Aircraft
Last updated: April 2008

Industry Codes:
  • NAICS – 336411 Aircraft Manufacturing
  • SIC – 3721 Aircraft

Overview

In 2007, the domestic airline industry was profitable despite rapidly increasing jet fuel costs. This was possible due to rising ticket costs, fuel surcharges, and increased overall load factors. Fuel prices, aging fleets, and fierce competition will continue to present the industry with considerable challenges.

In 2008, the commercial airline industry will face mounting pressure from rising jet fuel costs and a weakened domestic economy. As of the first week in March 2008, jet fuel pricing had increased nearly 68% during the preceding year and continued increases are likely on the horizon. At that price, the International Air Transport Association (IATA) projects that current jet fuel pricing will have a +$47 billion impact on the global industry. With the economy struggling, travel spending is high on the list of costs consumers will begin to trim. The World Travel & Tourism Council reports that global travel and tourism will slow from 3.9% to 3% in 2008. The IATA projects airline growth will slow from 8.4% to 4.7% in 2008.

Globalization of the commercial airline industry is projected to have a positive effect on the U.S. industry. The U.S. – E.U. Open Skies Agreement, signed in April 2007, took effect in March 2008, thereby opening competition for transatlantic routes. Similarly, a U.S. – Australia Open Skies Agreement was established in February 2008. As a result of these agreements, more flight options will be offered, the number of travelers is expected to increase, and prices will become more competitive.

Industry Condition – Poor


Key Industry Indicators

  • Kerosene Jet Fuel Price-Wholesale (cents/gallon)
    The Energy Information Administration projects wholesale prices for kerosene jet fuel to peak in May of 2008 and then begin to decline. Some airlines, anticipating prices will continue to rise, have been investing in futures in an aim to control fuel costs.

  • Boeing & Airbus Orders
    As U.S. fleets age and technology improvements result in more fuel efficient planes, orders for new aircraft spiked. However, the delivery of these aircraft is peaking just as traffic is beginning to show signs of slowing.
    Year Boeing Airbus
    2008 347 (as of 4/30) 420 (as of 3/31)
    2007 1423 1341
    2006 1058 824
    2005 1022 1111
    2004 277 370
    2003 249 284
    2002 251 300
    2001 314 375
    2000 589 520
    1999 355 476
    1998 607 556

New Aircraft Demand

The most popular aircraft, according to the Air Finance Journal's "Aircraft Investors and Operators Poll 2007" are as follows:
  • B737-800
  • A319
  • B777-300ER
  • A320
  • ATR72
Boeing's "Current Market Outlook" projects 20-year sales of new commercial airliners to total 28,600, categorized as follows:
  • 3,700 regional jets (less than 90 seats)
  • 17,650 single aisle airplanes (90 to 240 seats)
  • 6,290 twin aisle airplanes (200 to 400 seats)
  • 960 large airplanes (400+ seats)

Secondary Market

Overview

The market is strongest for regional jets which have grown in popularity over the past several years. Older commercial aircraft are increasingly difficult to sell because of high operating costs and poorer fuel efficiency. The market for turbo prop aircraft has stabilized.

Used Equipment Values – Fair

  • Supply of used equipment – Stable
  • Demand for used equipment – Decreasing

Liquidation Monitor

  • Recent bankruptcy filings
    • Eos Airlines, Inc filed on April 26, 2008
    • Frontier Airline Holdings filed on April 10, 2008
    • Skybus Airlines files on April 5, 2008
    • ATA Airlines filed on April 2, 2008; ended passenger service
    • Aloha Airlines filed in December 30, 2004; emerged February 2006; filed March 20, 2008; announced it would end passenger service on April 1, 2008
    • Delta Air Lines filed in September 14, 2005; emerged April 2007
    • Northwest Airlines filed in September 14, 2005; emerged May 2007

Factors Influencing Value & Marketability

  • Size
  • Age, total airframe hours, avionics
  • Fuel efficiency
  • Major component running hours since overhaul or since new
  • Major repairs and alterations
  • Compliance with Airworthiness Directives and Service Bulletins and Commercial Engine Bulletins
  • Complete log books and tracking of all maintenance for every major component
  • Flight logs
  • Cosmetic condition

Used Equipment Currently in Demand

  • B737-800
  • A319
  • B777-300ER
  • A320
  • ATR72

Industry Experience

Valuation Monitor

AccuVal routinely provides appraisal, consulting, and asset management services to the Aircraft & Aerospace industries, including aircraft manufacturers; major suppliers to the aircraft, aerospace, and defense industries; ground support equipment; airports; and hanger facilities. When appraisals of commercial aircraft are required, AccuVal partners with recognized industry experts. View industries serviced >>

Representative Clients Our Associates Have Served

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Success Stories

  • Performed Appraisals Supporting Many of the Largest Asset Based Loans Made to Aircraft Manufacturers and Their Suppliers
  • Conducted Early-Stage Valuations of Highly Specialized Materials and Manufacturing Techniques That Now Have Mainstream Application in Product Applications Outside the Aerospace and Defense Industry
  • Valued Defense Contracts, Including Product Line Useful Life Analyses to Estimate the Value of Specialized Tooling and Replacement Parts Businesses Pertaining to Combat Aircraft
  • Conducted Tax Consulting Pertaining to the Manufacturing Campus of a Major Aerospace and Defense Contractor
  • Valued Ground Support Equipment and Hanger Facilities
  • Managed Asset Dispositions of Abandoned Air Force Bases
  • View all Success Stories