Valuing valuers

Pretty much every industry has general guides for someone looking for an instant valuation. Keeping up with a secretive industry like business aviation is much harder. Words: Alasdair Whyte

It is not that long ago that brokers, bankers, insurance companies, manufacturers and others would eagerly unwrap folders to get their latest aircraft values. Now they can just log in. But the job of getting hard numbers has not got any easier.

Corporate Jet Investor: How important are reference values guides to the business aviation industry?

Chris Reynolds: They share a very important role in the industry, providing a starting point to determine aircraft values in the present or historically, which is possible by putting the power of accumulative data at the user’s fingertips. By presenting the values in a simple and easy-to-understand format, a user (who may or may not be an aircraft expert) can quickly assess values at a macro level, while also providing the means through appraisals and other custom analytic services to refine the value at a micro level when required.

Daniel Hall: While they may have been merely that – a ‘guide’, pre-2008, having a well-informed and objective opinion is of vital importance today. Ascend’s global team has one ASA [American Society of Appraisers] and seven ISTAT [The International Society of Transport Aircraft Trading] certified appraisers – we can look at the entire market for what it is and opine values without pressures; such as any remarketing or brokering engagements. Independence and impartiality are key, but external expertise is why accredited appraisers are needed to support accurate and professional investment decisions on business jet assets.

Anthony Kioussis: Value guides have historically played an important role in educating people about the relative value of an aircraft model by year of manufacture. Everyone understood that guides displayed historical data, and guides have traditionally been utilised to establish a reference point for a buyer or seller to formulate an idea as to the value of an aircraft.

Computing power today allows analysis down to the aircraft serial number level that takes into account an aircraft’s total time (not just its year of manufacture), exact specification and current maintenance status.

CJI: How do you collect the data?

Chris Reynolds: Aircraft Bluebook collects data from across the transaction spectrum including: the OEMs, dealers and brokers, financial institutions, the individual buyers and sellers, trade publications, from our clients, etc. As life-long members of both NAFA [National Aircraft Finance Association], IADA, and NBAA [National Business Aviation Association] we have ongoing conversations with the parties directly participating in the buying and selling of aircraft from all sides of the table.

Daniel Hall: Through a variety of sources, primarily through our trusted network of relationships. Aircraft trading is generally a very confidential business. It takes time to build a trusted network which you can rely on to inform your opinions of value. The industry works together. An example is the level of engagement by most of the OEMs with the appraisal and finance sectors, which has never been better nor more appreciated than it is today.

Anthony Kioussis: Collecting data within the business and general aviation community is not difficult, as we live in a data-rich environment. The challenge has always been collecting data that can be converted into actionable information and then made available to users in a timely fashion.

We have an automated compiler that is constantly collecting publicly available information. We also have agreements with numerous entities that provide us with pricing and other data on a routine basis that we aggregate to create information that is then made available to clients. We never, ever republish any datapoint provided to us in confidence.

“Trust, but verify – across a broad spectrum of industry players.”

CJI: How do you know that people with vested interests are not trying to move the market?

Chris Reynolds: Well that is the catch 22 isn’t it? The best recourse to ensure reasonable validity of the data collected is: ‘Trust, but verify’ – across a broad spectrum of industry players.

It is easier said than done at times, but triangulating data points has a way of making the outliers stand out. The great thing about the information age we live in, is the availability of data from multiple sources and the ability to investigate said data to better understand it. This in turn allows the values to be formulated and presented in an independent view of the individual markets. Providing an independent unbiased view is critical and is the backbone of the franchise of Aviation Week Network.

Daniel Hall: There will always be bad apples, but a good appraiser will always strive to obtain multiple data points or opinions, and not be swayed by one (which may look suspect). Over time you know which data you can trust and vice versa.

Anthony Kioussis: We have agreements with numerous entities that provide us with pricing datapoints. In cases where we are not able to view pricing information through a supporting document, such as the sales agreement, we will only use such information if it can be corroborated by two other parties.

CJI: Many people criticise values guides as being out of date. Are they missing the point?

Chris Reynolds: Well, a price guide must first be accepted for what it is, a product that trails the market by design. Aircraft Bluebook reports values every 90 days based on what has been observed, reported, and researched up to that point. Highly volatile periods of time will always present challenges in dynamic markets, which underscores the very important role aircraft appraisers also play in the valuation industry, but generally speaking price guides can present a good starting point in determining value.

Daniel Hall: I’ve been in conferences or on panels where a round of ‘appraiser bashing’ has begun... What I have seen over the past 10 years is an incredible development of the appraisal and valuation space – there is far more education as well as sharing of data than before. We pride ourselves as being one of the most transparent appraisers in the industry and people value us for this. We are upfront with our opinions and data capture which informs our opinions, typically numbering hundreds of confirmed transaction prices per year.

Anthony Kioussis: I believe they are. Value guides report historical values. Therefore, by definition, data must first be obtained, analysed, then converted into useful information before it is released. While computing power allows faster analytics to be completed these days, I believe value guides need to act as ‘value reporters’ not ’value creators’.

Furthermore, in accordance with their name, value guides are simply that: a guide as to an aircraft’s value. Asset Insight’s eValues System is able to derive quite a bit of information very efficiently, but if someone wishes to obtain very detailed information about a specific aircraft, they would be better served by searching for an Appraisal Report that included an aircraft inspection and an audit of its records.

CJI: How did you end up in this role?

Chris Reynolds: My interest in aviation started at an early age - I was an Aviation Major at Kansas State University’s Polytechnic Campus with early plans on a career in flying, but then switched gears to the business side of industry after landing a job at Aircraft Bluebook. Now as the Valuations Manager at Aircraft Bluebook, an ASA appraiser and a Commercial-rated pilot I have the best of all.

Daniel Hall: I have always been passionate about aviation! Through university I had an inkling that my future career path would take me into airlines, airports, or the OEM world. I had been lucky (in the economic climate post-2008) to pick up some business jet management experience during my degree. This proved invaluable when I interviewed for a graduate role at Ascend, where I discovered an even wider and more diverse aviation industry.

Anthony Kioussis: I remarketed trade-in aircraft for an OEM many years ago. Later, I worked as a broker, established and managed an airframe Hourly Cost Maintenance Programme, and led marketing for one of the largest aircraft financing and leasing companies. There were two common challenges that I experienced at every entity.

One, it was always time-consuming to derive an aircraft’s embedded maintenance expense; what we now term Maintenance Exposure. Two, staying on top of market values was always difficult, especially during times of rapid change, such as the traditional fourth-quarter sales frenzy, or during a market downturn.

I led a small team that conceptualised, designed, and launched the Asset Insight Index, a standardised scale by which every aircraft could be evaluated and graded against its optimal maintenance condition (achieved on the day the asset came off the production line). Asset Insight then merged with SAI Valuations and the ability to grade and value an aircraft in real time became the eValuesTM System.

“Highly volatile periods of time will always present challenges in dynamic markets.”

CJI: One of the things about guides is their historical value – will your guide be around in 20 years?

Chris Reynolds: Without a doubt! Aircraft Bluebook has been around for about 70 years and is part of the even longer running Aviation Week (more than 100 years). Together these two Industry standard brands offer a tremendous amount of historical resources and unlimited potential to our customers now and in the future.

Daniel Hall: On the one hand, as the industry continues to grow, aircraft financing and leasing will become more commoditised. On the other, a high dollar value asset, a global market, and an ever-evolving fleet from a technological and capability standpoint, will always require a form of appraisal or advisory. Evolution and complexity in the market always needs analysis and explanation.

Anthony Kioussis: It would be egotistical of me to believe that the eValues System will definitely be here in 20 years, especially considering the rate of change due to automation. However, I am confident that decision-making tools, such as those provided by eValues, will be available, although they will also be more capable than they are today.

I can assure you that Asset Insight – if it still exists as an entity – will be run by a much younger, and smarter, person.

CJI: What will you be doing in 20 years?

Chris Reynolds: If I am still doing this, that would be fine by me (so would fishing), but whatever it is, as long as it involves things that fly you can bet it will be part of my life!

Daniel Hall: Sorry for the pun, but the past 10 years have flown by – 20 years doesn’t seem so far out now! The entire aviation industry across multiple sectors has grown and developed beyond anybody’s forecasts; it is so dynamic that I look forward to experiencing and evolving with what the next 20 have to offer. Travelling to new places, seeing the latest models, engaging in education and mentoring the next generation of young people coming into the industry is exciting stuff!

Anthony Kioussis: I hope to be writing on industry topics as a thought leader, but at that age I might just be sitting on a lounge chair on a Greek island enjoying the sunshine and an adult beverage.

Daniel Hall Senior Valuations Analyst, Ascend by Cirium

Hall is a dual-certified aircraft appraiser with both the American Society of Appraisers (ASA) and the International Society for Transport Aircraft Trading (ISTAT). Originally from England he is now in New York. He specialises in the Business Aviation sector overseeing Ascend’s market values output for over 100 variants of business jet. In addition to being involved in the commercial aircraft valuations and appraisal space worldwide.

CJI Connect: +1 646 746 6840 [email protected]

Anthony Kioussis President and CEO, Asset Insight

Kioussis was vice president, strategic marketing with GE Capital’s Corporate Aircraft Finance group, joining GE after serving as VP – Aircraft Sales for Jet Aviation Business Jets. He first job was at British Aerospace – where he stayed for 10 years rising to VP – Sales, for JSX Capital, the aircraft remarketing subsidiary. He joined Jet Support Services, Inc, as sales director – airframe programmes, and developed JSSI’s Airframe Hourly Cost Maintenance Program.

CJI Connect: +1 (540) 905-4555 [email protected]

Chris Reynolds Business aviation valuations manager and aircraft appraiser, Aircraft Bluebook

Reynolds joined Aircraft Bluebook as an associate editor in 2007. He is an American Society of Appraisers (ASA) accredited senior appraiser and holds a Bachelor of Science degree in Aeronautical Technology from Kansas State University. Reynolds is also a Federal Aviation Administration (FAA) certified flight instrument instructor and a commercially rated single and multi-engine instrument pilot.

CJI Connect: +1 913-967-1956 [email protected]

Alasdair Whyte, Editor-in-chief, Corporate Jet Investor

Alasdair Whyte, Editor-in-chief, Corporate Jet Investor