Special to Leeham News
By Michael Allen
Jan. 25, 2018, © Airfinance Journal, Dublin: “We get asked to value a portfolio of 35-aircraft,” says Rikard de Jounge vice president – asset valuations at Avitas.
“No one tells you that the valuation is for an ABS transaction. They just ask for market and base values,” he adds.
Stuart Hatcher, head of intelligence at IBA Group, says it is still a “secretive market”.
“Providing that we are dealing with sellers, the information is generally good. The issue we tend to find is with the arrangers. And the communication can be quite sporadic,” he says.
The other issue is how much you are including into a valuation for a lease-attached aircraft.
ISTAT definition 20 years old
“There is reticence in the market to not providing lease-unencumbered values for ABS transactions and it’s a standard ISTAT-defined term. We have the same methodology but ultimately we share different views of the market.”
De Jounge disagrees: “We follow the ISTAT definitions but we may not have the same data and the same methodology. Methodology is up to yourself, as long as you can justify and show your work, and have an acceptable methodology, that’s fine with ISTAT.”
He adds: “Some variation in values should be a level of comfort. If we were all at $0.5 million for the same aircraft, that would be a source of concern. We provide an opinion, the data – and the world in which we operate is very opaque.”
ISTAT definitions are more than 20 years old and Hatcher believes they are “quite archaic.” About 25 years ago, the leasing market was small and back then aircraft were trading as naked aircraft, he says.
“You constantly have to make adjustments. Base values are a long-term trend rather than a market value, which is an evolving point at a point in time,” he recalls.
De Jounge agrees: “The business has changed. We do not only trade naked aircraft. Aircraft are now financial instruments with cash flows and future residuals, and that is a completely different analysis.”