Freighter Values Have Potential to Rise

December 10, 2018

Airfreight traffic during 2018 has settled down to more realistic levels but at least there continues to be a trend towards growth rather than stagnation and the thawing of trade relations between the U.S. and China may provide a boost for traffic flows which require the large freighter aircraft.

The values of some freighters have either remained unchanged or have actually risen by a modest amount. While lower load factors still suggest that the existing freighter fleet can cope with the improvement in traffic, there is still a need for additional freighters as older units are retired. The delivery of new freighters and the conversion of passenger aircraft remains low and this is aiding the used market. The value trends associated with freighter aircraft is more volatile than for passenger aircraft and there can be rise and falls in the short term. This is due to the limited number of freighter aircraft being in service. Indeed, the forecasts made by the manufacturers 20 years have proved to be wildly optimistic. Instead of the freighter fleet being seen as nearly doubling between 1997-2017, in reality it only grew by some 30 percent.

The Aircraft Rating reflects the considered suitability for asset based financing over a seven year period. Ratings range from A++ to E—and are provided by The Aircraft Value Analysis Co. Ltd. (AVAC) who were the first to launch ratings for aircraft in Aircraft Value News more than a decade ago. The Aircraft Value Analysis Co. Ltd. (AVAC)s Aircraft Ratings have since become the benchmark for the industry, investors and the appraisal community. Those aircraft scoring an A or B rating indicate suitability for asset based financing over the next seven years. A rating of C or D indicates that the owner needs to be aware that the risks are much greater even if the rewards can also be higher. A rating of E indicates little suitability for asset based financing and that attraction lies with the existing operator.



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