business aviation

  • Tracey Cheek posted an article
    When to Plan the Sale of Your Aircraft see more

    NAFA member David Wyndham, Vice President with Conklin & de Decker, shares tips on knowing when the time is right to sell your jet.

    Although it’s important for all owners to have a strategy on when to replace their aircraft, there are several important factors making an owner’s plan specific to their operation. David Wyndham offers insights on these.

    When you acquire an aircraft, whether it is your first or a replacement you may not be thinking about when you should sell. Though it may not be an immediate concern, a savvy owner should still have a strategy in place for when to sell.

    Unfortunately, there is no easy formula for this, nor is there a single tactic to follow. There are, however, two general reasons to dispose of your aircraft. The first is that it’s no longer capable of performing its mission. The second is that the aircraft is no longer economically feasible for the mission.

    Mission Situations

    One of the main reasons why people replace their aircraft is that their mission needs change and the aircraft no longer offers the capability required.

    A typical case is a requirement for greater range or passenger capacity. If you require additional range, your current aircraft could probably still perform the trip with a fuel stop. You should keep in mind that larger, longer range aircraft cost more to acquire and operate. Is avoiding that one-hour fuel stop worth spending $10m-$20m more for a larger aircraft?

    Another scenario might be the need to carry more passengers, more regularly. While adding more seats is not a viable option if you’re to preserve passenger comfort, some aircraft can add one or two more passenger seats with a simple reconfiguration. This may include using a belted lavatory as a passenger seat. (I had one client who used a typical eight-seat Hawker 800XP as a nine-seat shuttle by doing just that.)

    However, flying nine people 3,000 miles with an eight-seat aircraft is not a viable long-term solution, especially with baggage.

    High Utilization Operations

    I have worked with several clients who fly frequently. One has several Light Jets that average about 700 hours per year on 400–800nm legs.

    Maintaining a high utilization schedule such as this is easier with newer aircraft. Newer aircraft require less maintenance and spend less time in the shop for maintenance, which is a major reason why fractional companies have newer models in their fleets.

    Cost of Ownership

    If the cost of keeping your aircraft is outweighed by replacing it, then the best financial plan is to replace your aircraft.

    Operating Costs Increase with Age: As aircraft age, unscheduled maintenance tends to rise. Some components will wear out and other critical components may have a specific life limit.

    Engines are still going to be the biggest single cost item on most aircraft. Engine overhauls are infrequent but high cost, often exceeding $1m per engine on some large-cabin jets.

    At some point, the ability to support the aircraft will become difficult due to increased unscheduled maintenance and a growing scarcity of spare parts.

    Fleet size, the aircraft being out of production, and the average age of the fleet all factor into driving up the costs and availability of spares. This becomes a greater factor for aircraft in their mid-20s and older.

    Residual Values Decline with Age: Along with increased operating costs come declining values. The value of an aircraft is based partly on its age and partly on its maintenance status. For example, a 20-year-old business jet has much of its value associated with its maintenance status. That jet may be worth $2m with the engine in need of an overhaul but it will be worth $4m with freshly overhauled engines and a major inspection recently accomplished.

    Guaranteed hourly maintenance programs help to smooth the value curve by accruing for the maintenance and offering assurances that maintenance costs will remain predictable. But a 20-year-old aircraft on a guaranteed hourly maintenance program is still going to be worth more than a 22-year-old aircraft on a program.

    The Art of Life-Cycle Costing

    The financial planning for when to sell your jet is best done using life cycle costing. This analysis considers the total costs of acquisition, operation and disposition.

    Since you should be doing a maintenance and operating budget annually, the addition of resale value can also be done regularly and will ideally project values for the next three to five years at a minimum.

    While predicting future values is at best an educated guess, the life cycle cost of ‘keep versus replace’ over the next several years can give you a lead time to plan for the aircraft replacement as well as time to perform an analysis on future options.

    Planning for how long to own your aircraft is ultimately determined by your needs, your mission, and the life cycle costs. Consider all these at least annually and forward-plan.

    More information from www.conklindd.com.

    This article was originally published by AvBuyer on April 22, 2019.

  • Tracey Cheek posted an article
    Painting the Financial Picture see more

    NAFA member Adam Meredith, President of AOPA Aviation Finance Company, shares what items you need when preparing to finance an aircraft. 

    "You don't really need all of this financial information, do you?" It’s a question often asked by AOPA Finance clients. Yes, yes we do. If you want the lowest rate, the most competitive structuring, the least amount down, and the lowest payment, an exhaustive analysis of your credit worthiness must be made.

    Financial Documentation

    IRS Schedule Cs or Schedule Es are not enough. While they may indicate whether the ownership structure has any pass-through income on an individual's tax return, the description of that pass-through income is summarized as a line item or two. Likewise, K-1s only indicate percentages of a shareholder’s income and liabilities. Line items and percentages don’t tell the whole story. Full tax returns do.

    Global Cash Flow

    Your tax summaries may show cash going from one related entity to another. But are you actually taking from the “left pocket and putting it in the right pocket?” If so, that isn't real money, is it? The lender will net that out of your “global cash flow.” Global cash flow—also known as a Consolidated Statement of Cash Flows—is a listing of all the various entities in which a person has ownership and what their net cash flow from all the entities is.

    And then there’s the global debt schedule.

    Global Debt Schedule

    What is a global debt schedule? It’s a comprehensive list of all the ownership entities. It’s a listing of the actual total debts of each entity in which the individual has ownership. It details what the total amount owed is, and to whom. What the monthly payments are. How much is interest versus how much is principal. It also includes maturity dates for all debt.

    Depending upon what one’s business relationship is with his partners, the lender may require additional documents to help fill in holes in the financial picture. Those might include hypothecation, subordination, or even side agreements.  A hypothecation agreement could be submitted from the controlling party acknowledging the CEO emeritus is entering into a financial relationship.

    Speaking of partners, imagine a borrower has two partners and he owns one-third of the business. Some lenders may require the other two partners’ to be party to the transaction.

    For some, that’s just too much. They’re only going to have the loan for three years so the “pain-in-the-neck” factor is not worth their time and effort. Other folks just don't want to disclose all their financial information for personal reasons. Still others have obligations with lenders elsewhere that restrict them from guaranteeing debt or have covenants in place from other business debt. For these individuals, a collateral-based loan might be the more appropriate option. The trade-off is simplicity for a little bit higher interest rate.

    Collateral Based Loans

    A collateral-based deal might proceed more quickly from initial inquiry to funding but it does come with a different paperwork burden. Even so, the process is usually far less onerous. Banks will conduct an exhaustive search on the quality of the individual as well as on the aircraft. For the individual, they want to know if this person has filed bankruptcy. Do they have tax liens against them? Are there pending lawsuits on them, for any reason? A person applying for a collateral-based loan should be crystal clear how good or bad their character looks on paper.

    Every time an AOPA Finance advisor must request additional information because our client’s paperwork is incomplete adds additional stress to the process. Bottom line-- there are no shortcuts. A transparent, painless credit deal requires in-depth financial paperwork.

    This article was originally published by AOPA Aviation Finance Company on June 12, 2019.

  • Tracey Cheek posted an article
    Will High Time Engines Complicate the Loan Process? see more

    NAFA member Adam Meredith, President of AOPA Aviation Finance Company, discusses finding the "perfect airplane" and the loan process.

    You’ve finally found the perfect airplane. It has no damage history, all of its logs, great avionics, and good interior. The high time engines are the only downside. You’re not worried because the plane is flown often and mechanically is in great shape. When you present it to your lender, though, the lender balks. Why?

    Lenders tend to keep the worst-case scenario in mind. For them, that case is if they might have to repossess the aircraft with it needing an overhaul. To make it marketable again, the lender would have to use their own money for an overhaul. To counter that, most lenders are going to specify you have enough liquidity to cover an overhaul from Day 1.

    Some lenders may require an overhaul as part of the purchase. Others may require a "hold back" amount of money as a precursor to financing. That "hold back" amount must be sufficient to cover overhaul costs upon taking delivery. Because lenders recognize that the likelihood of other expenses popping up at any time with an airplane is high, they may also require an additional cushion of liquidity as a condition of completing the deal. Some lenders will simply bow out of the transaction entirely.

    For many pilots, having to fold an overhaul into the purchase price looks like a pricing discount opportunity. The reality is aviation market appraisers have already figured that into the equation. For example, if two identical aircraft are for sale and one has a fresh overhaul while the other is at TBO, the airplane with the fresh engines will have a market value of at least $30,000 more per engine over the TBO plane. 

    We've had clients who felt their ability to potentially liquidate an asset to cover an overhaul should have had that counted in their favor. Lenders tend to disagree with that assessment for two reasons. First, offering to liquidate an asset against an overhaul changes the global financial picture of the borrower. Keeping in mind that every aspect of one's financial picture is interconnected; it becomes easy to see why changing one part may have a negative domino effect overall.

    Second, where borrowers tend to feel eternally confident about their ability to quickly liquidate any asset they own, lenders are more sanguine about the reality of asset disposal. Financers can draw from plenty of historical precedent where circumstances changed for the worse, and the asset a borrower thought would be easy to sell to cover the unforeseen event fetched far less than expected or didn't sell at all. 

    The flip side of that coin are two specific instances where an airplane owner whose engines are at TBO might easily obtain an overhaul loan. In the case of an aircraft that is free and clear, it’s generally possible to get virtually 100% financing. The second situation is when a loan is still outstanding. If the amount requested--plus the remaining principal--adds up to less than 80% loan-to-value (LTV), a lender will typically refinance. In that case, the owner may not have to go more than 20% out of pocket to pay for the overhaul. 

    Lenders who provide this type of refinancing find it attractive for another reason. Often a pilot will include an avionics or interior upgrade, thus turning a simple engine overhaul into a whole aircraft refurbishment. The one caveat is, at least on the piston side, the relatively small dollar amount of a refinance loan for an overhaul is low, so it's not necessarily attractive to a lot of lenders.

    This article was originally published by AOPA Aviation Finance Company on July 10, 2019.

  • Tracey Cheek posted an article
    Aircraft Management Arrangements and the Flight Department Company Trap see more

    NAFA member, Ryan Swirsky, Associate with GKG Law, discusses aircraft management arrangements and their consequences.

    Aircraft owners frequently arrange for aircraft management companies to provide full-service management of their aircraft for aircraft operations under Federal Aviation Regulations (“FAR”) Part 91. However, when the aircraft management company contracts with the aircraft owner, there is the so-called “Flight Department Company Trap” that can result in serious negative consequences.

    Some background will be helpful.  It is common for a special purpose entity (“SPE”), typically wholly owned by an individual or his or her operating company, to take title to the aircraft.  The aircraft management company usually prepares its management agreement for the SPE to sign.  This commonly occurs because the management company rarely has any information related to ownership structuring issues.

    FAR 91.501(b)(5) allows aircraft operations to be conducted under FAR Part 91 when the carriage of officials, employees, guests, and property of a company on an airplane operated by that company is within the scope of, and incidental to, the business of the company (other than transportation by air) and no charge, assessment, or fee is made for the carriage in excess of the cost of owning, operating, and maintaining the airplane.  This generally means that flights must be in furtherance of a primary business activity of the company.  For example, flying executives of a company that sells widgets to a manufacturing facility where the widgets are made to oversee production would be within the scope of, and incidental to, the primary business of the company.

    Essentially, the Flight Department Company Trap is a situation where the SPE operates its aircraft illegally because stricter FAR are applicable to the SPE’s aircraft operations, but those stricter rules are not followed because the SPE operates the flights solely under FAR Part 91.  The primary activity of an SPE would be transportation by air, as there is no other primary business activity being conducted by the SPE (hence leading to the “Flight Department Company” description).  Therefore, the SPE will be unable to meet the requirements of FAR 91.501(b)(5).  Further, under FAR Part 91, the aircraft operator is not permitted to receive compensation of any kind, except under certain limited exceptions.  Capital contributions by an individual or by his or her operating company to the SPE (which would typically be the only way to fund aircraft operations, as the SPE’s only asset is the aircraft) are deemed to be compensation.

    With the structure where the SPE enters into the management agreement, the Federal Aviation Administration (“FAA”) would likely view the SPE as providing air transportation services for compensation to the owner of the SPE.  The fact that the SPE may be wholly owned by the recipient of such transportation services, or disregarded for federal income tax purposes, is irrelevant.

    Fortunately, aircraft owners can still engage aircraft management companies for assistance operating flights under FAR Part 91 if structured correctly.  Typically, the structure would entail the SPE “dry” leasing the aircraft (i.e. – lease the aircraft without crew) to an individual or his or her operating business, and the individual or business would enter into the aircraft management agreement.  That individual or business would then pay the aircraft management company, and the individual or business would be deemed the operator of those flights by the FAA.  Ideally, the SPE would not be involved in any cashflow with respect to the aircraft operating budget and would instead just have cashflow related income from the dry lease.

    While, from a practical perspective, it may seem like there is not much difference between the two structures (after all, the same ultimate individual or business is flying on the aircraft, and paying the costs for the flights), use of the incorrect structure can result in serious negative consequences.  Those consequences can include violation of insurance policies (and potential denial of coverage by the insurance company in the event of an accident), violation of loan covenants, civil fine exposure by the FAA to the SPE, penalties for the pilots of the aircraft (such as civil fines and license suspension), and federal excise tax liability.  Further, liability protection planning may be potentially undermined due to a piercing of the entity veil argument (due to the principal activity of the SPE being to conduct unlawful aircraft operations).  It is also more likely than not that this structure will undermine typical state sales and use tax planning.

    Aircraft ownership and operation is a complex topic that requires consideration of multiple, often competing, factors.  GKG Law’s business aviation attorneys have marshaled extensive knowledge of federal aviation, tax and regulatory issues, and we are one of the leading practices in the country primarily devoted to business aviation law.  For more information on this topic or other business aviation related needs, please contact Ryan Swirsky (rswirsky@gkglaw.com or 202.342.5282).

    This article was originally published by GKG Law on September 9, 2019.

  • Tracey Cheek posted an article
    Nardone and Company, Inc. Joins National Aircraft Finance Association see more

    EDGEWATER, Md. – Dec. 4, 2018 – National Aircraft Finance Association (NAFA) is pleased to announce that Nardone and Company, Inc. has recently joined its professional network of aviation lenders. “NAFA members proudly finance - support or enable the financing of - general and business aviation aircraft throughout the world, and we’re happy to add Nardone to our association,” said Ford von Weise, President of NAFA.

    Nardone & Company, Inc., is a Veteran owned corporation in their 25th year of business. Experience within Nardone & Company exceeds 40 years in the salvage industry and since their establishment on July 8, 1993, they have been dedicated business partners, producing the highest salvage return on the sale of damaged goods - quickly and cost effectively. The company’s Aviation Technical Services focuses solely on aircraft-related salvage, sales/recovery, current market values, inventory loss, and damage evaluations.

    The company’s President, George Nardone, Jr. is a member of the National Aircraft Appraisers Association (NAAA).  Mr. Nardone has Airline Transport Pilot Ratings and over 40 years of aviation experience. Their staff of highly experienced and dedicated professionals, with senior certified aircraft and USPAP compliant appraisers, pride themselves on immediate response and rapid reporting with complete documentation on all assignments. 

    Aircraft appraisals by Nardone and Company’s professionals provide the buyer or seller with onsite inspections, valuation utilizing current market conditions and their sophisticated NAAA appraisal that measures every aspect of the aircraft's value at a reasonable cost. They can also manage pre-purchase inspection and provide consulting services to help match clients with the appropriate aircraft to meet their specific requirements. 

    Much like NAFA, Nardone and Companyupholds the highest standards in aircraft appraisal throughout the aviation industry as dedicated partners with their clients. “We provide credibility and trust every time,” said George Nardone, President and CEO. Nardone and NAFA are committed to fostering the education and experience necessary to develop the aviation industry as a whole.

    For more information about Nardone and Company, Inc., visit www.nardoneandcompany.com

    About NAFA:  

    The National Aircraft Finance Association (NAFA) is a non-profit corporation dedicated to promoting the general welfare of individuals and organizations providing aircraft financing and loans secured by aircraft; to improving the industry's service to the public; and to providing our members with a forum for education and the sharing of information and knowledge to encourage the financing, leasing and insuring of general aviation aircraft. For more information about NAFA, visit www.NAFA.aero.

  • Tracey Cheek posted an article
    Equity Bank Joins National Aircraft Finance Association see more

    FOR IMMEDIATE RELEASE

    EDGEWATER, Md. – May 28, 2019 – National Aircraft Finance Association (NAFA) is pleased to announce that Equity Bank has recently joined its professional network of aviation lenders. “NAFA members form a network of aviation finance services who diligently and competently operate with integrity and objectivity throughout the world. We’re excited to welcome Equity to our growing organization as we head to our 50th anniversary,” said Jim Blessing, President of NAFA.

    Founded in November 2002 in Andover, Kansas by current Chairman and CEO Brad Elliott, Equity Bank has grown through a combination of organic growth and acquisitions, and now has $4.1 billion in assets. Equity Bank strives to provide an enhanced banking experience for customers with sophisticated banking products and services tailored to meet their needs, while delivering the high-quality, relationship-based customer service of a community bank. Parent company Equity Bancshares, Inc. trades on the Nasdaq Global Select Market under the ticker symbol EQBK.

    Equity Bank has now launched a business aviation division, headed by Morgan Littell, industry veteran and former NAFA member through UMB Bank. The division will focus on providing tailored financial solutions for business aircraft acquisitions. 

    “We’re proud to provide financing solutions that are tailored to the needs of our customers, including our dedication to the aviation needs of our clients,” said Craig Anderson, Executive Vice President and Chief Operating Officer of Equity Bank. “We’re pleased to have a professional leader like Morgan join our team, and she will be an asset to our customers.”

    Much like NAFA, Equity Bank is focused on community and growth in financial services, and that now extends to the business aviation industry. Equity and NAFA foster an environment in which passionate, knowledgeable and committed professionals can lend their expertise and high standards of service to the financial community.

    For more information about Equity Bank, visit equitybank.com.

    About NAFA:  

    The National Aircraft Finance Association (NAFA) is a non-profit corporation dedicated to promoting the general welfare of individuals and organizations providing aircraft financing and loans secured by aircraft; to improving the industry's service to the public; and to providing our members with a forum for education and the sharing of information and knowledge to encourage the financing, leasing and insuring of general aviation aircraft. For more information about NAFA, visit NAFA.aero.

  • Tracey Cheek posted an article
    Greenberg Traurig Joins National Aircraft Finance Association see more

    FOR IMMEDIATE RELEASE


    EDGEWATER, Md. – Aug. 1, 2019 –The National Aircraft Finance Association (NAFA) is pleased to announce that global law firm Greenberg Traurig, LLP has joined its professional network of aviation service providers. 

    “NAFA members form a network of aviation finance services who diligently and competently operate with integrity and objectivity throughout the world. We’re excited to welcome Greenberg Traurig to our growing organization as we head to our 50th anniversary,” said Jim Blessing, president of NAFA.

    Greenberg Traurig’s Business Aviation Practice represents owners and operators of business aircrafts, financial institutions, leasing companies, corporations, airlines, and other aviation-related businesses on a variety of finance, leasing, commercial, and related corporate matters. The team is skilled in advising both domestic and foreign airlines, lessors, and lenders on aircraft, engines, and parts financings; purchases and sales of aircraft and aircraft portfolios; equipment leasing matters; as well as airline investments and other aviation-related commercial and operational matters. Attorneys capitalize on the firm’s global resources by working closely with restructuring, tax, private wealth, antitrust, governmental affairs, intellectual property, environmental, and labor and employment colleagues to develop multifaceted strategies that meet clients’ aviation needs.

    Business aviation attorney Edward Kammerer, a longstanding contributor to and recent board member of NAFA, recently joined Greenberg Traurig as a shareholder. He advises the business aviation community on a wide range of transactions and issues, with a special focus on aircraft acquisitions and finance. With 40 years of experience, he represents major corporations, mid-sized companies, family offices, corporate executives, entrepreneurs, and business owners, helping them to acquire, operate, finance, and sell private aircrafts. Kammerer has previously served as in-house counsel for three leading equipment finance companies, including affiliates of two major banks and one leading insurance company. He had responsibility for the development of standard form financing documents and approved documentation of inbound and outbound syndicated secured financings. Kammerer is admitted in New York, Rhode Island, and Connecticut. 

    About Greenberg Traurig: Greenberg Traurig, LLP(GT) has more than 2,100 attorneys in 41 offices in the United States, Latin America, Europe, Asia, and the Middle East. GT has been recognized for its philanthropic giving, diversity, and innovation, and is consistently among the largest firms in the U.S. on the Law360400 and among the Top 20 on the Am Law Global 100.  Web: http://www.gtlaw.com Twitter: @GT_Law.

    About NAFAThe National Aircraft Finance Association (NAFA)is a non-profit corporation dedicated to promoting the general welfare of individuals and organizations providing aircraft financing and loans secured by aircraft; improving the industry's service to the public; and providing our members with a forum for education and the sharing of information and knowledge to encourage the financing, leasing and insuring of general aviation aircraft. For more information about NAFA, visit NAFA.aero.

  • Tracey Cheek posted an article
    Cassels Brock & Blackwell LLP Joins National Aircraft Finance Association see more

    FOR IMMEDIATE RELEASE

     

    EDGEWATER, Md. – Aug. 28, 2019 - National Aircraft Finance Association (NAFA) is pleased to announce that Cassels Brock & Blackwell LLP (Cassels Brock) has recently joined its professional network of aviation lenders. 

    “NAFA members form a network of aviation finance services who diligently and competently operate with integrity and objectivity throughout the world. We’re excited to welcome Cassels Brock to our growing organization as we head to our 50th anniversary,” said Jim Blessing, President of NAFA.

    Cassels Brock is a Canadian law firm focused on serving the transaction, advocacy and advisory needs of the country’s most dynamic business sectors. As one of the largest business law practices in Canada, they serve multinational, national and mid-market entities.

    The firm’s multidisciplinary aviation practice has the expertise and experience to help clients achieve their goals in complex national and multi-national aviation law and aircraft finance transactions, including personal and business aviation needs. Cassels Brock designs, implements and manages the transaction scenarios that best match clients' goals and the available legal framework (working within the international law, common law and civil law systems). 

    Cassels Brock is dedicated to serving the needs of both the Canadian and International aviation industries. They can advise, negotiate and draft all relevant documentation in English and French, and have a working knowledge of Spanish, enabling them to provide enhanced support to international clients.

    The firm prides itself on understanding the unique business and legal challenges clients face along with the intricate business and regulatory environment in which they operate. Their clients include high net worth individuals, aviation manufacturers and aviation financiers, including aircraft and engine manufacturers, aircraft and engine leasing companies and advisors, government export credit agencies, international banks, hedge funds and other investors.

    Much like NAFA, Cassels Brock provides timely, responsive, proactive and practical advice and joins NAFA in exceeding expectations in the aviation industry through teamwork and strong leadership. 

    For more information about Cassels Brock & Blackwell LLP, visit nafa.aero/companies/cassels-brock-blackwell-llp.

    About NAFA:  

    The National Aircraft Finance Association (NAFA)is a non-profit corporation dedicated to promoting the general welfare of individuals and organizations providing aircraft financing and loans secured by aircraft; to improving the industry's service to the public; and to providing our members with a forum for education and the sharing of information and knowledge to encourage the financing, leasing and insuring of general aviation aircraft. For more information about NAFA, visit NAFA.aero.

     

  • Tracey Cheek posted an article
    Three Myths About Business Aircraft Ownership see more

    NAFA member, David Wyndham, Vice President with Conklin & de Decker, discusses the myths about business aircraft ownership. 

    David Wyndham speaks to people who are new to Business Aviation on a regular basis, and also hears some recurrent myths about business aircraft ownership. Following he sets straight three of the more common misunderstandings…

    I tend to help clients select the appropriate aircraft for their flying needs and to cost out the various ways to achieve that. Along the way is the need and opportunity to educate and inform.

    Quite often the decision-maker is informed, but others (perhaps a board member or a CFO) are not. My first task is to listen to, and understand the client’s concerns and then, after validating them, provide answers – or at least a different point of view – for their consideration.

    But what are some of the common myths I hear relating to business aircraft ownership? Let's dive in…

     

    Myth 1: You can Make Money Chartering Your Aircraft

    One client operates a transcontinental business jet. When it’s in for scheduled maintenance, he often uses charter. After seeing the charter bills, however, he wanted to buy a second transcontinental business jet for his backup and to charter it while he was not flying.

    I worked with his aviation manager to find the break-even utilization. When accounting for the acquisition cost as well as the operating costs, there would be a need to fly over 2,000 charter hours annually. Why? There are two parts to the answer:

    First: Charter rates are a relative bargain. While $8,000 per hour to charter a Long-Range Jet may seem like a lot, the operating expenses are significant: The variable expenses of fuel and maintenance alone average about $4,000 per hour. The annual fixed costs, including items such as crew, hangar, insurance, training and airborne internet run to $1.4m.

    A typical charter payback to the owner is 85% of the listed hourly rate, and the owner pays for the aircraft expenses. So on that basis, our $8,000-per-hour charter provides the owner $6,800 per hour. 

    Deducting the $4,000 variable hourly costs leaves $2,800 per hour. To accumulate the $1.4m fixed costs takes 500 charter hours.

    So, after that isn’t it all profit? In short, no. Our owner paid $60m for his global business jet. Current market depreciation is about 7% per year (or a loss in value of $4.2m per year). And that would require another 1,500 charter hours to make the deficit up. Hence our 2,000-hour break-even point.

    Second: Money is not free. Our owner has a cost of capital, or an opportunity cost. If he paid $60m in cash for the jet, he can’t invest that money in his company or other ventures. If you add in a 10% return on capital, there is $6m per year in the lost opportunity of having his money tied-up in the jet.

    He could opt to decrease that up front with an operating lease or a loan, but then his fixed expenses increase. To verify this, look at the financial reports of the airlines: An airline needs to fly between 2,500 to 3,000 hours per year per airplane in order to make a profit.

    There is almost no way an on-demand charter operator can book enough charter to cover the costs of owning their own business jet. When an aircraft owner utilizes a charter operator to charter their aircraft when not in use, both parties can win.

    The charter operator gets the use of a business aircraft without the cost to acquire it. The owner gets some revenues to offset their operating costs.

     

    Myth 2: You Should Focus on Only one Cost… ‘Acquisition’

    Every pilot report and airplane review article mentions three things:

    1. Cabin and amenities;
    2. How far the airplane flies;
    3. Acquisition cost.

    Whenever I do an analysis of costs, I look at the total life cycle cost. This includes not only the acquisition cost, but the operating costs, and disposition.

    While the acquisition cost – less the recovery at resale – is significant, the operating costs can amount to just as much over time.

     

    Myth 3: Operating Costs are Consistent

    At least a couple of times each year I have a client who is shocked when confronted with their maintenance costs. A recent situation involved the owner of a large-cabin business jet. The management company had told the owner to budget $3,500 per hour for fuel and maintenance, yet when they looked at their total expenses for 2018 those items averaged over $5,000 per hour.

    Working through the management company’s reports, while also running our own “should-cost” analysis, we found a cost listed under maintenance for international travel, for which the mechanic accompanied the jet on a multi-week trip overseas. 

    Though this was smart planning, it was not necessarily a ‘routine’ maintenance expense.

    The owner also had an inspection every 2,400 flight hours. They flew less than 300 hours in 2018 and averaged the cost of the 2,400-hour inspection over the 300 hours they flew, not the 2,400 hours it took to accrue the expense.

    In my should-cost analysis the accruals for the maintenance from Conklin & de Decker’s data, adjusting for the cost of fuel, came to approximately $3,600 per hour over time. In any given year, the average for that year varied from about $2,400 to over $7,000 per hour.

    The bottom line is that maintenance costs are cyclical. Unless you are on a guaranteed hourly maintenance program provided by the OEM or a third-party provider like Jet Support Services, Inc., the cost in any given year can fluctuate greatly.

     

    In Summary…

    All of the above misconceptions can be cleared up by listening, explaining and budgeting correctly. It also helps to have someone who understands both the costs and the operation to assist in the understanding.

    More information from www.conklindd.com.

    This article was originally published by AvBuyer on August 19, 2019.

  • Tracey Cheek posted an article
    Is business aviation ready for Blockchain? see more

    NAFA member, Corporate Jet Investor, discusses Blockchain and business aviation.

    BLOCKCHAIN IS one of those words nearly everyone has heard of or read about over the past decade, but very few people can define exactly what it is. Those who take a shot at explaining it usually end up saying something along the lines of: “Blockchain is a distributed, decentralized, public ledger.” Instead, the best way to think about blockchain is that it allows data to be held securely in a provable format. The blocks of the chain are digital pieces of information or data.

    This deep granularity means small items can be tracked, with the data stored on a network of computers. Fundamentally, the goal of blockchain is to allow digital information to be recorded and distributed, but not edited. Accessing indivudal blocks requires a key, created by complex algorithms. This ensures the data items cannot be tampered with, essentially helping the data points be verifiable.

    For business aviation the potential application of this technology could be vast, from storing individual financing documents to spare-parts tracking of the smallest aircraft components. Fuel companies are also working on using it.

    First movers

    Adoption across business aviation of blockchain is still very much in its early stages but this will change soon. Clay Healey, owner of AIC Title Service, is among the first movers. The firm has been using blockchain since last year, mainly placing closing information into it, for roughly 2,000 assets with a $2bn value in closing. Healey says that AIC uses blockchain primarily for security but adds that a lot of the language around blockchain is slowing its adoption.

    “For us at AIC, blockchain really is an added layer of security. I think a lot of the words used around blockchain make it incredibly hard for most people to grasp it. Nodes. Decentralisation. What do they mean?” he asks rhetorically.

    “Breaking it down logically, it’s a way to put information across a vast array of servers, and that makes it extremely secure and virtually un-hackable. I say virtually as for verification of the documents, 51% of the computers, or servers, need to agree that the data is correct. To hack 51% at the same time is a huge task.”

    Aiham Bader, founder and CEO of Click Aviation Network, is another pioneer. The trip support company is already using Blockchain technology for its Instant Permit Programme and is looking at leveraging it to help with parts traceability.

    “If you are going to implement blockchain, start from within,” said Bader. “Have a group from your company who understand your business, vision, the target and the plan. Then you have the engine within who understand blockchain and if it fits within your business. Then from all the problems you have to pick out only one problem and start with it first.”

    Todd Siena, founder and chief of Block Aero, a start-offering a blockchain platform, also highlights that for aviation blockchain offers security of data and a method to verify the truth of that data, which can be crucial for an aircraft’s resale value.

    “Where we see the value of blockchain at Block Aero is that it organises asset data and secures the verification of it. Given that aircraft value is linked to this asset trace data integrity, which grows over the life-cycle, being able to prove up that asset data is vital. If you lose the data, or it is incomplete, then you are losing resale value,” says Siena.

    Being able to store and verify crucial data cross many components is of obvious benefit to aviation, especially on the maintenaBlock Aero recently announced a flagship pilot project with Turbine Services & Solutions and Etihad Airways nce side where there are numerous parts to track.

    The blockchain pilot project, sponsored by Mubadala Aerospace R&D, aims to improve engine-overhaul times by enhancing cooperation between parties that need to collaborate on aircraft asset data.

    Healey agrees that blockchain’s ability to prove-up documents makes blockchain a good opation for aviation.

    “One great thing about packaging our closing documents into one PDF is that all the information is there and if it is housed on the blockchain it’s incredibly easy to obtain that information if and when there’s a need to prove upwards.”

    Siena thinks that aircraft will ultimately either be on the chain or not, with implications for the pricing of financing and asset sale value.

    “I think the world will diverge into a place where we have aircraft and assets on-chain and off-chain. Maybe those at the start will be newer aircraft and premium ones like business jets,” he says.

    On-chain aircraft may also be able to get tailored insurance policies as well, Sienna adds.

    “These on-chain assets will enjoy several advantages over those not on the blockchain. For example, insurance may be cheaper as you can prove to the insurer the condition of the asset with risk monitoring over the life-cycle,” says Siena.

    “Right now, most insurers offer very generalised policies, but providing more granular data means these can be more tailored. The same can be applied to asset financing.”

    Back on the chain gang

    One obstacle to blockchain’s wider adoption is that making a complete repository of all aviation assets is something of a herculean task.

    “But away from putting new stuff into the blockchain, reverse engineering blockchain into the aircraft title world may be near on impossible as there are just so many aircraft. You’d have to go so far back to get all the information. If someone was to draw a line in the sand and say ‘let’s just do it from say 2018’, then it might be feasible,” says Healey.

    Registry support would play a critical role in making the adoption of blockchain more feasible. But according to Healey no registry has embraced blockchain as of yet, though AIC is in talks with a European registry around use of blockchain.

    OEM support would also help fasttrack blockchain’s use across aviation, according to Paul Jebely, partner at law firm Pillsbury in Hong Kong. “The inevitable march towards modernity must invariably begin with the OEMs as first movers,” Jebely says.

    However, costs and a lack of immediate efficiency gain may dissuade OEMs from adopting blockchain swiftly, Healey argues.

    “I wouldn’t say blockchain really adds efficiency and it does cost a lot, even for relatively small users like us. If you’re an OEM, the cost will be many times more and imagine having to log every piece of metal, every change to that piece of metal – that’s not efficiency, that’s slowing you down! But then again when it comes to certification, you can just take all that data stored in one place, assert that it’s true and present to the FAA or whomever– that is where the streamlining blockchain offers starts to come in for OEMs.”

    Other technologies are available 

    Use of blockchain may not accelerate rapidly in business aviation, but there is little doubt that harnessing technology can bring business efficiencies. For example, Healey is using computing power to cut down the amount of time it takes to trace ownership.

    “We are working on a computer system that will essentially be able to read registry documents, and hope to have that online by June. That will bring efficiencies as, before, tracking all the owners, different parts etc could take four to five days,” Healey says. “There’s a 9ft tall office we have here, and some of the paper trails you’d produce from those registry searches would be as tall as the ceiling. And you have to double check all of that! Now the computer will read that document in eight minutes and all we will have to do is to check it, which might take an hour or two. That’s a tremendous time saving.”

    Smart business-aviation firms need to embrace technology that assists them. Whether blockchain is one that will become widespread looks unlikely in the near term. But as AIC’s planned new system shows, there are always new avenues to explore.

    This article was originally written and published by Jamie Bullen, Reporter, with Corporate Jet Investor in CJIQuarterly Q3 19, July 2019.  

     

     

  • Tracey Cheek posted an article
    Positioning Oneself in a Seller's Market see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, shares his strategy for positioning yourself in a buyer's market.

    In a seller’s market, the best way for a buyer to position themselves is through a three-pronged strategy of pre-approval, extra liquidity and nimbleness. Buyers who finance may find themselves up against cash buyers. That’s why being nimble is so important. The buyer may have to make an offer on multiple planes before they finally get into first position on a transaction.

    If you think you’re able to pay cash for a plane with the intention of getting it financed after the fact, make sure the transaction goes through proper escrow channels all the way to closing. AOPA Aviation Finance knows from experience that being pressured by a seller into purchasing a plane quickly without all the proper due diligence leads to bad outcomes more often than not.

    Many buyers are aware that incomplete logs, damage history, or a title with a cloud over it are reasons for a finance company to nix the deal. However, in this era of heightened security measures, uncertainty where (and to whom) the money from an aircraft sale went might also prevent the ability to obtain financing. Not to mention, subject a buyer to unwanted scrutiny from one or more three-letter government agencies post-closing.

    Finance companies have a regulatory obligation to follow the money. They must vet not only the buyer, but also the seller as well. This is done in order to ascertain whether money from a cash deal is destined for a bad actor on a list of prohibited persons who might possibly funnel the money to an organization on one of a number of “bad guy” lists. The simplest way to protect yourself from such close scrutiny while still preserving your potential for financing is to have the transaction go through escrow.

    Buying a high-quality airplane in a seller's market has a lot to do with timing. In past seller's markets like this one, AOPA Aviation Finance has seen frustrated clients try two distinct tactics to improve their chances when their timing was off: offer a buyer well above asking price; and/or settle for a lower quality airplane.

    We like to advise our clients that a tight market is a particularly important time to maintain objectivity, despite understandable temptations to the contrary. AOPA Aviation Finance helps a buyer by keeping a dispassionate perspective. However, in those instances when a buyer simply cannot remain objective, we counsel them to be prepared for one of three scenarios: 

    1. A person dead set on paying more than where a plane ”book’s out” with the pricing digest guides needs to be prepared to pay for a valuation to justify why the plane is worth more, or
    2. They need to be able to shell out the difference between where it books and the asking price--in addition to the regular down payment, or
    3. A combination of the two

    Lenders will finance an aircraft only on value as determined by an independent third party so the difference between that value and the buyer's asking price will have to be made up by the borrower. If a buyer can't afford to make up that difference without changing their global financial picture, AOPA tends to advise against the deal.

    Some clients feel that settling for a lesser value aircraft at least gets them a plane. For instance, pursuing a well-appointed TBM 700 because they lost out on one too many highly sought-after TBM 850s. The thing is, it's very likely other frustrated buyers have drawn the same conclusion. They too flood the market, which boosts the popularity of TBM 700s, which artificially boosts their prices. Short term win, but long-term loss. That's because the market will inevitably reverse. When it does, the 700 will likely depreciate faster and farther, thus commanding less in resale as a result. 

    Is it worth it to bet that you'll use and sell that lesser plane before the market turns? Is it worth it to take that risk in a market whose output is only a few thousand aircraft annually, and whose market is heavily dependent on a robust economy? A conversation with an AOPA Aviation Finance expert can help guide your decision-making and help hone your acquisition strategy.

    This article was originally published by AOPA Aviation Finance Company on July 8, 2019.

  • Tracey Cheek posted an article
    The Dos and Don’ts of Hiring Aircraft Appraisers see more

    NAFA member, Jason Zilberbrand, President of VREF Aircraft Value Reference & Appraisal Services shares what you need to know when hiring an aircraft appraiser.

    The joy of taking flight is one like no other. The business of getting to that take off though can be another matter.

    The purchase or sale of an airplane isn’t exactly an everyday sale. For many buying or selling an aircraft, it’ll be their first time at the rodeo. That’s all the more reason to be prepared when getting into an aircraft transaction.

    Hiring an aircraft appraiser is an important part of the aircraft transaction process. If you’ve never worked with an aircraft appraiser before, it’s essential that you prepare yourself for the experience.

    Read on, and we’ll walk you through all the dos and don’ts of working with aircraft appraisers.

    Understanding Aircraft Appraisal

    If you’re going to get an aircraft appraised, hopefully, you understand why you’re taking such a step. But many potential aircraft owners simply call an appraiser up because they’re told to do so. They don’t take the time to understand the reasons behind the recommendation.

    A proper understanding of the aircraft market is hard to get. A big aircraft company is likely to have a team of appraisers on hand at all times who keep incredibly detailed track of aviation industry trends and costs. Those unlucky enough to not own a multi-million dollar company have to outsource to receive such expertise.

    An aircraft appraiser uses their unique knowledge of the aircraft and market trends to properly estimate the value of a given aircraft. Appraisers are held to a high standard and must be able to back up their estimates with a huge amount of data.

    Their estimates must hold up to scrutiny even in a court of law.

    You might need an appraisal for a variety of reasons. You can use an appraisal to properly find the right selling price for an aircraft or to see if the buying price for another is reasonable.

    There are many other reasons to have aircraft appraised. You might be refinancing a loan, looking at an insurance policy, or just curious about the current value of your aircraft.

    It’s important to understand the purpose of your appraisal. This way, the appraiser you hire can take special care to analyze discuss areas most closely related to those goals.

    Do Find Someone Qualified

    The aircraft appraisal industry is unregulated. That means that anyone out there can technically give a value amount for an aircraft since there are no required standards for training or experience.

    That doesn’t mean you should throw a dart at the wall and hope you hit someone who knows what they’re talking about.

    The Appraisal Standards Board develops and publishes a set of standards on behalf of appraisers. Ensuring that your appraiser lives up the standards of that publication can be important.

    There are two organizations in the aircraft appraisal world that are known for their great reputation. They are the N American Society of Appraisers (ASA) and the International Society of Transport Aircraft Trading (ISTAT) and they both have long histories. VREF has a substantial staff of Senior Accredited Appraisers through both the ASA and ISTAT. It is important to note that hiring an appraiser is hiring his knowledge and experience. If the appraiser is not qualified to appraise the asset then he/she should bring in an appraiser that is qualified, or the report would not be considered USPAP compliant.

    Both organizations provide a wealth of training for their members. A badge of certification from one or both of these organizations can mean a lot in terms of an appraiser’s credibility.

    Regardless of who you go with, you should ensure that the appraiser you hire qualified and experienced when it comes to the kind of aircraft under consideration. Ensure that a field visit is part of their process.

    An appraisal is a tricky business and there are many ways to come to a final number. The last thing you want is someone who doesn’t know what they’re talking about giving you a number that will lead you in the wrong direction.

    Don’t Get Too Subjective

    A proper appraisal of an aircraft will be an objective evaluation of the aircraft. You are filling out a balance sheet, not a sales pitch. As such, don’t be surprised when certain selling points don’t add up to the valuation you might wish for.

    Having the wrong floor plan or missing critical equipment for compliance might be a recipe for lower than anticipated values.

    Just because you have a certain taste for a design or feature, doesn’t mean that aspect will add value to your aircraft. There are certain aspects you might find cool about an aircraft that actually detract from the value.

    Enjoyment is subjective after all, and it’s important to keep this in mind when it comes to appraisal.

    Do Consider Databases Used

    An appraiser will need to pull and use a certain market database for their analysis. Publications are consulted frequently by aircraft appraisers, but not all these publications paint the same story about the state of the market or industry.

    VREF Aircraft Value Reference & Appraisal Services, delivers aircraft and engine data through online subscription services and published quarterly digests. VREF provides valuations, appraisals and advisory services to a world-wide client base of aviation professionals including, banks, financial institutions, lessors, manufacturers, aircraft operators and suppliers. VREF Aircraft Value Reference & Appraisal Services plays a key role in informing decisions and identifying opportunities within the aviation industry. VREF is also the official Valuation Guide and Appraisal company for the AOPA.

    The database used for reference can have a huge impact on the final estimated value of an aircraft. As such it’s important that you, as the hiring party, stay well informed.

    The Dos and Don'ts Of Aircraft Appraisers

    Aircraft appraisal can be a tricky business. If it’s your first time working through an aircraft transaction, it can take a minute to get used to working with aircraft appraisers. But with the above tips, you’ll be well on your way to a proper valuation.

    Need more info about aircraft ownership? Feel free to contact us with any questions.

    This article was originally published by VREF Aircraft Value Reference & Appraisal Service on April 18, 2019.

  • Tracey Cheek posted an article
    What Are The Benefits Of Title Insurance For An Airplane Purchase? see more

    NAFA member Adam Meredith, President of AOPA Aviation Finance Company, answers your questions about title insurance when purchasing an airplane.

    Question: I’m planning to purchase a used airplane in the next 6-months. I’ve heard some owners talk about not needing title insurance? Wouldn’t this be required by a lender? I’m familiar with title insurance for a home purchase, but what exactly are the benefits of title insurance for an airplane purchase?

    Answer: Surprisingly, no, many lenders do not currently require title insurance on every transaction. 

    Similar to a home, your aircraft also has a title history which should be reviewed before buying. While most AOPA members know the importance of this and perform a title search prior to buying an aircraft, many may not know there are numerous scenarios where a lien or claim can end up in the FAA registry and/or otherwise “clouding” your ownership interest. By obtaining title insurance, the title insurance company will defend you legally against any bogus claims.  

    Question: I would like to purchase my first airplane this year. My price range is about $50k.  I’ve been looking at your website and the list of financial documents you will require, especially for a business owner like myself, seems daunting. Are there any other options for someone like me? I have good credit and good cash flow.

    Answer: While providing the full list of financial documents gives you the most lending options, some of our lenders do offer low doc products. The underwriting guidelines tend to be more constrained, however, for well-qualified borrowers all that is needed is an application. Because this product does not require supporting financials rates will average .25-.75% higher than our most competitive options. If you are interested in more details about this low doc option, please give us a call and we can give you a more specific rate quote.

    This article was originally published by AOPA Aviation Finance Company on May 3, 2019.

  • Tracey Cheek posted an article
    JetNet Sees Mixed Signals for Bizjet Market see more

    NAFA member Paul Cardarelli, Vice President of Sales at JetNet, discusses the current state of the business jet market.

    Business aviation data provider JetNet is fairly optimistic about the state of the business jet market, but sees some warning signs on the horizon, the company said in a state of the business aviation market presentation on Tuesday at EBACE 2019. While GDP has long been associated with business jet usage, JetNet v-p of sales Paul Cardarelli said his company's analysts have noted a bit of decoupling in GDP growth between the U.S., which has been above 3 percent for the past two quarters, and the Euro Area, which has remained flat at 1.2 percent for that span. Cardarelli placed some of the blame on the protracted drama of Brexit, which is estimated to be impacting the UK economy by £19 billion a year, among other factors.

    He noted that the business jet fleet remains “geographically concentrated,” with approximately 61 percent of the world’s business jet fleet based in the U.S., and that the 22,138 business aircraft in service today had 4.5 million cycles in 2018. The last time the fleet was at that level of utilization was around 2005, when the in-service fleet numbered approximately 14,000.

    “So we’re about one-third more aircraft than we were in ’05, and yet we’re operating about the same number of cycles,” Cardarelli noted. “This is one of the things that gives us some concern. We have an oversupply situation and we have underutilization going on.”

    Another metric of the health of the market lies in the preowned segment. An inventory of less than 10 percent of in-service aircraft is considered by many as indicative of a seller's market and, as of the end of March, the numbers according to JetNet’s data were 9.3 percent for business jets and 6.7 percent for turboprops, the lowest levels since before the global economic downturn.

    Yet, the company noted there were 513 retail jet sale or lease transaactions in the first quarter, compared to 641 a year ago—marking a year-over-year decrease of nearly 20 percent. Cardarelli attributes the discrepancy to a variety of reasons, including the partial U.S. government shutdown in January and stock market turbulence. Another factor could be the limited choice in the marketplace as buyers finally jumped in at the bottom of the market and have removed most of the choice aircraft.

    On the new aircraft side, all five of the major business jet airframers have shown an increase in backlogs in the first quarter, an aggregate 5.5 percent rise, with book-to-bill ratios all above one while Embraer and Bombardier are approaching two. “We feel good about that—that’s a good metric for the industry,” said Cardarelli. “We’re always conservative at iQ, we do want to call them as we see them, but we’re actually bullish, particularly for the OEMs."

    Since 2011, JetNet iQ has conducted its quarterly surveys gathering 500 responses in each for approximately 17,000 results from 132 countries. JetNet iQ founder Rollie Vincent shared the latest data from the company’s second quarter survey, which is 85 percent complete. The survey asks respondents to describe the current market conditions for business aviation as either not yet at the low point, at the low point, or past the low point, and establishes a net optimism score by subtracting the first number from the last.

    In the second half of last year, that number hovered around 50 percent, but plummeted to 27 percent in the first quarter of this year, and with the majority of responses received for the second quarter, optimism seems to have eroded further to 24 percent. In North America, more than 50 percent of the respondents either somewhat or strongly believe there is increasing risk for a global economic slowdown in the next 12 months, while in Europe that rate exceeded 70 percent.

    “It’s all across the market, the mood has changed,” said Vincent. “We think this is a caution sign, and it’s going to affect preowned sales first, which we think are coming down.” Also in Europe, nearly 60 percent of the respondents believe to some degree that uncertainty over Brexit has affected their aviation activities.

    The survey typically asks respondents several topical perception questions, and among them this quarter was if they are experiencing difficulties recruiting and retaining aviation-related staff. In North America and Europe, 77 percent and 67 percent agreed from somewhat to strongly that they were, adding more evidence of an industry-wide talent shortage.

    Asked about their belief that all their aircraft would be ADS-B-compliant by the Dec. 31, 2019 deadline in the U.S., enough respondents indicated strongly that they would not, leading the company to speculate that thousands of aircraft could be affected. That could perhaps to a long overdue mass retirement of aging aircraft, Vincent said.

    For the first time in eight years of surveys, JetNet noted the percentage of intent to purchase light jets, which had been as low as 11 percent, has finally exceeded 30 percent, meaning a long-awaited improvement in the segment is under way, fueled by the Pilatus PC-24. That aircraft model earned the most responses to the question “what model were you most interested in for your next purchase?,” beating out the popular Gulfstream G500, G650/650ER and Bombardier Challenger 350 over the past three surveys.

    Vincent updated the company’s 10-year forecast to 7,100 jet deliveries worth $237 billion through 2028. For the first time, the company included the category of supersonic business jets (SSBJ), which he expects will make an appearance sometime around 2026. Based on the survey results, more than 75 percent of the respondents in North America, and nearly 50 percent of those in Europe, believe to some degree that SSBJs will be in service in the next decade.

    This article was originally published by Curt Epstein on AINonline on May 22, 2019.

  • Tracey Cheek posted an article
    Light Twin Sales Lift Pre-owned Helicopter Market see more

    NAFA member, Aero Asset, shares the latest on the pre-owned helicopter market.

    Retail trades of preowned helicopters were up 9 percent across all helicopter configurations and weight classes last year, with the light-twin market leading that increase, according to the inaugural Preowned Helicopter Market Trends report released by newly established Aero Asset.

    Co-founders Emmanuel Dupuy, William Strum, and Valerie Pereira announced the formation of Aero Asset, a new global helicopter brokerage, this week at Heli-Expo 2019. All are experienced helicopter sales specialists who formerly worked for Avpro. Dupuy and Strum are leading sales at Aero Asset, while Pereira, a specialist in aircraft market research, is the director of business development and research.

    “We believe the time is right for an independent, advisory-focused helicopter brokerage,” Dupuy explained. “The preowned market took an upturn in 2018, after several years of flatlining, and we look forward to the trend continuing on an upward curve.” 

    At the same time, the Aero Asset executives released the Preowned Helicopter Market Trends Report for 2018. Based on the firm’s proprietary intelligence and knowledge of the market, the report focuses exclusively on the twin-engine preowned helicopter markets, ranking the best and worst markets in 2018. It also provides analyses of 15 twin-engine helicopter models in the light, medium, and heavy categories, from the Airbus H135 to the Sikorsky S-92A.

    For instance, the report finds the sales for the Bell 429 fleet up 30 percent in 2018 and the supply was down 20 percent, with a retail trading range of $4 million to $5 million. The report called the 429 the sixth most liquid twin in the preowned helicopter market. And it noted that the Leonardo AW139 fleet experienced a 350 percent leap in sales volume, while the supply at 30 units, is up 20 percent year-over-year. Meanwhile, the report is calling the EC225/H225 volume "opaque" and "cloudy," finding a retail trading range of between $1.5 million and $8 million.

    Overall, the report detailed 90 sales of light twin helicopters last year, a 13 percent increase, while 44 medium helicopters traded hands, unchanged from 2017. In the heavy market, three helicopters were tracked as sold in 2018.

    Preowned twin-engine helicopter prices range from sub-$1 million at the very bottom—the Airbus H155/EC155B1 and Leonardo A109E Power—to more than $12 million for the top end marked by the Sikorsky S-76D. Absorption rate—the amount of time it would take to deplete inventory at current sales levels—varied from 1.6 years for light helicopters to 2.8 years for mediums to five years for heavy. This rate was lower year-over-year by double digits across all weight classes, with that for the medium helicopter category down 48 percent, from 4.1 years in 2017.

    “Brokers and dealers cultivate a short view of the markets, leveraged by intel from past deals and best buys available for sale,” said Dupuy. "This data is very refined. This report aggregates 2018 helicopter trading intel and compares it with the previous year and leverages key comparative indicators.” 

    Toronto-based Aero Asset plans to publish its market report quarterly going forward.

    Click here to download the Q1 2019 Preowned Heli Market Trends Report.

    This article was originally published by R. Randall Padfield on AINonline on March 6, 2019.