The Business Of Airplane Trading

The airplane industry is one lucrative sector where buying and selling of aircrafts has seen an upward trend in recent years.  Gone are the days when only millionaires could think of owning a private airplane, as a plethora of middle-class and upper middle-class has invested their earnings in having an airplane of their own. In a sector, where the number of transactions is perhaps, not as big as the automobile sector, the business of buying and selling aircrafts has different equations all together. A lot many countries have seen increased business in aircraft for sale New Zealand, being in particular. Weekend getaways to other parts of the country get all the more easier with an airplane of own and is also a style statement for many!

The Business Of Airplane Trading

The Aircraft Investor

The aircraft investor has a very simple outlook before purchasing the flyer. The investment is made based on the present value of the aircraft and the future selling value, in subsequent years. A drop in the asset value of the aircraft will significantly bring down the profit margins of the airplane. However, in the aircraft industry, the value of the flyer does not decrease remarkably within a few years. At the same time, thorough analyses of the factors that determine the future value of the aircraft need to be made. Now, there are many ways the value of an aircraft is determined. For example, the base value of an aircraft is the value of the aircraft in a transaction where both the buyer and the seller have agreed upon. In a balanced market condition, the current value of the aircraft goes more or less in parallel with its base value. However, the current value, based on the appraiser’s analysis, can see an upward or a downward trend, based on market factors and the macro-economic parameters, in general. The future value of an aircraft is forecast by experts based on the upcoming trends in aviation industry and changes in the legal framework. Adjust this future value with the maintenance costs and depreciation of the aircraft, and you arrive at the adjusted future value of the flyer, which is closer to the value at which the investor is likely to sell.

Factors Driving Aircraft Business

Given the macroeconomic factors of inflation, economic slowdown and financial health of the country do not throw up surprises, and the value of an airplane is determined by market specific parameters like the market penetration of the flyer, the gap between demand and supply, liquidity in secondary market and the market share. Beyond market driven factors, there are the performance equations that are to be sorted out, which are specific to the airline being transacted, like the engine power, technology of the aircraft and other specifications.

The Business Of Airplane Trading

While the performance driven factors tend to vary from one airplane to the other, it is the market driven factors that are analyzed first. The market share of the aircraft manufacturer is the most significant parameter used to determine the value of the airplane. A higher market share means more liquidity of the flyer, enabling easier marketing and financing options.  The customer base and the geographical distribution of the aircraft manufacturer drive the secondary market value of the flyer. Limited area of business outreach usually wanes down the market penetration of the airplane, which in turn, mutes the secondary market value of the flyer. The value retention of an airplane in the secondary market in determined by the liquidity it has in the marketplace. One more crucial factor in determining the value of an airplane is whether the aircraft family is still up and running in the aviation industry. For the obsolete models, maintaining the market value in years to come becomes all the more difficult. Additionally, the omnipresent factor of demand and supply gap is always there as a parameter in the economics of an airplane.

The specifications of the model being purchased need to be analyzed thoroughly and weighed with the prevalent technology in the aviation sector. The manufacturer of the engine, its power and thrust rating is one of the key factors in evaluating the airplane. The fleet family of the model is another factor useful to judge the value of an airplane. The attractive ones usually have common features with other families that can be re-used in the maintenance of the flyer.

Buying and selling airplane is usually a high value transaction and hence, an in-depth understanding of the mechanics of the aviation industry and the evaluation models of an airplane is necessary to make a good buy.

Related News

Copyrıght 2014. All RIGHTS RESERVED.