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Taking the stress out of aviation asset risk ratings

August 20, 2019

Let’s be honest, aviation asset risk management can never be an entirely stress-free business. The clue’s in the name. But […]

Let’s be honest, aviation asset risk management can never be an entirely stress-free business. The clue’s in the name. But there are smart ways to reduce stress, as well as to mitigate risk if you’re confident that you’ve got the right insights to inform your aircraft investment strategy.

Ever felt like you’re looking through fog when researching the credit score of aircraft or values of an aircraft? The very thought that you might be basing your calculations on unreliable data, despite your best efforts in conducting due diligence, can result in no small amount of personal stress. Because if you’re the person in charge of managing your organization’s aviation asset investment strategy, it’s hard not to feel that the buck stops with you, right?

So, what measures can you take to operate with more confidence in our ever-changing and volatile marketplace?

When it comes to assessing the future residual value risk of investing in an aviation asset, your research depends on more than the future base value. Many appraisers use this forecast, but, in today’s world, the requirement to have a data and model-driven, statistically-relevant value is more important than ever. Put simply, that’s the missing link. The path to profitability, and fewer gray hairs.

Cirium Asset Risk Ratings can help you join the dots

Our consultancy division, Ascend by Cirium, is leading the way in innovative new approaches to providing data and analytics tools and resources, designed to deliver the most accurate view of commercial aircraft.

Cirium asset Risk Ratings include asset base value depreciation and downside market volatility scores. The goal: to enable more effective asset risk management through quantitatively derived future market value downside risk estimates.

It allows savvy aviation finance pros to clearly view and calculate how far below the base value market values could fall, how volatile values have been, and the implied future volatility of an aviation asset. You’ll also be able to easily access data on the historical market and base vs. future base value of the aviation assets you’re assessing. Sound reassuring?

What’s included in an aircraft rating?

Ascend by Cirium publishes Asset Risk Ratings on a quarterly basis for all the major commercial aviation assets, comprising:

  • Asset Risk ratings which illustrate the future market behavior by illustrating both the depreciation and future value volatility
  • Historical market and base vs. future base illustrations
  • Market value / base value ratio analysis
  • Market value depreciation index – by age

5 key business benefits

Equipping yourself and your team with the most comprehensive insights available, enables you to take your aircraft investment strategy to a new level:

  1. Gain a quick and detailed overview of the short, medium and long-term outlook of an aviation asset
  2. Implement a common language for all employees to understand base value depreciation and downside volatility on all commercial aircraft types
  3. Conduct analysis of an aircraft value by specific aircraft type, year of build, and subseries
  4. Access expert analysis on factors affecting the depreciation of values and market drivers
  5. Plan with confidence – build strategic plans with the most accurate view of commercial aircraft

Let’s be clear about our definitions

It’s not just the data that we’re rock solid on. We also clearly define what we measure – and the language we use. Here’s what we mean when we talk about an Ascend by Cirium Aircraft Rating…

Market values = market trades and analysis all contribute to spot trading prices achieved in market transactions.

Base values = long-term value potential under the theoretical market scenario of demand and supply balance.

Downside volatility = measures how deep future market values could fall below the base value forecast under assumption of a balanced market to a 95% confidence interval.

Ready to put it to the test? Our team of consultants are on hand to answer your questions and find a bespoke solution tailored to support your specific aircraft investment strategy.  Contact us.

Cirium brings together powerful data and analytics to keep the world in motion. Delivering insight, built from decades of experience in the sector, enabling travel companies, aircraft manufacturers, airports, airlines and financial institutions, among others, to make logical and informed decisions which shape the future of travel, growing revenues and enhancing customer experiences.

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