Aircraft appraisals should take more tailored approaches towards aircraft valuations, senior leasing executives suggested during a panel discussion at the ISTAT Americas conference in Phoenix on 1 March.
"Where I see a little bit of a disconnect is that an appraiser looks at the airplane – and the condition of the airplane, and its value – as a naked airplane," noted Steven Udvar-Hazy, chief executive of Air Lease. "Frequently, when we have an attractive lease attached, there's not a commensurate valuation… It only looks at the metal value independently, which is fine, but you could have two different airplanes – one that's parked and another that's leased out at very good lease rates – and, for an investor or an owner, it's two different sets of cash flows."
SMBC Aviation Capital chief executive Peter Barrett makes a similar argument, noting that "the biggest challenge is that aircraft valuation is not a bespoke business".
Boeing 737-800s, for example, can vary in value depending on the lease and other circumstances; however, "that bespoke nature is very hard to get", says Barrett. "We see that a lot, particularly in what's reported – 'a 777 traded for x' – but nobody actually talks about the condition of the aircraft and the circumstance of the seller, the circumstances of the lease – or no lease. I think it's that informed nature that makes it difficult to really get that consistency across the market."
Appraisers have a "really hard job", acknowledges Jeffrey Knittel, president of CIT Transportation & International Finance. "And I think that, given the information they have, they do a very good job."
But he highlights that information-sharing can be problematic for lessors. "What makes it difficult is that we are trading on information," he says. "We're trying to figure out markets, we're trying to figure out what lease rates and buy rates are, and that's a major part of our value portion. So for us to turn around and just give that away is a very, very difficult thing to do."
Knittel sees it as important that lessors, as well as engine and aircraft OEMs, give appraisers "as much information as possible about how we see the markets, what we see the potential of airplanes, and what we see as issues", but he cautions that "it will be difficult for us to say: 'We're leasing x airplane at x dollars' – just for competitive reasons".
Source: Cirium Dashboard
