ISTAT Jetrader - Autumn 2020 - 30

unraveling, what does that mean for
Residual Value? What does that mean
for strength in the secondary market?
And what are we looking at when it
comes to the availability of finance?
The second side is filtering. We
can take the raw data one step further.
What makes sense? How can we sift
through the points that are important
to us? How do we create an apples-toapples comparison? Let's look at lease
terms. Let's look at return conditions

and order cancellations. We look at the
raw data and say, OK, we know that
this airline can retire these aircraft,
we know what they're doing. We know
these aircraft are coming out. We know
this market was already soft to begin
with, maybe it had a bubble. Then we
have to look at, well, what's going to
happen now? That raw data starts to
create a story. Let's take a Residual
Value and look at the part-out market.
With the part-out market now kind of

How is appraising like...
......climbing a ladder?
Take Action
Adjust Beliefs
Conclusions

Assumptions
Assign Meaning
Filtering
Raw Data

We know there's always a backstory to the data.
No two transactions are alike. It's never really an
apples-to-apples comparison.
30

* T H E O F F I C I A L P U B L I C AT I O N O F I S TAT

and the lease compensation. How much
knowledge do we have based on how
much it costs to reconfigure an aircraft,
the maintenance of an airframe or an
engine? We filter all these things and
start to put together what it means
when we see aircraft trading. We know
there's always a backstory. No two
transactions are alike. It's never really
an apples-to-apples comparison. It's
kind of like looking at the value of a
lease. You can tell the story of the lease
by how much leverage the lessor had
over the lessee or vice versa. Who had
more leverage in the lease contract?
Who is getting more of the return
compensation? What credit risk profile
is put into place when we look at that
lease? We start to pull this apart, and
that's filtering. Then we assign meaning
to all this. Let's weigh the importance
of the factors that we're looking at. We
filtered out, we've taken the raw data,
and we have all this stuff coming to us
at multiple different angles of attack.
We're looking at bits and pieces of
information - empirical, subjective
and otherwise - and we're now trying
to make sense of it.
But what is the data telling us?
How does it fit within an appraiser's
respective methodology? Every
appraiser has a methodology. They
look at things differently. Some will
look at aircraft values from a different
starting point. When we start to assign
meaning - when we start to weigh
the factors - we have to weigh the
relevance of how that comes into play.
The assumptions are now where it
starts to really build up. Let's take the
aircraft condition as an assumption:
Was it half-life? Full life? We start to
unpack some of these items. And then,
from that, we start to make conclusions.
How does that affect a Base Value or a
Market Value? These conclusions are
fundamental to how we start to put
together that value, and then maybe we
adjust our beliefs. Maybe we do nothing.
Maybe it's a blip and the market will
recover and thus we don't have to go
too far. Or maybe we say there's a
ISTAT Jetrader - Autumn 2020

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