ISTAT Jetrader - Autumn 2020 - 32

Individual Methodologies
Obsolescence
Ubiquity

Depreciation Curve

Lease Rates

Years of Manufacture
Operator Base

Tertiary Value

Economics
Orders/Backlog/
Deliveries

Historical Value

Key Appraisal Terms

Cost

Income

Half-Life

Market

Appraisal Fundamentals

Highest and
Best Use

A350s are popular, which makes sense
because those aircraft provide the most
operational flexibility. 777-300ERs are
being operated, but in what capacity?
As a temporary freighter or as
passenger? The larger the aircraft, the
harder to fill. What does that actually
look like? What changes the construct?
That construct becomes economic life.
All of a sudden, aircraft are lasting
longer. And so we ask ourselves,
well, was that airline ownership? Or
is it lessor ownership? Who owns the
aircraft? And what is the construct? If
it's on a lease, what is the monetary
benefit at the end of lease for either
renewing, recapitalizing that aircraft,
or perhaps parting it out? Again, the
exit strategies are so much more
32

* 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

Value in Use

granular than they were before
even 9/11 when we look at how the
creativity of the end-of-life solution
and how lessors, investors and owners
can exit the residual exposure of
an aircraft. Depreciation: That's a
fundamental argument among many
as far as where these aircraft are,
how they're depreciated and the
curves. For the appraisal community,
that depreciation curve is something
that each appraiser opines on based
on their own methodologies, based
on how they weigh criteria that are
important to them and whether we have
permanent structural changes, whether
those permanent structural changes
are certain aircraft types, two engines
to four engines, widebodies, large

widebodies, narrowbodies, etc.
Individual methodologies take in
weighing factors that start to shape
how we look at constructing a value.
In this case, let's take a look at how a
Base Value might be constructed, and
then that will lead to a Market Value.
If you look at these factors: aircraft
ubiquity with regards to who owns it,
how many aircraft are being operated,
depreciation curve, obsolescence of
an aircraft type, whether it is now
considered obsolete, what happens
if it's obsolete but there's no other
technological advancement that
supersedes that, who's operating this
aircraft, how large of an operator,
what kind of operator, what is the
tertiary value, what does the construct
of orders and the backlogs and the
deliveries tell us? And when we start
to see all of that come together, let's
overlay historical value. We take the
data points we've had in the past
from similar types and put that on a
curve to see how these current aircraft
types might react in the future or in
the present.
Ultimately, the market will
challenge everything we know to be
true. We are not going to come out
unscathed. We have to be looking at
our own internal models and our own
assumptions. Some models will be
proven to be fine because they built in
sensitivity, and some models will be
blown out of the water. We've been
lucky in the last four or five years that
our market has been on the uptick and
that things have moved in our favor.
But those of us who've now gone
through two to three cycles have seen
this show before, and we can start to
make assumptions about how we have
to deal with things and how best to
make that analysis.
To view the full presentation, go
to istat.org/ISTAT-Online/ISTATLearning-Lab.


https://istat.org/ISTAT-Online/ISTATLearning-Lab https://istat.org/ISTAT-Online/ISTATLearning-Lab

ISTAT Jetrader - Autumn 2020

Table of Contents for the Digital Edition of ISTAT Jetrader - Autumn 2020

ISTAT Jetrader - Autumn 2020 - Intro
ISTAT Jetrader - Autumn 2020 - Cover1
ISTAT Jetrader - Autumn 2020 - Cover2
ISTAT Jetrader - Autumn 2020 - 1
ISTAT Jetrader - Autumn 2020 - 2
ISTAT Jetrader - Autumn 2020 - 3
ISTAT Jetrader - Autumn 2020 - 4
ISTAT Jetrader - Autumn 2020 - 5
ISTAT Jetrader - Autumn 2020 - 6
ISTAT Jetrader - Autumn 2020 - 7
ISTAT Jetrader - Autumn 2020 - 8
ISTAT Jetrader - Autumn 2020 - 9
ISTAT Jetrader - Autumn 2020 - 10
ISTAT Jetrader - Autumn 2020 - 11
ISTAT Jetrader - Autumn 2020 - 12
ISTAT Jetrader - Autumn 2020 - 13
ISTAT Jetrader - Autumn 2020 - 14
ISTAT Jetrader - Autumn 2020 - 15
ISTAT Jetrader - Autumn 2020 - 16
ISTAT Jetrader - Autumn 2020 - 17
ISTAT Jetrader - Autumn 2020 - 18
ISTAT Jetrader - Autumn 2020 - 19
ISTAT Jetrader - Autumn 2020 - 20
ISTAT Jetrader - Autumn 2020 - 21
ISTAT Jetrader - Autumn 2020 - 22
ISTAT Jetrader - Autumn 2020 - 23
ISTAT Jetrader - Autumn 2020 - 24
ISTAT Jetrader - Autumn 2020 - 25
ISTAT Jetrader - Autumn 2020 - 26
ISTAT Jetrader - Autumn 2020 - 27
ISTAT Jetrader - Autumn 2020 - 28
ISTAT Jetrader - Autumn 2020 - 29
ISTAT Jetrader - Autumn 2020 - 30
ISTAT Jetrader - Autumn 2020 - 31
ISTAT Jetrader - Autumn 2020 - 32
ISTAT Jetrader - Autumn 2020 - 33
ISTAT Jetrader - Autumn 2020 - 34
ISTAT Jetrader - Autumn 2020 - 35
ISTAT Jetrader - Autumn 2020 - 36
ISTAT Jetrader - Autumn 2020 - 37
ISTAT Jetrader - Autumn 2020 - 38
ISTAT Jetrader - Autumn 2020 - 39
ISTAT Jetrader - Autumn 2020 - 40
ISTAT Jetrader - Autumn 2020 - 41
ISTAT Jetrader - Autumn 2020 - 42
ISTAT Jetrader - Autumn 2020 - 43
ISTAT Jetrader - Autumn 2020 - 44
ISTAT Jetrader - Autumn 2020 - 45
ISTAT Jetrader - Autumn 2020 - 46
ISTAT Jetrader - Autumn 2020 - 47
ISTAT Jetrader - Autumn 2020 - 48
ISTAT Jetrader - Autumn 2020 - 49
ISTAT Jetrader - Autumn 2020 - 50
ISTAT Jetrader - Autumn 2020 - 51
ISTAT Jetrader - Autumn 2020 - 52
ISTAT Jetrader - Autumn 2020 - Cover3
ISTAT Jetrader - Autumn 2020 - Cover4
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