All posts tagged 'aircraft value' - Page 2

Jurassic Jets

Are older business aircraft even sellable? And how old is OLD?

At the recent NBAA convention in Las Vegas, I sat in on several briefings about the state of aircraft sales and residual values. It was unanimous that older aircraft are not selling. No news there. It's been that way since 2008. What was interesting is the speakers' definition of "old."

I've been going with older than 15 years as "old" in terms of the ability to sell at a reasonable price within a reasonable amount of time. Age 15 also works with getting financing: The Aircraft Age + Length of Lease/Loan should not exceed 20 years. Age 15 allows for a five year financial deal. It seems like the new "old" is younger than that. And no, we can blame it on the Millennials. Blame it on the economic booms of the late 1990s and again in the mid-2000s.

An "old" business airplane is now older than age 10 in terms of maintaining a residual value and being sellable.

Glancing through the GAMA shipment database by year, business aviation saw significant increases in sales and deliveries during the past 15 years. Many manufacturers saw their sales double, peaking in delivery backlog in about 2008. Thus, there are a large number of relatively recent vintage airplanes available that are in the 5 to 15 year group, and especially aged 5 to 10.

The future air navigation systems that have been developing are in place or will be in the next decade. New or nearly new aircraft are either capable of using the full airspace, or can be easily upgraded. Older aircraft may not be so easily updated, especially older business jets that need the upper altitudes for efficient flight.

Older business aircraft, especially jets, have operating costs significantly higher than their new equivalents. A second or third overhaul on most turbine engines will be very costly due to retirement components within the engine. Unscheduled maintenance is also much higher for these older aircraft.

Lastly, emerging markets outside the US can, and do, purchase mostly new or newer aircraft. Developing nations are adopting the EASA regulations as it relates to aircraft aging issues. Some even place an age limit on imported aircraft.

So we have a large number of recently produced aircraft, many with updated avionic systems, that can be purchased for quite reasonable prices. Financial institutions have the money to lend, provided the credit is excellent. The 20 or 30-year old airplane costly to maintain, and sending them to a developing nation to sell isn't viable. These aircraft are just not selling. Let’s take a look at an example.

Jet Years produced Percent Fleet For Sale Average Days Listed For Sale
Gulfstream GIII 1979-1987 18% 828
Gulfstream GIVSP 1992-2002 13.56% 375
Gulfstream G450 2005-current 7% 239

You can buy a used GIII for under $1 million. But almost no one wants one even at that price. Newer GIVSPs and especially the G450 have a market.

One of the speakers referred to the oldest business aircraft as "Jurassic Jets." They are from a bygone era of cheap gas. They are not selling and the financial institutions do not want them on their books. From what the speakers say, and I agree, this is not going to change. Many of these aircraft are with their last owner.

Metrics - Measuring What’s Important

Metrics are a simply set of measurements that we use to quantify results. In business, they are commonly used to measure important, limited resources. A metric can be used as a measurement of success — how well we are using what is being measured.

If you are operating an aircraft for business, you should have some metrics that show the value of the aircraft to your organization. Some measurements are easy: hours flown and passengers carried. Many metrics involve costs to operate the aircraft, whether that is done via a budget or by other means. Those measurements are all important, especially costs are I’ve discussed before. But, which of those help establish the value of the aircraft to your organization?

Seth Godin writes a blog that deals with being productive and creating value in your work. He comes from a tech background, but the topics he covers apply to all sorts of skilled work. In a recent blog post, Seth brings up two important things about measurements:

  1. The thing that you measure should be something that you want to improve.
  2. Many organizations measure what is easy, not what is important.

He makes the point that many organizations pick an easy metric and then that becomes their focus. Be wary that the easy metric may have the unintended consequence of improving something that has little value to the organization.

The use of an aircraft for business most often involves a finite resource: time. The richest person in the world and the poorest all have only 24 hours in their day. The value to the organization of the individual’s time is in relation to the impact they have within the organization. The business aircraft can help reduce the low value use of time spent traveling and allow for the high value time spent being with important customers or in creating things that add value to the business.

So time could be a good metric. But is hours flown the metric you want to measure? If we are focusing on “improving” this metric, would a decrease in hours flown represent an improvement? Maybe, but maybe not. If you are a commercial operator who is being payed a fixed price to deliver something, reducing the time needed is one good metric. 

In aviation, we have to measure the hours flown. But the use of those hours flown may not be a good measure of how well your operation is accomplishing its mission. If you are involved in the transportation of senior executives, more valuable but harder to measure metrics might include:

  • Time avoided traveling by less productive means (airlines for example).
  • The value of that time (based on the executive’s salary and worth to the company).
  • The number of high value trips that the aircraft enables.


These are not easy measurements, but they can be used to clearly show the value of the aircraft. Then the cost metrics of how much this service costs can be placed into its proper perspective. The improvement focus can be in increasing the use of the aircraft in flying those most valued trips in a cost effective manner. 

The value of the executives’ time is a difficult measure and one that the aviation department has no authority to declare. But, successful companies do value their employees’ time and should be making efforts to increase their productivity. This is where the business aircraft has no equal.

There are many more metrics that can be used (dispatch reliability, aircraft availability to throw out but two). What metrics do you report and how many are being used to generate improvements in your services?  Click reply and let us know.



 

JETNET Offers Commercial Airliner Fleet Subscription Services

UTICA, NY – JETNET LLC, the world leader in aviation market intelligence, is now offering their new Commercial Airliner fleet subscription service, also know as “Big Planes”. JETNET Commercial Airliner will complement their business aircraft and helicopter subscription services, bringing together the “complete trio” of aviation fleet information.

Since acquiring Aviation Data Services, Inc. (AvData) in 2004, JETNET has continued to research worldwide commercial airline fleet data. AvData had its beginnings in October 1966 in Wichita, Kansas, and was one of the early pioneers that started the capture, analysis and dissemination of aviation fleet information and intelligence through the use of a worldwide reporting system.

“We are very pleased to present our “Big Planes” service to the worldwide commercial aviation marketplace,” said Vincent Esposito, JETNET President. “That includes widebody (twin aisle), narrowbody (single aisle), freighter and regional (under 100 seat) jet airliners, along with commuter turboprops.”

Since 2004 the commercial airline fleet data has been maintained under an annual single-source contract services agreement. JETNET is now offering the airliner aircraft fleet data through its real-time internet-accessed Evolution program, combined with both business aircraft and helicopters. The total fleet is comprised of nearly 100,000 in-operation airframes, 35,000 of which are airliners. 

JETNET’s services meet and exceed the industry’s requirements to provide timely, accurate data and information on these dynamic fleets, a critical service for aircraft professionals. The company routinely assists its clients, whether airframe manufacturers, maintenance and repair shops or financial institutions with special studies. These include services such as market analysis, product and business plan evaluation, fleet aging and ownership trends, and market projections.

Current JETNET clients include major airframe and powerplant manufacturers, service and maintenance organizations, aircraft finance and leasing companies, and dealers and brokers. JETNET is a resource employed by various aviation regulatory agencies throughout the world, and many others who require data on these aircraft populations. They are also regularly cited by trade and national media outlets.

The ways in which JETNET can assist you and your organization are virtually limitless”, said Lucia Frontera, JETNET’s Director of Market Research. “We recognize that each client has a unique set of requirements. What they share is the need for timely, accurate, complete fleet information, backed by the best aviation research organization in the world.”

The heart of JETNET’s market research is their 45 

person multilingual research team in Utica, NY, actively calling aircraft operators in order to maintain real-time updates to JETNET’s nearly 100,000 aircraft database.

For more than 20 years, JETNET has delivered the most comprehensive and reliable business and commercial aircraft research to its exclusive clientele of aviation professionals worldwide. In 2004, JETNET acquired Aviation Data Services, Inc. (AvData), founded in October 1966. JETNET is the ultimate source for fleet and marketplace information and intelligence. The company offers services for aviation professionals over the full spectrum of business and commercial aviation, including business jets and turboprops; fixed wing and helicopter aircraft; and commercial airliners; as well as management and networking tools for business aviation professionals and executives. Headquartered in its state-of-the-art facility in Utica, NY, JETNET provides multichannel access to real-time, userfriendly, comprehensive aircraft data.

For more information on JETNET Commercial Airliner, log on to www.jetnet.com or contact Michael Chase, JETNET Director, Special Projects at 214-226-9882 or [email protected]. For more information on JETNET LLC log on to jetnet.com or contact Paul Cardarelli, JETNET Director of Sales and Marketing, at 800-553-8638 (USA) or [email protected] or International inquiries, contact Karim Derbala, JETNET Exclusive Agent, EMEA, at 41.0.43.243.7056 or [email protected]

Looking at the 2010 business aircraft sales market

Gulfstream V business aircraft

Business Jet Traveler recently weighed in on the year that was 2010 in the realm of used business aircraft sales. It still is somewhat obvious to most in business, whether aviation related or not, that markets remain timid. However, some segments of the private jet market have fared better than others.

Furthering a trend seen in new models presented at the NBAA Annual Meeting & Convention in Atlanta this October, large-cabin long-range jets continue to move.

The BJT article notes that buyers went after these aircraft, such as the Gulfstream V at prices below $20 million and the Gulfstream IV/SP under $12 million, and Gulfstream IV under $10 million.

The article notes that these prices hover around half the value for these aircraft three years ago, when the industry saw its pre-recession peak.

[more]

Many of the used business jets advertisements placed at GlobalAir.com seemed to reflect that trend, although this is unscientific and based only on memory. Marketing among larger Hawker and Falcon Jet models for instance, in addition to the above-mentioned Gulfstream aircraft, appeared more agressive than with some other models.

The BJT article says other business jets, such as the Learjet 60XR, saw a tougher time in a sometimes-stagnant used-aircraft sales market.

Read the full report here.

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