How can airlines keep track of their asset values?

Dr Stuart Hatcher says different aircraft should be valued under different parameters.

Question: How can airlines keep abreast of changes to the value of their assets?

Expert: IBA Group head of valuations and modelling Dr Stuart Hatcher

Through the thousands of aircraft appraisals the International Bureau of Aviation (IBA) has conducted over the years, the valuation team has learnt that no two aircraft are the same – so why would they be valued in the same way and under the same parameters?

The Jet Values 2 (JV2) system, from IBA, uses advanced technology designed with this knowledge in mind.

It can allow for specification distinctions to be made, taking account for modifications, or the various options manufacturers make available when selling new aircraft. It will also factor in the retrofit options that keep older aircraft flying for longer.

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The main benefit of the JV2 system is the ability to access valuation expertise on an asset’s worth, both now and in
the future.

Over the past two decades, IBA’s team has seen all manner of business scenarios, from cyclical trends with typical peaks and troughs, to unpredictable and hard to read depressions and upturns.

To gain a value opinion for most commercial aircraft in service, you can set the forecast length and inflation percentage, request a lease rate, market value and soft value projection, whilst also choosing the output format.

Couple this with a specification adjustment tool, and you get an opinion that truly reflects the value of the asset under analysis - not just a ‘text book’ example.

When used with the ‘My Fleet’ function, the system will also generate full portfolio valuations, both current and for the future.

In addition, JV2 enables companies to construct and manage their own fleet of aircraft from scratch, however big or small.

Their fleet can contain any number of individual aircraft selected from the fleet of current Western build commercial models, as well as custom aircraft that can be tailored to specific needs.

As many different fleets as required can be created and sub-divided into portfolios, for quick and easy ‘at a glance’ management.

The system contains detailed specifications on all the aircraft listed within the system. This includes many details that have a direct bearing on the valuation, such as delivery date, Maximum Take-Off Weight (MTOW), engine type, current hours and cycles, as well as range and fuel capacity.

The aircraft serial number, current registration, owner and operator are also provided. Every value opinion produced also gives information on the specific value effect.

This is included in the report document, in addition to the specific values requested – giving a detailed one page analysis every time.

IBA tries to keep reports to a single page ‘snapshot’ value opinion, which can easily be inserted into existing models/reports or distributed among colleagues.

IBA is working to develop the next ‘add-ons’ to provide more functionality to the user. Two of these developments include full-life adjustments and the PDF store.

With these two enhancements, users can determine their end of lease compensation exposure and download the latest market reports as generated by the valuation team.

Users have said these reports have proven invaluable in front of countless credit committees time and time again – so now IBA plans to make them more easily available.

As values hit rock-bottom, the industry is identifying that 2010 is the optimum time to make money in the long term, and IBA’s jet valuation system forms an important part of this strategy for all organisations operating in the aviation sector.