Jetrader - September/October 2010 - 26

the rapid drop in MD80 values—the same happened more recently with B737 Classic values and early samples of the A320. With the new generation of widebodies rapidly approaching, the same may happen, and in some cases, such as the 747400, is already happening.

Concerns for the Financier
While it is generally recognized that, apart from airlines and leasing companies, the ﬁnancial community plays an increasingly important role in the aviation

equipment market, it wasn’t that long ago that even some of the major airframe and engine manufacturers hardly spent any time presenting and explaining their new products to the ﬁnancial community. In some cases even the extremely important opinion leaders of the appraisal community were ignored. While this has changed signiﬁcantly and savvy OEMs organize ﬁnanciers and investor meetings, unfortunately there are still a few OEMs that could do better in presenting their products to the ﬁnancial community.

HAVE A WISH.
MORE RANGE / LESS EMISSION / BETTER PERFORMANCE / HIGHEST RELIABILITY

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Today it seems that a number of fair weather players—or “tourist banks” as they are sometimes called—can be seen returning to the airﬁnance market—a market they abandoned as soon as the going got a bit more difﬁcult only a few years ago. Given the complexity of the aviation business and the equipment involved, it is essential for an aviation bank to have a deep knowledge of the airline business, the equipment markets and the technical characteristics of the assets involved. On one hand, this helps identify potential problem situations, such as ﬁnancing aircraft that can be earmarked as oddballs. While during the upturn in the market these oddball aircraft may seem acceptable, during the downturn these are generally the ﬁrst aircraft to be parked or scrapped. On the other hand, an indepth understanding of the asset may actually help in identifying opportunities, e.g. by identifying the signiﬁcant part-out value of otherwise difﬁcult to ﬁnance aircraft. Obvious examples of these situations include the MD90 as well as the B737-600, both less attractive aircraft but with very marketable engines. Contrary to what is often assumed, it is important for the ﬁnancier to get full disclosure from the clients of the equipment speciﬁcations, including nonstandard items, modiﬁcations, damage history, etc. It is highly recommended for airline/lessor and ﬁnancier to obtain full information in order to make the cost of changing LOPAs, weight and/or thrust upgrades, cargo conversion potential, etc., fully transparent. Certain, sometimes expensive, features unfortunately cannot always be recognized as adding value for a ﬁnancier. Airlines claiming millions in extra value for a sophisticated IFE system may be disappointed. Winglets, however, will in most cases add value. So, in a complex business like the commercial jet market, specialist banks that understand “money and metal” will be able to come up with creative solutions that in the long-run will beneﬁt all parties involved. Maybe more than ever in the past, “ﬁnance-ability” has become an import characteristic of any commercial jetliner.

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publication of the International Society of Transport Aircraft Trading 6/29/10 11:33:58 AM

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Jetrader - September/October 2010

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