to protected in a hangar), including repainting and reskinning the exterior and replacing or repairing instrument panels, aircraft seats, interiors or even sun-crazed windows.
    • Contaminated fuel, or more likely, a lineman who accidentally fills your gas tanks with the wrong fuel.
    • Unforeseen mechanical failures or mishaps, such as a blown tire, a gear door jamming, a baggage door opening in flight and ejecting an object that damages an elevator or tail surface, etc.
    • Compliance with unforeseen airworthiness directives (ADs).
    • Animal strikes, bird strikes, lightning strikes, prop strikes, strikes by another aircraft taxiing into you.
    • Mud daubers corrupting your pitot-static system or rodents chewing through electrical cables or nesting in your push-pull tubes.
    • Sudden failure of one or more instruments, navigation radios or engine monitors.
    • Even a pandemic.

    The list is extensive but not exhaustive. Hence our advice to add 10% to 15% on top of your projected operations budget, so when those hidden costs reveal themselves, you aren’t surprised.

    This article was originally published by AOPA Aviation Finance Company on June 10, 2020.

  • NAFA Administrator posted an article
    NAFA member, David Norton, partner at Shackelford Law, shares presentation on Part 91 Dry Leasing. see more

    NAFA member, David Norton, partner at Shackelford, Bowen, McKinley & Norton, gave a presentation on Part 91 Dry Leasing, which was immediately followed up with a panel discussion on illegal charters, the two topics going hand-in-hand.

    According to Norton, a wet lease is defined as the "aircraft plus crewmember," and a "dry" lease as a mere equipment lease of the aircraft.  Some aircraft owners, shying away from key legal, logistical and cost differences between Part 91 and Part 135 operations, enter into dry leasing agreements seeking to raise revenue with their aircraft while letting others operate the aircraft.  If not done properly, Part 91 dry leasing can result in penalties from the FAA and refusal of insurance coverage when incident occurs.

    The key question is whether operational control is transferred or if an air transportation service is actually being provided.  Norton says that "operational control" continues to be a confusing term among owners and pilots, but essentially boils down to who gets to stay where an airplane is going on a given day. 

    "Pilots will say they have operational control, but unless they are the aircraft owner or the aircraft is leased to them personally, pilots are generally not in operational control of the airplane," said Norton.  "The operator is generally a company or person who has the right to say where [the aircraft] is going on a given day, and for [business jets] that means you're usually hiring a professional pilot.  So it's not necessarily the person whose hands are on the yoke acting as the operator."

    Read more

    This article was originally published by Shackelford, Bowen, McKinley & Norton in The Binder, Vol. 45 No. 2 - Summer 2020 - on August 4, 2020.

     

  • NAFA Administrator posted an article
    Used Aircraft Maintenance Analysis – July 2020 see more

    NAFA member, Tony Kioussis, President of Asset Insight, shares the latest used aircraft maintenance report.

    As July ended, Asset Insight’s tracked fleet of 134 fixed-wing business aircraft, and 2,331 aircraft listed for sale equated to a 1.2% inventory fleet decrease compared to June, and a year-to-date (YTD) increase of 6.8%.

    The tracked fleet’s Quality Rating dipped a bit from June’s 12-month best figure, and the latest ‘for sale’ fleet mix increased the anticipated cost for upcoming maintenance events close to the 12-month high (worst) figure. However, July’s 5.293 Quality Rating kept the inventory within the ‘Excellent’ range on Asset Insight’s scale of -2.5 to 10.

    July’s Aircraft Value Trends

    Average Ask Price decreased 1.5% in July, leading to a 5.0% value decline since the start of 2020. By aircraft group, the figures were as follows:

    • Large Jets: This group fueled the loss with a reduction of 2.4%, and a total value loss during 2020 of 11.8%.
    • Medium Jets: Ask Prices increased 1.5% during July but were still down 3.7% YTD.
    • Small Jets: The group posted a 12-month high figure through a 0.3% gain in value and is now up 9.2% for the year.
    • Turboprops: Ask Prices gained 2.8% but are still off by 2.4% during 2020.

    July’s Fleet for Sale Trends

    The tracked fleet’s total number of aircraft listed for sale decreased 1.2% in July (29 units), reflecting a YTD inventory increase equating to 6.8% (149 units).

    • Large Jet Inventory: Decreased slightly by 0.4% (two units), but remains up 14.8% (64 units) YTD.
    • Medium Jet Inventory: Availability was down a substantial 2.7% (18 units) for July, bringing the YTD increase down to a single unit (0.2%).
    • Small Jet Inventory: Decreased 2.6% (18 units) in July but was still up 6.4% YTD (41 units).
    • Turboprop Inventory: The only group to post an increase, Turboprops were up 1.2% (nine units) for the month, and inventory has now grown 9.6% (43 units) YTD.

    July’s Maintenance Exposure Trends

    Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) increased (deteriorated) 3.1% in July to $1.419m, signaling upcoming maintenance for the latest fleet mix would be close to the 12-month high (worst) figure. The last time our tracked fleet posted a higher (worse) Maintenance Exposure figure was in October 2019. Individual group results were as follows:

    • Large Jets: Worsened (increased) 1.0% for the month, but the figure was better than the group’s 12-month average.
    • Medium Jets: Worsened by 0.7%, but the figure was only slightly above (worse) than last month’s 12-month best number.
    • Small Jets: Suffered greatly from the reconstituted inventory, increasing 15.3% to set a 12-month worst (high) figure.
    • Turboprops: At the other end of the spectrum, Turboprops posted a 12-month low (best) figure through a 3.6% decrease.

    July’s ETP Ratio Trend

    The inventory’s ETP Ratio rose (worsened) to 71.2%, from June’s 69.9%, following three consecutive monthly improvements (decreases), bringing our tracked fleet to just below its worst (highest) 12-month figure.

    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 Q2 2020, aircraft whose ETP Ratio was 40% or greater were listed for sale nearly 53% longer than assets with an ETP Ratio below 40% (251 days versus 384 days). How did each group fare during July?

    • Turboprops: For the eighth consecutive month, Turboprops registered the lowest ETP Ratio at 41.8%, a 12-month low (best) figure that continued earning them the top spot among the four groups.
    • Large Jets: Improved for the third straight month, this time to 61.4% from June’s 64.0%, thereby remaining in second place.
    • Medium Jets: Deteriorated (rose) slightly to 73.7% from June’s 73.4%, with the figure remaining better (lower) than the group’s 12-month average.
    • Small Jets: Made the environment for many sellers even more challenging through a Ratio increase to 96.5%, a 12-month high figure that was substantially worse than June’s 85.8%.

    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 July 2020.

    Most Improved Business Jets and Turboprops - Asset Insight July 2020

    Most Improved Models

    All six ‘Most Improved’ models posted a Maintenance Exposure decrease (improvement). Ask Price, on the other hand, was not as uniform, with the Beechcraft King Air C90, Bombardier Global Express, and Cessna Citation II, posting decreases of $5,976, $101,143, and $23,789, respectively. The remaining models experienced the following price increases:

    • Gulfstream GIV-SP (MSG3): +$2,102,500
    • Dassault Falcon 50: +$84,286
    • Beechcraft King Air B200 (pre-2001): +$9,247

    Gulfstream GIV-SP (MSG3)

    Eclipsing all models in July is the one that occupied the ‘Most Deteriorated’ spot during our June analysis. It earned the top position through a Maintenance Exposure decrease exceeding $852k, along with an Ask Price increase exceeded $2.1m. But that does not bring visibility to the full story.

    There were two aircraft listed ‘for sale’ in June carrying Ask Prices. When the asset carrying an Ask Price approximately one-third lower than the remaining one sold, the figure naturally shifted dramatically.

    Still, there’s no getting around the model’s substantial improvement in Maintenance Exposure, derived through the single July transaction and three additions to inventory. With an ETP Ratio of 55%, and with inventory at only five units (5.6% of the active fleet), sellers should have some realistic opportunities to trade their aircraft, assuming price expectations are sensible.

    Beechcraft King Air C90

    Our research uncovered two aircraft trades in July, and the 47 units comprising the latest inventory mix equated to 12.1% of the active King Air C90 fleet – hardly the stuff of legend.

    While the model’s Maintenance Exposure decrease of $71k far exceeded its Ask Price reduction, the resulting 116.6% ETP Ratio does not hold much promise for sellers. Buyers, on the other hand, have their pick of the litter.

    Dassault Falcon 50

    Two units found new owners in July. The remaining inventory of 23 aircraft equated to 12.3% of the active fleet. While the ‘for sale’ fleet saw Maintenance Exposure decrease over $33k and Ask Price increase more than $84k, the resulting ETP Ratio still exceeded 126%.

    Although statistically deserving of its spot on the ‘Most Improved’ list, it is doubtful that sellers will experience a dramatic change in fortune although, for some buyers, this may still be the perfect solution for their geographic operating environment.

    Beechcraft King Air B200 (Pre-2001 Models)

    The second King Air model to occupy a spot on this month’s ‘Most Improved’ list definitely belongs here. Four units traded in July, and the 55 aircraft listed for sale create good selection for buyers, while sellers can benefit from availability only equating to 7.1% of the active fleet.

    The model’s ETP Ratio, at 46.2%, is also a great deal more conducive to deal-making and resulted from a Maintenance Exposure drop exceeding $70k and a slight Ask Price increase.

    Bombardier Global Express

    By no means a stranger to this list, the Global Express gained its position in July following a Maintenance Exposure decrease approaching $393k that was overshadowed an Ask Price decrease exceeding $101k.

    We did not record a sale during July, and the model’s 21 listed units equate to 14.6% of the active fleet. However, with an ETP Ratio of 67%, and considering the aircraft’s capabilities and industry following, sellers should have more opportunities than sellers of many other models posting such figures.

    Cessna Citation II

    Occupying the final slot on July’s ‘Most Improved’ list is a model whose constituents range in age from 25 to 42 years, and whose 83 inventory units equate to 16.5% of the active fleet. For buyers not afraid to become the final owner of an asset within the Small Jet range, the Citation II might be worth considering, as Ask Price fell nearly $24k in July while Maintenance Exposure improved (decreased) over $55k.

    Of course, the aircraft’s actual Maintenance Exposure could make your acquisition a bit more expensive that planned, considering the ETP Ratio stood at nearly 128% when last calculated.

    Most Deteriorated Business Jets and Turboprops - Asset Insight July 2020

    Most Deteriorated Models

    All six models on July’s ‘Most Deteriorated’ list registered a Maintenance Exposure increase. The Bombardier Learjet 36A posted no Ask Price change, while the remaining models experienced the following decreases:

    • Cessna Citation ISP: -$58,192
    • Bombardier Learjet 55: -$26,071
    • Gulfstream GIV-SP: -$348,000
    • Hawker Beechjet 40: -$75,000
    • Gulfstream GIV: -$11,111

    Cessna Citation ISP

    The best aircraft among July’s ‘Most Deteriorated’ assets held the second-highest position on June’s ‘Most Improved’ list. Its dramatic change in stature came from a $7k Maintenance Exposure increase, along with a $58k drop in Ask Price.

    As if the model’s 128.5% ETP Ratio posed an insufficient challenge for sellers, inventory stood at 20% of the active fleet (55 units) as we closed out July. Three aircraft did trade last month, but this model’s fleet is aged between 35 and 43 years of age, so prospective buyers need to keep in mind that any future resale is unlikely to generate a price much above salvage value.

    Bombardier Learjet 55

    First the good news: One asset transacted last month and we did not record any additions to the Learjet 55 inventory.

    Now the bad news: The 14 units listed for sale equate to 14.6% of the active fleet for an asset whose ETP Ratio is 188% (by virtue of Maintenance Exposure increase exceeding $55k and an Ask Price decrease of more than $26k).

    Ask Prices for this model range between just below $500k to just below $1.0m. For an aircraft aged 33 to 39 years, even the low end of the pricing spectrum will be challenging for sellers to achieve, unless they can effectively monetize their aircraft’s Maintenance Equity.

    Gulfstream GIV-SP

    Three transactions took place in July proving, yet again, this model’s strong following. However, with a Maintenance Exposure increase approaching $487k, along with an Ask Price decrease of $348k, the GIV-SP, unlike those operated under MSG3 Maintenance rules (see above), found its way onto the ‘Most Deteriorated’ list.

    While the 19 aircraft listed for sale represent only 9.1% of the active fleet, the model’s 97% ETP Ratio will make selling against its MSG3 brethren challenging for most existing owners, especially if the aircraft’s engines are not enrolled on an Hourly Cost Maintenance Program.

    Hawker Beechjet 400

    This 31 to 34-year-old model joined the ‘Most Deteriorated’ list having completed no transactions during July. It did so on its Maintenance Exposure weakness which increased (worsened) over $25k, along with a $75k reduction in Ask Price.

    Only four units are listed for sale. Unfortunately for sellers, that equates to 12.1% of the active fleet, while the model’s average ETP Ratio, at over 131%, equates to a challenging selling environment.

    Gulfstream GIV

    The third Gulfstream model to make either list finds itself in the second worst position among July’s ‘Most Deteriorated’ group.

    Two aircraft transacted in July to lower the number available for sale to 21 units (12.4% of the active fleet). Unfortunately, at the ripe old age of 27 to 34 years, this superb aircraft is beginning to reach its financial obsolescence through an ETP Ratio approaching 185%, due to a Maintenance Exposure increase exceeding $477k, along with another Ask Price reduction.

    Bombardier Learjet 36A

    With an ETP Ratio approaching 185%, and units that are as much as 44 years old, it is not difficult to understand why this model occupied the most deteriorated spot on July’s list. What might be surprising is that one aircraft did trade in July, and only four are listed for sale.

    Unfortunately, those listings equate to 10.8% of the active fleet whose Maintenance Exposure increased by more that $306k by virtue of the latest inventory mix.

    While air ambulance work has kept this model flying, it, too, is staring at financial obsolescence with some units probably already at that destination.

    The Seller’s Challenge

    It is important to understand that the ETP Ratio has more to do with buyer and seller dynamics than it does with either the asset’s accrued maintenance or its price. For any aircraft, maintenance can accrue only so far before work must be completed.

    But as an aircraft’s value decreases, there will come a point when the accrued maintenance figure equates to more than 40% of the aircraft’s ask price. When a prospective buyer adjusts their offer to address this accrued maintenance, the figure is all-too-often considered unacceptable to the seller and a deal is not reached.

    It is not until an aircraft undergoes some major maintenance that a seller is sufficiently motivated to accept a lower figure, or a buyer is willing to pay a higher price and the aircraft transacts, ultimately.

    A wise seller needs to consider the potential marketability impact early maintenance might have on their aircraft, as well as its enrollment on an HCMP where more than half of their model’s in-service fleet is enrolled on one.

    Sellers also need to carefully weigh any offer from a prospective buyer against the loss in value of their aircraft for sale as the asset spends more days on the market awaiting a better offer, while simultaneously accruing a higher maintenance figure.

    More information from www.assetinsight.com.

    This article was originally published by AvBuyer on August 14, 2020.

  • NAFA Administrator posted an article
    Your Private Air Transportation Options – Making An Informed Decision and Executing It Correctly see more

    NAFA member, Anthony Kioussis with Asset Insight, hosts their latest podcast "Aircraft Ownership Lifecycle Podcast" featuring NAFA member, Lee Rohde President and CEO of Essex Aviation Group.  

    Lee Rohde discusses how the consulting company he founded advises aviation-related entities on a wide range of aircraft acquisition, strategic planning, financial, operational and management matters. Specifically, Lee covers:

    • Private Air Transportation options – what should prospective users consider in reviewing their options for meeting their travel requirements?
    • In the event an entity determines they want to acquire an aircraft, how should they go about identifying the best model to meet their travel requirements?
    • What factors have the greatest influence on the decision to acquire a new vs. a pre-owned aircraft?
    • The issues and complexities associated with refurbishing or upgrading a pre-owned aircraft.
    • The expertise an entity should secure if they are planning an aircraft acquisition.
    • The factors to be considered when determining an Offer Price for an aircraft.
    • What a pre-purchase inspection entails and why it is such an important part of acquisition process.

    Listen to the podcast here.  

    This podcast was originally published by Asset Insight.

  • NAFA Administrator posted an article
    Private Aviation Tax Considerations for Prospective Aircraft Buyers see more

    NAFA member, H. Lee Rohde, III, President & CEO of Essex Aviation Group, Inc., discusses tax considerations when purchasing an aircraft. 

    Acquiring a private aircraft for personal use is an exciting experience, one that opens innumerable doors for frequent travelers — however, to ultimately realize the benefits of your investment, you must first ensure that you’ve fully accounted for all financial considerations, especially aviation taxes.

    Too often, private aircraft owners aren’t fully informed of certain taxes that are involved in the ownership and operation of the aircraft; which are important as it relates to their operating budget and the overall aircraft ownership experience. That’s because tax considerations should be structured not only during the initial transaction, but throughout the ownership lifecycle, and can affect how you decide to utilize your aircraft.

    Read the recommendations below to avoid being blindsided by private aviation taxes.

    Location, Location, Location

    You might be surprised to learn just how many soon-to-be private aircraft owners ignore the opportunity to create even the most basic tax plan in advance of a transaction. Generally speaking, this isn’t for lack of interest but, rather, lack of understanding. Many buyers simply lack the awareness and experience to appreciate how seemingly minor factors, such as the physical location of the aircraft at closing or the location of the hangar where they intend to house their aircraft, can affect taxes.

    For example, some states place a substantial sales tax on aircraft, while others have fly-away exemptions with strict timelines and requirements. Certain states also apply use and property taxes to aircraft purchases or transactions, which can vary and are affected by a number of factors. As federal and state tax laws change over time, working with an experienced aviation advisory team during your transaction will only become more valuable and necessary.

    Plan in Advance

    It’s unreasonable to expect potential buyers to automatically be familiar with state aviation tax regulations and laws, especially as they pertain to private aircraft, which is why it’s important to work with a qualified aircraft consultant and aviation tax advisory firm. Although private aviation consultants aren’t able to provide complete tax advice, they can help you determine the following in advance of your purchase date:

    • What your regular usage will be
    • Where you intend to fly (and for how long)
    • Where you intend to store your aircraft
    • How tax considerations affect your ownership structure
    • How to identify aviation tax counsel

    Your consultant can also act as a liaison between you and the seller, representing you throughout the transaction, as well as managing the process of positioning your aircraft at the right location during the time of closing for tax purposes.

    Consult a Tax Attorney

    In addition to determining your private aircraft usage and handling your acquisition, an aviation consultant can set you up with experienced aviation tax advisors and tax attorneys to round out your team. Aviation tax advisors and tax attorneys are well-versed in aircraft-specific tax codes and have the expertise to identify possible deductions or opportunities to maximize your tax savings by reducing the amount you pay for sales, property and ongoing use taxes. It’s impossible to emphasize enough just how important it is to work with aviation-experienced tax advisors and attorneys — only professionals with extensive industry experience will have the unique knowledge to properly address all of your tax considerations.

    Your private aviation consultant should work closely with your tax team every step of the way. Even if you do your due diligence from a tax perspective, there’s a possibility that, at some point, you’ll be audited. Should this occur, your consultant, tax advisor and aviation attorney will collaborate and help represent you during the audit.

    The right aviation advisory team will consistently go above and beyond for its clients, whether that entails figuring out which private aviation travel option best meets their unique needs, helping them understand how tax considerations affect their cost of ownership and operation, or tirelessly advocating on their behalf. With a collective 70 years of experience in the aviation industry under their belt and a vast network of connections, the consultants at Essex Aviation Group are uniquely qualified to usher clients through every step of the private aircraft acquisition process, as well as put them in touch with some of the best aviation tax advisors and attorneys in the industry.

    This article was originally published by Essex Aviation.  

  • NAFA Administrator posted an article
    Business Jets: Not Just for Business see more

    NAFA member, Peter Antonenko, Chief Operating Officer at Jetcraft, discusses the business of business aviation.

    I’ll come right out and say it: I love airplanes, I love flying, and I love the business of business aviation. The combination of short-field landing capabilities, range and speed make private aircraft a perfect corporate tool. But something that’s often overlooked is how business aviation has an exceptionally broad range of utilizations, particularly in times of crisis, supporting air ambulance, cargo, and governmental missions.

    Many industries have done an excellent job pivoting to meet the demands of the Covid-19 pandemic – distilleries making hand sanitizer, fashion brands stitching surgical masks and car manufacturers producing ventilators.  At Jetcraft, we are proud and privileged to be part of a sector that was ready to act when needed.

    For example, aircraft cabins configured to carry the same life support equipment found in trauma centers have been used widely to transport patients, especially during this crisis. The variety of these specially equipped business jets gives people access to larger hospitals regardless of how small their local runway is, or how far they need to travel. This medical capability was true before Covid-19 and it will remain true long after.

    Medevac operations are not the only use for business aircraft during a pandemic. Throughout this crisis we have seen private jets previously used for corporate missions being offered for cargo – in particular, transporting personal protective equipment, ventilators and medications. Efficiency is a must at times like this, as outbreaks spike at different rates around the world and needs are constantly shifting.

    Statistically, 40% of air cargo is transported in the belly hold of passenger aircraft. With a significant portion of the world’s airline fleet grounded, a pinch point to move supplies occurred. Business aviation stepped up with owners and operators taking on some of the critical capacity needs.

    A focal point of air transport, business or commercial, has been putting people in front of one another with great speed. Video conferencing is helping fulfill the role of in-person meetings in the short term, but the need hasn’t been replaced. In this regard, business aviation has been instrumental in the fight against Covid-19, as governments and agencies use private aircraft to fly scientists on fact-finding missions and reposition medical staff to areas with a shortage.

    As for corporate owners, these jets have proven more useful than they may have ever imagined. Business aircraft are making it possible to move employees during a time when airline flight options are minimal, and allowing key individuals to be where they are needed to keep supply lines running smoothly.

    Business aviation has long been a tool designed to fit around people’s needs, and it is also worth mentioning the select group of people who make these missions possible. It is thanks to the pilots, mechanics, ground crews, line technicians, and staff at the manufacturers, FBOs and MROs across the globe, that staffed, flew and maintained these aircraft so they might complete their missions. To them, we share our greatest thanks for their hard work in enabling our sector to support Covid-19 relief efforts, and for their continued dedication to our industry now, before, and in the future.

    This article was originally published by Jetcraft on May 27, 2020.

  • NAFA Administrator posted an article
    NAFA member, Adam Meredith, President of AOPA Finance, answers your aircraft purchase questions. see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, answers your aircraft purchasing questions.

    Question:  I am a healthy 60 year old, retired student pilot with aspirations to purchase a used Cessna 182 for recreational travel after successfully passing my private pilot check ride. My intention at this point is to pay cash /not finance, but that decision is not based on considerations other than a personal aversion to debt. My expected budget for the purchase is $100-$175K, including any ancillary expenses associated with the purchase (inspections, taxes, fees, etc.) I am ignorant of the various considerations involved in choosing / buying an airplane and am curious about any services AOPA may offer to assist new pilots in purchasing their first airplane.

    Are there benefits to financing? Is there a “playbook” on buying an airplane that AOPA provides for its members? Is there a financial advantage to waiting, i.e., is the current market in used GA aircraft likely to soften into a “buyers market?” Is it typically more cost effective to acquire a low tech platform and update avionics or look for a plane with glass panel already installed? Other considerations not mentioned?

    Answer: The biggest benefit to financing is for folks with cash flow that want to preserve liquidity. Right now, especially, we are seeing people preserve capital either for investing in the market or for a safety margin if things start to get tight, cash flow-wise, down the road. In terms of a “play book”, we have a great resource page on our website for members trying to navigate the purchasing and financing process: https://finance.aopa.org/aviation-finance/first-time-buyers

    At this point, it seems unlikely for the used GA aircraft market to soften. Inventory levels of good 182s was limited prior to the COVID-19 outbreak. What we’ve seen since the COVID-19 outbreak is very few new listings of aircraft for sale, making it just as hard to find deals. Could it change down the road?  Possibly, but at the rate things are going it won’t likely be for a while longer. In terms of acquiring a low tech platform and updating the avionics vs. looking for an airplane with glass panel already installed, you are almost always better off (economically) buying an airplane someone else has done upgrades on. They put the money in but won’t get it back out. We always recommend that members get pre-approved so that when you find the airplane you like you’re not going to lose out to a cash buyer. Please reach out to us by calling 800.627.5263 so we can answer any other questions you may have.

    This article was originally published by AOPA Finance on May 29, 2020.

  • NAFA Administrator posted an article
    An Aircraft's Final Sale see more

    NAFA member, Amanda Applegate, Partner with Aerlex Law Group, discusses the process for the final sale of an aircraft.

    As more aircraft reach the end of their useful life, understanding the process for the final sale of an aircraft is becoming more important. If there are no buyers for an aircraft or if an aircraft is more valuable for its parts than as a whole unit, then the aircraft owner should endeavor to find the best possible solution for the aircraft’s final sale. Depending on the aircraft type and the parts inventory at the time, there may be multiple interested buyers for the parts of the aircraft. Once the best offer is found, a sale agreement should be drafted and include all of the necessary deal points. For the final sale of an aircraft, there are additional deal points that don’t apply to a normal sale. Here are a few to consider:

    • Is the delivery location going to be the same location as where the aircraft will be parted out? If so, then will the aircraft be deregistered at the time of sale? If so, the sale agreement should not require the purchaser to prepare and file a registration application, but instead file a deregistration notice with the FAA. However, if there is any chance that the purchaser will not part out the aircraft and may instead resell the aircraft, then the deregistration request should not be filed.
    If you file the deregistration notice with the FAA it is very difficult to then register the aircraft again at a later date and requires filing proof acceptable to the technical branch of the FAA that the aircraft is still airworthy.
    • A detailed list of the loose equipment that is being sold on the aircraft should be attached as an exhibit to the sale agreement. For example, is the aircraft being sold with the china, glassware and flatware on the aircraft or does the seller plan to reuse the china on a future aircraft? Does it include any equipment that was used in the hangar for the aircraft, like a tow bar?
    • Is the aircraft airworthy and/or are there inspections that are past due? Usually a sale agreement would require the aircraft to be airworthy. However, that may not be necessary in the case of a final sale. If there are inspections that are past due, then the inspections may not be necessary if the aircraft is already at the location where it will be sold and parted out. However, if the aircraft is not at the closing location or has to be flown after closing to the location where it will be disassembled, then one of the parties may need to obtain a ferry permit. The cost of the ferry permit should be measured against the cost of doing the necessary work on the aircraft in order to make it airworthy.
    • The aircraft records, especially burn certificates, are very important when selling an aircraft for parts. The records need to be complete for each part so that the part can be sold and used again. If the records are incomplete the part will have far less or perhaps no value.
    • Is it important that the seller retain the registration number? Unlike when an aircraft is being sold and will continue to fly, if the aircraft is being deregistered, there is no need to file a request to change the registration number at the time of closing. Instead, when the deregistration is filed, a request to reserve the registration number back to seller should also be filed. If the purchaser doesn’t plan to deregister the aircraft immediately, the parties should agree on a timeline to return the registration number back to the seller.
    • The pre-purchase inspection is far less extensive for an aircraft that will be sold for parts. It is not always as important that all systems be fully functional and therefore the timeline from execution of the sale agreement to closing is more compressed, because the inspections prior to closing may just be a review of the aircraft records and not a fully survey of the aircraft.

    Making a decision to sell an aircraft for parts, can be an emotional decision for an aircraft owner because they have often times flown in the aircraft for many years, arriving in many locations with lasting memories. The emotional impact is greater when the aircraft is being sold for parts instead of to someone else who will use it. As a result, the emotional component can sometimes prevent the best business decision from being made. As an example, I have had a client who searched for someone to buy the aircraft for reuse and sold the aircraft at a lower price than could have been achieved if they had considered selling the aircraft for parts.

    When an aircraft is sold for the final time, there are differences in the sale process. The delivery location is far more important, as is loose equipment list and complete aircraft records. Be sure to take the differences into account when entering into the sale agreement.

    This article was originally published by Aerlex Law Group on April 9, 2020 in Articles, BusinessAir Magazine, The Latest.

  • NAFA Administrator posted an article
    Used Aircraft Maintenance Analysis – May 2020 see more

    NAFA member, Tony Kioussis, President of Asset Insight, shares the latest Used Aircraft Maintenance Analysis for May 2020.  

    The number of aircraft transactions continued to be fewer than normal in May, primarily owing to uncertainty over the COVID-19 pandemic. Assets listed for sale continued to increase at a slower pace, but which models were impacted most? 

    During May 2020, Asset Insight’s tracked fleet of 134 fixed-wing models and 2,324 aircraft listed for sale equated to a 0.7% inventory fleet increase over April, and a year-to-date (YTD) increase of 6.5%.

    While the fleet remained within the ‘Excellent’ range, posting a figure of 5.301 in May, the Quality Rating was lower than in April (5.311) on Asset Insight’s scale of -2.5 to 10.

    A more detailed examination of May’s inventory fleet mix revealed fewer near-term maintenance events, but individual event costs are anticipated to run slightly above the 12-month average.

    May’s Aircraft Value Trends

    Average Ask Price for the tracked fleet decreased another 4.4%, following April’s 1.6% reduction, with May’s pricing approximately half-way between the 12-month average and high figures. All four groups contributed to the decrease:

    • Large Jets: Ask Prices fell 6.4%, leaving them at their 12-month average.
    • Medium Jets: Ask Prices decreased 3.9%, virtually equidistant between the group’s 12-month high and average figures.
    • Small Jets: Ask Prices decreased 1.3% to only slightly lower than their 12-month high posted in April.
    • Turboprops: Lost 2.3%, but prices remained above the group’s 12-month average.

    May’s Fleet for Sale Trends

    The tracked fleet’s total number of aircraft listed for sale increased 0.7% in May (5.8% YTD). That’s a month-over-month increase of 16 units in May, and 142 units YTD.

    • Large Jet Inventory: Increased 1.0% (five units), and 13.5% YTD (+58 units).
    • Medium Jet Inventory: Rose another 0.3% (two units) for May, and 1.1% YTD (seven units).
    • Small Jet Inventory: Decreased 0.3% (two units) in May, but the total YTD increase is 9.0% (+58 units).
    • Turboprop Inventory: Increased another 2.4% (+11 units) during May, and is now up 4.2% (+19 units), YTD.

    May’s Maintenance Exposure Trends

    Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) increased (worsened) 0.9% to $1.39m, meaning upcoming maintenance for the current fleet mix would be a bit more expensive to complete.

    The figure was slightly worse than the $1.385m 12-month average, and individual results were as follows:

    • Large Jets: Worsened (increased) 1.7% for the month, but remained better than their 12-month average.
    • Medium Jets: Worsened (increased) by 0.6%, but also managed to maintain a better (lower) figure than their 12-month average.
    • Small Jets: Worsened (increased) 1.1% to post the group’s second consecutive 12-month worst (highest) figure.
    • Turboprops: Improved (decreased) 1.8% to a Maintenance Exposure only slightly worse than the group’s lowest (best) 12-month figure.

    May’s ETP Ratio Trend

    The fleet’s ETP Ratio was unchanged during May 2020 at 69.8%, a figure half-way between the 12-month high and the 12-month average Ratio.

    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 Q1 2020, aircraft whose ETP Ratio was 40% or greater were listed for sale nearly 68% longer than assets with an ETP Ratio below 40% (245 days versus 413 days). How did each group fare during May?

    • Turboprops: At 43.5%, the group maintained the top (best) spot by posting the lowest ETP Ratio – a figure only slightly worse than April’s 43.2%.
    • Large Jets: Worsened from April’s 64.4% to 66.0% in May, but remained in second place.
    • Medium Jets: Remained in third position by posting a second consecutive 12-month low (best) figure of 71.2%, following April’s 72.3%.
    • Small Jets: Deteriorated from April’s 87.8% to 88.5%, slightly increasing the selling challenge for most assets.

    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 May 2020.

    Read the full report here.

    This article was originally published by AvBuyer on June 19, 2020.

     

  • NAFA Administrator posted an article
    Podcast: Business & Legal Issues to Consider When Acquiring An Aircraft see more

    David Mayer, a Partner with the law firm of Shackelford, Bowen, McKinley & Norton, LLP, discusses some of the business and legal issues one should consider when acquiring a new or pre-owned aircraft.  Topics covered include:

    • The kinds of business professionals a buyer should engage for an aircraft purchase.
    • The terms a Letter of Intent (LOI) should include when it comes to the acquisition process.
    • Why use an LOI rather than enter into an Aircraft Purchase Agreement immediately?
    • Should the LOI state the purchase be contingent on securing financing?
    • Drafting the Aircraft Purchase Agreement.
    • Issues that are important to address in the Aircraft Purchase Agreement.
    • How Federal Aviation Regulations can affect aircraft purchases and structuring.
    • The benefit of establishing a Limited Liability Company (LLC) or Trust to own an aircraft.
    • Tax planning and bonus depreciation.
    • The “fly-away” sales tax exemption.
    • How aviation insurance protects an owner or lessee.
    • The importance of Uniform Commercial Code (UCC), FAA and International Registry filings.

     

     

    This podcast was originally published by Asset Insight on July 21, 2020.

     

    About David G. Mayer

    David Mayer has decades of experience in guiding clients through domestic and international transactions, disputes, and other matters. Currently, most of his work relates to business aviation and aircraft finance.

    He likes to describe when he can first help clients: “When they say airplane, I’m in.” In this regard, David advises his clients at all stages of their experiences in buying, selling, structuring, leasing, financing, maintaining, and upgrading private aircraft. His tasks range from simple to complex.

    David helps clients evaluate and, when feasible, minimize local, state, and federal taxes, particularly bonus depreciation, associated with purchases and sales of business aircraft, turboprops, and other private aircraft, comply with federal aviation regulations, and manage liability risk that they worry an aircraft may cause.

    He represents, among others, high wealth individuals, large private and public companies, private jet owners and lessees, Part 135 and Part 91 operators, flight departments, charter operators, brokers, consultants, and management companies. By representing various lessors, lessees, lenders, and borrowers, David knows both sides of the transaction, enabling him to expedite and achieve favorable results for his clients in a wide array of legal matters.

    David has experience as a corporate counsel in addition to his longer experience as a partner in law firms. Adapting to the client’s interest, David provides insightful, thoughtful, and common-sense advice honed in part by calling on his extensive industry contacts in business aviation to enhance the quality and value of the client experience.

    He writes blogs for Aviation International Network, in the industry’s AINsight series, which, in part, positions David at the leading edge of legal and business developments in business aviation.

    Shackelford, Bowen, McKinley & Norton, LLP

    Shackelford, Bowen, McKinley & Norton, LLP represents clients in matters involving business, commercial and entertainment law based on years of experience in courtroom trials and negotiations across the U.S. We assist large corporations as well as individuals in a variety of industries, including aviation, energy, entertainment, financial institutions, health care, hospitality, real estate, and retail automobile sales.

     

  • NAFA Administrator posted an article
    Asset Insight Launches Podcast Series Focusing on the Aircraft Ownership Lifecycle see more

    July 7, 2020 – Asset Insight today announced the launch of a new podcast series, available through the company’s website (www.assetinsight.com) and across all podcast platforms, free of charge. The library of episodes is stocked with 15 to 30-minute sessions focused on all segments of the Business & General Aviation aircraft ownership lifecycle – Acquiring, Financing, Operating, Maintaining and Selling. Host Anthony Kioussis visits with expert guests from numerous industry organizations and sectors who offer best practices, timely advice, proven principles, and explore specific aspects of the business aviation industry.

    The Asset Insight Podcast library presently features 8 episodes, including sessions with Jay Mesinger at Mesinger Jets; Jim Blessing at Air Fleet Capital; Shelly Svoren at First Republic Bank; Lee Rohde at Essex Aviation; Jim Simpson at First Republic Bank; René Bangelsdorf at Charlie Bravo Aviation; Janine Iannarelli at Par Avion Ltd; and Ryan Waguespack with NATA. More podcasts will be made available each week.

    “Asset Insight is in a unique position to bring aviation professionals together to hold timely discussions in short, interesting, educational and entertaining on-demand podcasts.” said Tony Kioussis, president of Asset Insight, LLC and host of the series. “This new aviation podcast series offers our community the opportunity to select episodes and topics on their schedule, and according to their interest and business segment. As many of us work from home to maintain safe social distancing, our podcasts allow people to remain connected. The podcasts can also assist new personnel entering the industry; people that would otherwise find it challenging to secure such information.”

    Asset Insight Podcasts are available on Apple Podcasts, Spotify, Stitcher, Google Podcasts, www.assetinsight.com http://www.assetinsightpodcast.com, and wherever you get your podcasts.

    This release was originally published by Asset Insight on July 7, 2020.

  • NAFA Administrator posted an article
    AMSTAT and VANGAS publish charts demonstrating the impact of COVID-19. see more

    Tinton Falls, NJ – July 22, 2020: AMSTAT and partner VANGAS Aviation Services, the leading provider of business aviation analytics have published charts showing monthly trends in business aircraft values in 2020 by market group. This data has been generated using the AMSTAT Aircraft Valuation Tool.

    In the Heavy Business Jet market group, 2020 stated with a 4% increase in the average estimated value for this group. This trend was reversed in the second half of March and start of April offsetting the initial gains and more with a 7% decline. Values plateaued in late April and early May and then proceeded to fall 16% for a net year-to-date decline of 18%. Early data suggests a recent slowdown in this decline.

    In the Super-Mid Business Jet market group estimated values rose for the first 2 months of 2020, gaining 6%. There then followed a period of values oscillated between March and April. Between the second half of May through June the average estimated value for Super-Mid Business Jets fell 15%. Year-to-date values in this group fell 14%.

    As with the Heavy Jet and Super-Mid Business Jet groups, the Medium Business Jet average estimated value rose at the start of 2020. For Medium Jets this increase was 3%. Between February and May average estimated values in this market group fell 22%. This downward trend slowed in June and may have started to level off recently.

    In the Business Turboprop market group, the average estimated value rose 4% between January and February 2020. The trend between March and May was generally downward, falling a net 14%. As with the Light Jet group, the average estimated value of Business Turboprops has lately started to regain some of the loses from earlier months. Since the start of June, the average estimated value has risen 5%.

    Andrew Young, AMSTAT General Manager said: “The AMSTAT Aircraft Valuation Tool is constantly incorporating the latest market data and is able to quickly generate serial number specific aircraft values that reflect current market conditions. The data generated by this tool has enabled VANGAS to create the charts we see here showing the impact of COVID-19 on aircraft values in 2020 and how some market segments might be starting to show some recovery in values.”

    Don Spieth at VANGAS added, “The Aircraft Valuation Tool allows users to access information about current market conditions including event driven impact like COVID 19. We are also able to leverage decades of AMSTAT research to determine probabilistic outcomes by comparing previous market disruptions in business aviation. These tools empower our industry with the ability to react to trends and adverse market conditions to better serve their clients.”

    Read full report here

    This release was originally published by AMSTAT on July 22, 2020.