Contact Us
Cirium - financial investments - analytics, data for the travel industry

Industry outlook

Why an F on a report card is not always a fail…

November 13, 2018

In school, we all know that an F is a fail but in the world of asset risk ratings it […]

In school, we all know that an F is a fail but in the world of asset risk ratings it represents the depreciation rating and the corresponding number denotes volatility.

A famous phrase recited across the world is one man’s rubbish (or trash) is another man’s treasure. On one hand, investors prefer low vitality and low depreciation, however, if you are seeking better returns you might typically prefer higher volatility, although not necessarily low depreciation.

To present a workflow that is common for financial analysts, we have chosen an asset risk rating for a 747-400 (GE) with the year of build between 1991 and 2005. Key statistics about this asset includes the in-service, in storage and average ages of the fleet. Further analysis is available on the managers and operators which provide key stats such as:
Top 5 carriers of GE powered 747-400 (In-service fleets):

The market value / base value ratio for the 747-400 (GE) has shown a wide range of values. After the mid-2015 base value is recalibrated, we see this ratio move upwards and away from its historical lows.

An asset risk rating of F9 has been given to the 747-400 (GE), the F means base value depreciation is >12.0% and the 9 shows the implied volatility is 35%.

Asset risk ratings include details on the airframe and engine build, unlike soft market ratings. Therefore, the consultants at Cirium are creating asset ratings in a quantitative manner with a qualitative sense check.

Rating reference guide:

Need to reach that next level of risk analysis? Our experts are ready to give you access to these reports.

RELX logo