|
Jay Mesinger
Questions & Answers
May 26, 2004:
Q: I am new to the process of buying a business jet.
As I look at the listings of aircraft for sale in the
category that I am interested in, there are over 100
aeroplanes for sale. How does one even begin to sort out the
aircraft and pare them down to a manageable list of
candidates?
A: Great question. Complex answer. Having chosen the
category, you must have already considered mission and
budget. Now it is time to start the arduous process of
finding the needle in the haystack. The first thing we do
when asked to pare down a list is to eliminate those
aircraft in the category that have been on the market for 18
months or longer.
Typically those aircraft are not really for sale and are
consequently not priced correctly. With that group out of
the way the list will begin to shrink and leave the
‘actively for sale aeroplanes’ remaining. Now comes the part
where one must be familiar with model year nuances, engine
intervals and other differences in the respective aircraft.
The next group to eliminate would be those which have
airframe time that do not fit your comfort zone. This zone
is typically is driven by average time on the fleet or
lender discomfort or on the low side, budget constraints.
Usually the newer and lower time the aeroplane, the higher
the cost. Now you are left with an active selling group that
has an airframe time that fits one of the above parameters.
The last pass comes by eliminating those aeroplanes which do
not have the equipment that you need for your proposed
operation; for instance, APU, thrust reversers, eight seats
instead of ten, etc. This will bring the list down to a
final group which can now be judged on future capital costs
affecting both residual value and overall cost of the asset.
These costs could be for engine hot sections or overhauls
needed within a close proximity to purchase or regulatory
compliance that will be needed for continuing operation. The
final look at the remaining aircraft should come from an
examination of overall value. The most aircraft for the best
price from the remaining candidates; your needle in the
haystack.
Q: I have heard and read a lot about ageing airframe.
Is it really a factor that will affect our current overall
fleet?
A: The short answer – absolutely! The long answer is
a little more detailed. There are many problems associated
with and that evolve from the ageing airframe issue. One of
the biggest is an unanswered question of support. The cost
to supply parts, comply with more frequent inspections and
comply with upcoming regulations (RVSM, TAWS, Noise
Abatement) are in many cases, cost-prohibitive.
When compliance costs almost as much as the value of the
airframe or more, an owner cannot justify the expense. When
I looked at the aircraft for sale today at many levels
(light, medium and large body jets and all turboprops) I
found that an average of 68 per cent of the total aircraft
for sale are over 20 years old.
This is a huge percentage of the total fleet and it has
significant impact for the aircraft buyer as it relates to
the available inventory. A buyer needs to consider the cost
of compliance and maintenance, the availability of spare
parts and avionics as well as the desire of lenders to
finance and insurers to insure these aircraft, both today
and in the future.
It is also important to think about these issues from a
future buyer’s perspective too, as they will impact your
residual value when you might want to transition out of the
aircraft. Everyone in the industry is questioning the future
of the ageing airframe, the down-line effects and the
operational and financial impact. The answer will continue
to unfold over the next few years.
- Jay Mesinger
|
