High Aircraft Quality & Mixed Pricing Data Indicate Opportunity for Buyers & Sellers
January 18, 2016 – AMISSVILLE, Virginia. Asset Insight, Inc. today published its Fourth Quarter 2015 issue of the Asset Insight Index Market Report (AI2 Market Report) covering the pre-owned aircraft market for calendar year 2015. This AI2 Market Report evaluates 91 fixed wing aircraft models, totaling 1,910 aircraft listed "for sale." Overall, 2015 was an illustration of a “buyers’ market” with higher quality aircraft available at decreasing Ask Prices compared to 2014. Maintenance Exposure (accrued / embedded maintenance) of “For Sale” aircraft improved / decreased slightly in 2015 over 2014, however, when factoring in lower Ask Prices, the Maintenance Exposure to Ask Price Ratio (“ETP Ratio”) worsened / increased year-over-year, negatively impacting Sellers. As we head into 2016, the underlying takeaway from the 2015 analysis is that with accurate, timely, unbiased value and Maintenance Exposure data, Buyers can secure excellent value while “market timing” can help Sellers improve their residual value position.
Appearing for the second quarter is the analysis comparing the ETP Ratio versus the average Days on Market before an aircraft trades. The chart illustrates a clear relationship: the lower the ETP Ratio, the less time an aircraft will likely spend on the market. Specifically, Asset Insight’s analysis indicates that if an aircraft has an ETP Ratio below 40% it is, on average, presently spending 207 days on the market. Aircraft whose ETP Ratio is 40% or greater will, on average, spend 281 days on the market. On balance, the average For Sale aircraft spent more days on the market in Q4 2015, than in Q3 2015.
Asset Insight president, Anthony Kioussis says of the year-end report,
There are some great values available, but market data can be confusing. Without good-quality information at your service while buying or selling an aircraft, you are basically in hard-IMC with a dark instrument panel. You’re flying blind without maintenance value and exposure information specific to the aircraft whose purchase or sale you are pursuing.
Asset Insight increased the number of fixed-wing models tracked for the AI2 Market Report from 76 in 2014 to 91 by the end of 2015. By specific market sector, the Year End 2015 analysis reflected the following:
• Large Jets – Excellent quality assets with improved Maintenance Exposure ratings are available in this category for a lower Ask Price. The ETP ratio remained above average. While 2015 saw a slight reduction in Quality rating over 2014 (from “Outstanding” to “Excellent”), Large Jets still exhibit the highest Quality Rating among the tracked segments. Finally, the spread between Ask and Transaction pricing contracted for Large Jets due to sharply lower Ask Prices late in the fourth quarter, indicating a possible market shift.
• Medium Jets – The group saw a record low Ask Price the end of 2015. While Asset Quality in this segment decreased slightly (from “Excellent” to “Very Good”) and the Maintenance Exposure worsened, year-over-year, trends were showing signs of improvement in the fourth quarter of 2015. The Ask and Transaction price spread narrowed only slightly in the fourth quarter for Medium Jets.
• Small Jets – This segment is the high performer in the marketplace, 2015 over 2014, offering improved Quality and higher Ask Prices. While the Maintenance Exposure in this group worsened slightly, Asset Quality improved from “Very Good” to “Excellent” for the first time. Only small variations in Ask and Transaction prices were demonstrated in the Small Jet segment, illustrating a level of stability over the past three quarters.
• Turboprops – From 2014 to 2015 the Quality rating in this group improved from “Good” to “Very Good.” Maintenance Exposure improved as well, while Ask Prices decreased and remained below average – an unusual combination. Together, these indicators illustrate real opportunity for Buyers to find high quality Turboprops for very reasonable prices. While there were signs of a small increase in the spread between Ask and Transaction prices for Turboprops in the fourth quarter, values in this group remained consistent during 2015.
Tony Kioussis summarized by saying,
“Whether you are buying, selling or managing a fleet of business aircraft, it has never been more important to have access to quality, complete and impartial information to help you make wise decisions and anticipate the need for appropriate action. The market is sending us mixed signals and having data specific to the serial numbered aircraft or fleet you are reviewing is critical.”
Asset Insight’s proprietary Asset Grading System ProcessTM (AGSP) analyzed the average maintenance condition of jet and turboprop aircraft listed for sale as of December 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.