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Market Indicators
In-Service Aircraft Technical Condition and Price An Asset Insight Index analysis of 76 fixedwing models and 1,550 aircraft listed “For Sale” on July 31, 2014, registered little change in overall market asset quality ratings compared to last month’s figures… Maintenance Rating (ATC Score): average ‘Asset Technical Condition Score’ (an aircraft’s rating relative to its Optimal Maintenance Condition – the day it came off the production line) decreased 5.2 AI2 basis points, to 5.342 from June’s 5.394, remaining comfortably above the Mid-Time/Mid-Life 5.000 level on the ATC Score scale of -5 to 10. Financial Rating (ATFC Score): average ‘Asset Technical Financial Condition Score’ (rating scheduled maintenance events cost associated with the aircraft ATC Score) was virtually unchanged, remaining below the Mid-Time/Mid-Life 5.000 level – on the zero to 10 ATFC Score scale – by registering 4.965 versus the previous month’s 4.957. Asset Exposure (ATFE Value): the average ‘Asset Technical Financial Exposure Value’ (an aircraft’s accumulated maintenance financial exposure) worsened by over $97k, raising the average aircraft’s accrued maintenance expense to $1.423m and registering the worst figure for the past twelve months. Large Jets retained possession of first place relative to asset quality, Medium Jets came in second, while Small Jets once again earned third place. Turboprops registered mixed Ratings this month, and with the group’s Asset Exposure worsening by over $38k to register a 12-month high of more than $559k, Turboprops remained in fourth place.
State Tax Updates Conklin & de Decker’s Nell Stubbs highlights some of the sales and use tax changes effective July 1, 2014… Colorado: HB1374 expanded the flyaway rule to resident/non-resident on-demand air carriers.
Large Jets
Small Jets
Medium Jets
Turboprops
Exposure to Price Ratio (ETP Ratio) Spread in the ratio of ‘Asset Exposure to aircraft Ask Price’ (ETP Ratio) narrowed slightly this month, but the Overall Market average for aircraft Asset Insight tracks increased to 45.2% from 42.4%. Anything over 40% is considered to be an excessive ATFE Value in relation to the Aircraft Ask Price - so the industry average is both high and worrisome. Last month, Asset Insight stated “assuming Ask Prices do not deteriorate, the Overall Market ETP Ratio should continue to improve.” Ask Prices were slightly improved this month, but Asset Exposure increased more than anticipated, worsening the ETP Ratio. Market Outlook Average Ask Price for the aircraft we track registered a 1.9% increase to $5.74m, but that figure was $100k below the average value generated during the past twelve months. Asset Insight continues to believe overall
Minnesota: Jet fuel tax rate change to 15 cents per gallon. Not applicable to jet fuel or special fuels purchased by an airline company. Aircraft registration fees will change to a low of $100 to a high of $75,000 per year, based on the base-price of the aircraft (manufacturer’s list price).
market asset quality will improve during the third quarter. Large Jet average Ask Price increased approximately 1.6% this month, but fell short of the group’s 12-month average. Maintenance and Financial Ratings for Medium Jets registered above their 12-month average, while the relative price stability for Small Jets, in the face of high Asset Exposure value figures, continues to be impressive. Since actual trading value is what truly matters, sellers can only hope those figures are just as positive. In view of the consistent average Ask Price figure achieved by Turboprops, Asset Insight previously advised serious buyers to focus on asset quality rather than aircraft price. It now believes Turboprop asset quality improvement is likely over the next few months, and aircraft that achieve a high Asset Insight Index are unlikely to remain on the market for long. MI www.assetinsightinc.com
New Mexico: HB24 provides a deduction from gross receipts for sales of certain (>10,000) commercial & military carriers. In addition, HB14 provides a deduction from gross receipts from selling aircraft parts or maintenance services.
Mississippi: Aircraft used predominantly to transport persons or property to offshore oil or natural gas exploration, or production platforms or vessels are exempt from sales tax.
Kansas: Amateur-built aircraft used exclusively for recreational and display purposes are exempt from property tax.
Missouri: HB2029 made permanent an existing sales tax break for parts used to repair or modify aircraft.
MI www.conklindd.com
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www.AVBUYER.com
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Georgia: HB 933 made permanent the exemption from sales tax on parts to repair airplanes so long as such aircraft is not registered in this state.
Wisconsin: Charges for the repair, service, alteration, fitting, cleaning, painting, coating, towing, inspection and maintenance of any aircraft or any aircraft parts are not subject to sales tax. Parts used to modify or repair aircraft are exempt from Wisconsin sales and use tax.
Aircraft Index see Page 4