"Buyer’s Market" Continues through Q3 2015
October 14, 2015 – AMISSVILLE, Virginia. Asset Insight, Inc. today published its Third Quarter 2015 issue of the Asset Insight Index Market Report (AI2 Market Report). Asset Insight analyzed 91 fixed wing aircraft models, totaling 1,826 aircraft listed "for sale." While the Ask Prices increased just over $25,000 since June, they remain just 3% above the lowest figure achieved during the past 12 months. Coupled with an "Excellent" Asset Quality Rating and improving Maintenance Exposure of the "for sale" fleet, low prices mean good value is available to savvy Buyers.
"Comparing Maintenance Exposure to Ask Prices allows us to see that the exposure burden for aircraft on the market improved significantly in the third quarter of 2015"
stated Tony Kioussis, president of Asset Insight.
However, data from SAI Valuations, LLC indicates that transaction values generally continued to decline and this downward valuation trend is expected to continue. It is vital for buyers and sellers to understand how market dynamics affect their aircraft of interest to manage their risk.
Key in the Asset Insight analysis is the Maintenance Exposure to Price Ratio (the "ETP Ratio"). In Q3 2015, the ETP Ratio across the “for sale” fleet improved significantly, from June’s 64.7% to 51.6%. However, any ETP Ratio over 40% represents excessive exposure in relation to Ask Price, therefore detailed analysis by make, model and serial number is required to understand the true market position of any aircraft.
New to the AI2 Market Report is an analysis of the ETP Ratio versus the average Days on Market before an aircraft trades. The chart illustrates the 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 184 days on the market. Aircraft whose ETP Ratio is 40% or greater will, on average, spend 249 days on the market.
* Source: Amstat (www.amstatcorp.com) – September 28, 2015
By specific market sector:
- • Large Jets – Registered the best asset quality among the four groups, as well as the lowest ETP Ratio for the quarter and year to date. Ask Price ended the quarter above July's figure, hovering around the 12-month average. Considering the group’s Maintenance Exposure, Buyers can realize good value in available assets.
- • Medium Jets – The group saw a 12 month low Asking Price, but improved / lower Maintenance Exposure and ETP ratio, offering good transaction opportunities for Buyers and Sellers alike.
- • Small Jets – Record high Ask Prices should buoy Sellers in this category, while excellent asset quality, improved Maintenance Exposure and ETP Ratio leads to good news, and good value, for Buyers.
- • Turboprops – The overall Quality Rating deteriorated for this group since June’s analysis, and Ask Price registered just under the group's 12-month average. The ETP Ratio decreased / improved noticeably, from 51.1% to 45.0%, registering the second best figure among the four groups.
In summary, Tony Kioussis notes that
"overall, Ask Prices continued to decrease but the Quality Rating of the 'for sale' fleet continued to be strong, offering transaction opportunities for both Buyers and Sellers. However, results vary significantly between market segments, and further, from aircraft model to model. To optimize value, prospective Sellers should monitor aircraft quality for similar listed assets along with their own aircraft's Maintenance Exposure. Buyers, on the other hand, must carefully analyze an aircraft’s Maintenance Exposure for their anticipated ownership period plus a couple of years beyond, to truly understand the value and exposure of candidate aircraft. Market conditions continue to be challenging and it is vital to understand market dynamics and to conduct detailed analytics on the specific serial number(s) under consideration."
Asset Insight’s proprietary Asset Grading System ProcessTM (AGSP) analyzed the average maintenance condition of jet and turboprop aircraft listed for sale as of September 28, 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.