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JULY 2015 ASSET INSIGHT INDEX MARKET REPORT REFLECTS “EXCELLENT” ASSET QUALITY AT VERY ATTRACTIVE PRICES - “Buyer’s Market” Prevails as Ask Prices Continue to Fall

July 16, 2015 – AMISSVILLE, Virginia. Asset Insight, Inc. today published its Second Quarter 2015 issue of the Asset Insight Index Market Report (AI2 Market Report). A new addition, commencing with this Q2 2015 report, is an analysis from SAI Valuations, LLC (SAI) that adds a dimension to the market data not previously offered with Asset Insight’s maintenance analysis. Industry analytics point to an all-time high Maintenance Exposure to Ask Price Ratio (ETP Ratio) relative to “for sale” aircraft – primarily due to lower Ask Prices – and that both buyers and sellers are moving towards lower transaction values. While the data reflects a positive market for aircraft BUYERS, well informed sellers are also able to make better transactional decisions through the use of complete and unbiased data. 

 

Coming out of the second quarter of 2015, we are impressed by the excellent quality of aircraft listed for sale at prices that will provide tremendous value,

stated Tony Kioussis, president of Asset Insight.

To optimize their chance of securing a buyer at a reasonable price, sellers will want to take care to understand the real position of their aircraft in the marketplace relative to other available aircraft. Incomplete or misunderstood data could lead to unacceptable holding times or unnecessarily low selling prices – or both. Buyers, too, should do their homework before reaching any acquisition decision, as an uninformed, or under-informed, decision could lead to the purchase of an aircraft with an excessively high level of upcoming maintenance.

 

Charts

The significant observation of the last 12 months is the falling selling price of tracked aircraft.  Pricing for every group of aircraft, except Small Jets, has fallen.  Ask prices for the aircraft tracked by Asset Insight fell 7.87% during Q2 of 2015.  Drilling down over the past 30 days, the only group to see an increase in selling price is the Turboprop market group, while the ask prices for all for-sale aircraft fell 1.49% during the same period. Overall Asset Exposure actually improved in the second quarter of 2015 (by $137,949 or 7.21%), but the drop in selling prices, resulted in the worst Maintenance Exposure to Ask Price Ratio (ETP Ratio) Asset Insight has seen since beginning to track such analytics. By specific market sector:

  • • Large Jets – With Ask Price at the group’s twelve month low point ($14.76 Mil), Sellers that chose not to act – when pricing was at a 12 month high in March – may have passed on some good opportunities, as Buyers now appear to hold a better hand.
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  • • Medium Jets – The group’s current $3.71 Mil Ask Price is virtually equal to the $3.70 Mil twelve month average and reflects a $100k reduction over the past 90 days. While the group’s ETP Ratio is challenging, we believe good opportunities exist for Buyers and Sellers alike – fueled by Prices.
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  • • Small Jets – Asset quality of small jets available for sale improved in Q2 to “Excellent” and the Maintenance Rating and Financial Rating both increased over June 2014 data, indicating that both buyers and sellers have positive inducement for transactions.
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  • • Turboprops – An Ask Price of $1.61 Mil, which is a $30k decrease since March but a slight increase during the last 30 days, represents the only market segment with an increase in selling price in the last 30 days. Although the group’s asset quality is, once again, the lowest of the four sectors, Turboprop asset quality continues to rate as “Very Good” and the climate should lead to mutually beneficial transactions for both buyers and sellers
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Tony Kioussis summarized the Q2 2015 report by saying,

Extremely high quality aircraft are available in the marketplace, with prices favorable to buyers. However, buying or selling without understanding the true scope of the maintenance condition and exposure of any aircraft, specific to an individual aircraft and relative to other aircraft on the market, could lead to unnecessary losses, surprise maintenance costs and expensive holding time.

 

Asset Insight’s proprietary Asset Grading System ProcessTM (AGSP) analyzed the average maintenance condition of jet and turboprop aircraft listed for sale as of June 30, 2015 (Source: AMSTAT) to generate the AI2 Market Report. The AGSP derives the Asset Insight Index, whose components are the Maintenance Rating (ATC Score), Financial Rating (ATFC Score), and Asset Exposure Value (ATFE Value).  Dividing the Asset Exposure Value by the aircraft’s Ask Price derives the Asset Exposure to Ask Price Ratio (ETP Ratio) – a quantitative view of the aircraft’s current marketability.  The AGSP is based on patented algorithms that examine current age, flight hours and cycles on an aircraft’s systems and major sectors – airframe, engine(s), propeller(s), APU, paint, and passenger interior – as well as the typical cost to repair or replace parts with no defined life.