Stay ahead of the curve by reading our latest view on business jets
Daniel Hall, Senior Analyst, ISTAT Certified Appraiser, ASA Accredited, Ascend by Cirium provides his view in this recent report ahead of EBACE 2019.
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Executive summary:
- Business jets are depreciating assets – but there is far from an accepted approach on how to deal with residual value forecasting.
- Value retention is dynamic. Our analysis using actual market values (rather than list prices) tells us that five-year-old business jets have averaged at 61% value retention from their original value when new. Since 2012, this has translated to 9.4% depreciation per annum in years 0-5; preliminary 2019 data shows a marked improvement in Small and Medium category aircraft.
- The overall health of the business jet market has improved by some metrics, one of which pertains to values. A strong 2018 resulted in just a 3.5% year-on-year decline in Current Market Values from 2018 to 2019. However, the volatile past five years cannot be ignored when projecting residual values in absence of other methods.
- The concept of Base Value is an important tool for financiers and lessors to manage their future asset risk. It has recently been stated that “residual values are flattening out now as a result of the market pickup”. This is an extremely risky approach to take. This analysis illustrates examples of this and discusses the concept of a balanced market.
- The analysis further substantiates the need to use external and impartial sources to validate the internal analytics being conducted to support investment decisions. Aircraft value forecasts are a cornerstone of any asset risk strategy. A prudent investor would be wise to take a range of opinions from more than one source.
Ascend by Cirium
How can we help? Spread across global offices of London, New York and Hong Kong, the award winning Ascend by Cirium team consists of ISTAT and ASA-certified appraisers and aviation analysts who can conduct appraisals conforming to USPAP standards.
