Aircraft Valuations - According to the Vref 2022 market report, Cessna Citation model prices, including the Citation length, rose between 2 and 20 percent from the second quarter. (Photo: Textron Aircraft
Popular values in business aircraft remain strong, although there are some signs that the seller's market may be changing, according to the Vref Market Report for the third quarter of 2022. Vref said that this value has remained despite inflation and the economic downturn.
Aircraft Valuations
According to the report, the spring rate has not affected many airlines' prices and "buyer interest in business jets remains at a level not seen in many years." When it comes to turboprop and business jet inventory, the average is between 3 and 4% of the workforce. However, this average has risen between 1 and 2 percentage points since the beginning of the last year. The jet business has continued to grow, with Cessna Citation values, for example, up between 2 and 20 percent from the second quarter, according to the report.
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The report states that days on the market have not changed from the first quarter to the second quarter. Although there were fewer aircraft sales in the second half than in the first half, "we are still on par with a normal year if we leave out the crazy rate of 2021," the report said.
Jason Zilberbrand, president of Vref, said there are several areas where prices are falling. "Demands continue to be higher than the market, although we can finally reach the top for asking prices, because for the first time in recent years, those who are forced to reduce prices are asking prices. to find a buyer and "turnkey" ready to fly , modern aircraft are still the money to buy in all classes".
Vref expects the fourth quarter to be "accelerating" as buyers continue to take advantage of bonus cuts before they end and "shipment rejection" is "enough to keep the train on track, maintaining demand and asking prices at current levels." Popular Gulfstream prices are up 41 percent over the past year, partly due to weak demand for the G450. (Photo: Gulfstream Airlines)
According to a report by market analyst Jefferies Aerospace & Defense Electronics, the most popular passenger jet was at a 1.3 percent pace, prompting continued price increases, up from 11 percent last year. Jefferies says some products are seeing price increases, led by Gulfstream, which rose 41 percent in terms of sales volume, including the G450 and G150.
Aircraft Appraisals, Sales & Acquisitions
Using Amstat data, Jefferies launched a monthly survey that measures the price of business flights. It indicated that the average known product has increased by 4 percent as of February 2021. Aircraft prices are based on the estimated selling price of regular and/or discounted products, aircraft age, upgrades, engine configuration and usage, which provides an estimate of what the aircraft's selling price should be . In terms of price, Gulfstream led the increase with the G280 and G650 each up 26 percent, and the G550 up 29 percent.
Asking prices, however, are currently unchanged, 13 percent higher than the average fleet comparison. This dynamic overrides most ships except the Dassault. "Embraer and Gulfstream auction prices on the used resale market appear to be more consistent than the average with 28% and 27% higher prices," the analyst said. "The average used Bombardier and Cessna prices are 7 percent and 6 percent above average ... Dassault is about in line." more accidents possible, as explained by the evaluation group Ishka, which also warns that the type that many of the younger airlines can get more reliable values.
Since the beginning of the Covid-19 crisis, all types of aircraft have suffered a drop in market value due to severe disruptions to air travel. According to Ishka Consulting, the wider network declined between 45%-50% in terms of market value, while some of the best aircraft, such as the 737-800 and A320s, were down 15%-20%. On the other hand, smaller or newly built aircraft have now fallen by 10%-15% compared to their value in January 2020.
In recent months, the rate of market attrition has slowed for many types of aircraft (see chart below). Speaking to the Ishka Insights team, Eddy Pieniazek, head of Ishka Advisory, explained that the speed of the decline is mainly due to the sharp decline in the values recorded at the beginning of the crisis, but added that some of the aircraft types have reached the normal level of "Low".
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"At some point there is a floor below which the value of certain aircraft does not fall, this can be the same value or where investors do not want to trade the aircraft," explains Pieniazek. "In particular, for some of the smaller aircraft, investors may choose to store the engine and wait for the market to rise, rather than sell and accept a loss." Some of the older aircraft are listed only for salvage value, for engine parts and components. Some aircraft that are 20+ years old may be in this category, but some aircraft have yet to enter the category so the value can go up, down with no sign of an upswing in the market.
Most airline values have experienced a haircut over the past 15 months. The extreme crash became a two-aisle plane. For example, since the crisis began, the value of 2010 A330-300s has halved, from $47 million in January 2020 to $22 million in May 2021. Similarly, 2010-year B777-300ERs have halved in value over the same period, with this aircraft type drops from $73 million to $34.5 million, according to Ishka's research. Many types of flights are discounted between 30% and 40%.
The declining values reported by Ishka were echoed by other value experts speaking at the Ishka conference in London. Scope Ratings, which analyzed a 30-year sample of airline market value data, found that airline values have fallen across the board, covering all types of aircraft, by an average of 32% since the start of the Covid-19 pandemic. According to one study, everyone's values dropped an average of 44%. The asset class that performed best during the pandemic was cargo aircraft, explained Helene Spro, director at Scope Ratings GmbH, and the aircraft type that performed the worst were wide-body jets such as the A380, A340 and B747. Spro showed that even after removing this type of expansion, residual values dropped by an average of 39%.
However, the rapid decline in prices at the beginning of the epidemic was followed by another "step", the epidemic has become a long-term phenomenon and the realization that the growth rate of the market will continue to disappoint until 2020 and 2021. The graphs below show the current market value (CMV) and market lease ratio (MLR) for short-haul, multi-passenger and regional airlines from January 2020 to May 2021. 30%-40% of the airline market could fall some investors are looking for a place to get in and hope that the market will start to improve soon, but they warn that the value of the airline continues to be affected by other concerns.
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The driver behind market demand is the speed of vaccine introduction and relaxation of restrictions. As this continues to accelerate, travel may be required as well, which can help recover flight values for certain types of assets. Pieniazek says strong demand for long-haul and regional carriers will likely balance the market in 2023 or 2024, while long-haul networks may not see that balance until 2024 or 2025. Additionally, while some airlines will show signs of recovery, others will . the prospect of constant price reductions due to changes in operating conditions and flight systems.
All airline values have been affected by the outbreak, although some types of airlines will see a faster recovery than others. Analysts believe the small, efficient airline will recover quickly and may even surpass its pre-Covid value. Most experts believe that the best placed aircraft for recovery would be the neos, MAX, B787 and A350.
However, some new entrants are drawn to the A330 because of the availability and cost of the aircraft (see Insight: 'Are used A330s the hearts (and wallets) of entry-level aircraft?'). Pieniazek says the A330s "could be attractive to the market" because some airlines have considered using large jets instead of short-haul planes due to the current cost and nature of the aircraft. He warns, however, that it will be difficult to meet the requirements for other types such as the larger B777.
Some types of older aircraft will benefit as they return to the market and retain their value. Other types of larger aircraft will have difficulty finding accommodation
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