Jetrader - March/April 2009 - (Page 11)

economic downturn has begun weakening demand for the B767-300ER. Further weakening can be expected once the delayed B787 program is back on track and deliveries begin. This one-two punch combined with developing demand for the freighter variant means that freighter conversion will become a viable option for the B767300ER. In fact, had the B787 program not been delayed, B767 values would already be at the point where conversion might be the most desirable course of action. As a result of the B787 problems, however, the B767 lessor with near term lease expirations must weigh the prospect of declining rental rates, shorter leases and weaker credits in the passenger market against a conversion investment that could ultimately yield higher rents and longer leases in the freighter market. Question #3: Should freighter conversion be considered on a speculative basis? The B767-300ER provides a good theoretical example, but it remains a thin argument upon which to hang an investment decision. While a conversion and leaseback of a lessor-owned asset with an existing lessee seeking to operate the aircraft in freighter conﬁguration requires a reasonably straightforward analysis, the variables with a speculative conversion tend to discourage all but the most courageous lessors. Speculative conversions require assumptions to be made with limited supporting empirical data. These assumptions include, but are not limited to, post-conversion lease rates, expected lease terms (e.g. three two-year leases or one six-year lease?), and most critically, revised residual value assumptions. Although there are several reasonable methods to calculate the residual value of a converted aircraft, none have been calibrated sufﬁciently due to the lack historical data; as a result conversion residual value assumptions are merely educated guesses. While speciﬁc opportunities may provide a rational basis to consider speculative conversion, doing so obligates the CONSULTING • Strategic Planning • Industry Forecast • Airline Planning TECHNICAL • Inspections Audits • Redeliveries Repossessions • Maintenance Cost Studies & & VALUATIONS • Aircraft Engine Values • Value Modeling • BlueBooks Online Values & & The Leading Independent Asset Management Company www.AVITAS.com tel.: 703.476.2300 fax: 703.860.5855 Jetrader 11 http://www.AVITAS.com

Table of Contents Feed for the Digital Edition of Jetrader - March/April 2009

Jetrader - March/April 2009 A Message from the President Contents Calendar/News Crunching the Numbers World Air Cargo Forecast Brain Drain in the Transportation Industry Aircraft Appraisals From the ISTAT Foundation Aviation History Advertising Index

Jetrader - March/April 2009

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