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Consumers are More Informed - What does that Mean for 'Experts'?
Consumers have huge amounts of research and data available to them when shopping for products and services; what does that mean for experts? I examined the changing tides in consumer research and the steps that experts can take to stay relevant.
Times Have Changed, Should We?
Everything about how consumers interact with products and services has dramatically shifted over the last few decades. Consumers have more resources at their fingertips than ever before. Just consider the idea of the global community that the internet provides for shoppers - in a few keystrokes, you can be searching thousands of reviews, articles, and videos related to your product. So it seems reasonable to wonder - where does that leave people like me? Those of us that have staked our careers in providing expert information to an educated populous - are we out of jobs?
Be Relevant or Fail
If houses, boats, cars, or airplanes have something in common it’s that they’re expensive. The advent of consumer-facing technologies like Zillow for homes or Car Gurus for vehicles has given everyone access to amounts of aggregated data that would have been incomprehensible 15 years ago - FOR FREE.
The real estate industry has great market research and data, so I will pick on them for a moment.
A study published by the University of Alabama in 2003 revealed that the creation of an online multiple listing service (MLS) had drastically increased the number of properties a consumer was able to “visit” online. Despite this increase, the overall shopping period a prospective buyer took to reach a decision did not change, nor did the reliance on a real estate agent. This is important. It shows that while access to advanced resources may improve the overall quality of the shopping experience it does not undermine the value that an expert provides when purchasing high-worth items.
The increase in public data has changed the dynamic between the consumer and the expert. It increases the pressure on the expert to truly…. be an expert. It has become much more difficult to underperform in these types of industries. The consumer will quickly recognize if your knowledge-base begins and ends with the same information they can find on google in 5 minutes.
Provide Hard Value
An educated client is a great client. There is no question in my mind that a person that comes empowered with knowledge will ask the right questions, challenge my thoughts in a productive way, and have a better outcome with whatever service I am providing because they are more invested. With that said, expert's must bring drastically more value to a client than what was required 15-20 years ago. Experts can no longer operate solely on information that was once difficult for clients to obtain, we must adapt our practices and provide a greater analysis of data that our clients can rely upon.
In my sphere within aviation (particularly in the brokerage space), I occasionally hear a prospect ask, “why do I even need you? I can find all of what I need online?”. We shouldn’t take these questions offensively (as I often tell myself), this is simply a reflection of the times we live in and the type of high-net worth and above average intelligence clients that many of us work with daily. My response is always the same; I tell my prospect that I encourage them to research along with me if that is something that interests them, but it is my trained eye, experience, and understanding of what to look for that differentiates my practice from the lay-person. These types of questions should serve as a stark reminder that our service ought to be worth the price of entry. I think this adds needed and beneficial pressure to experts to continue to employ and leverage new technologies and make an even more effective and impactful experience for the clients.
We must recognize that the consumers of today are generally coming to us armed with a higher level of knowledge than ever before. We can choose to take advantage of this with innovative approaches that leverage our client’s greater understanding of the market - or we can blame the access to resources as the source of our failings. I challenge not only my firm but all of my colleagues to continue to push towards excellence and understand that changing tides should not evoke fear, but a drive towards innovation. In the end, these types of evolutionary shifts force us to assess our strengths and shortcomings and to adapt. We’re better for it and so are our clients.
Author:
Cameron Tipton, ASA, ARM-MTS
accredited senior appraiser
appraisal review & management - mts
Future Values in Business Aviation - What's Certain?
Aircraft values are hotly contested at the beginning of each year by everyone - OEM’s, brokers, appraisers, but what’s the truth? How do you cut through all the noise? What’s absolutely certain anymore?
headlines move articles not always facts
Depending on who you ask - the 2020 biz av market is either booming or on the verge of total collapse. That’s a bit of the world we live in today - hardline positions make for more entertaining arguments and surely help boost search results, but they make it difficult for the rest of us who just want real facts. Misinformation can leave the business aviation industry exposed to an undue optics problem that can ultimately lead to market instability. I’m not breaking out the crystal ball today (I’ll save that for future posts), but here are the facts you need to know.
The Truth…
Extremes are statistically rare. Without delving into the raw mechanics, it’s important to understand that the market always seeks balance and stability. That means that if someone is forecasting record-breaking growth or the world’s largest bust - your spidey-senses should be tingling.
The reality is, it’s tricky to forecast a single segment’s movement and even more so an entire industry. Does movement in the single-engine turboprop market have a huge bearing on the stability of large cabin biz jet sales? No, not necessarily. Business aviation serves as a support role for so many industries, and aircraft classes can serve distinct market segments that may help bolster (or bust) their values.
Here’s the “inside” scoop - the lower the intrinsic utility of the aircraft the more volatile the values will be. It may seem simple and it is really, but this concept has caught the market off guard more than once. During the financial crisis of 2008, the business aviation market faced major market instability with values plummeting across all aircraft types and classes. However, those that suffered the most were those with a lower intrinsic utility to their respective owners. In some cases, large-cabin business jet values fell by over 50% between 2008-2009. Certainly, these aircraft had more to lose in terms of monetary value but a close look at market conditions would reveal that while a high-utility turboprop like the King Air 350 did have an accelerated value loss after 2008, the market overall remained liquid; while an aircraft like the Gulfstream GIV-SP suffered a nearly 40% loss in core value due to downward market pressure from a flooded market (among other factors) which was not an uncommon sight among heavier business jets. I’m not picking on the GIV-SP as a “low-utility” aircraft, it’s a good airplane, but the reality is, the market certainly believed it had lower utility than a King Air - it’s much harder to pivot a GIV-SP from carrying executives from industries that simply no longer possess the capital for continued operation to say, carrying cargo. The great news is manufacturers are more aware of this dynamic now more than ever - low utility aircraft simply don’t sell well.
OEM’s Want a Stable Future
Manufacturers across all types and classes are focused on delivering aircraft that deliver exceptional value to the widest variety of customers. That doesn’t mean that OEM’s are less concerned with delivering a great on-board experience - but they need the “bling” to be backed by discernible value for the customer - like being able to fly faster, further, and higher than ever before while staying connected to what’s happening at the office in real-time. This pressure to innovate or become obsolete has never been more apparent. Over the past decades, we have witnessed a continual consolidation of OEM’s that were not able to keep pace with an industry set on moving forward and overall, that’s good for the consumer. OEM’s that are dedicated to creating true value for their customers not only build better airplanes but are helping assure a more sustainable future for business aviation.
Here’s the Takeaway:
Market forecasts are not always reliable and that’s a problem for consumers and the business aviation industry.
Forecasting values of all of business aviation is disingenuous. Biz av supports a huge variety of industries, many of which, have very little effect on one another.
The intrinsic value an aircraft serves to its consumers is a huge driver of market stability - low utility aircraft will suffer the most during market downturns.
Aircraft manufacturers care about the future. No group has more at stake to guarantee that their planes have a long-lasting value-add for their customers. Especially in a world where consumers are more sensitive to purchasing assets that offer quantifiable ‘real-world’ value.
Cameron Tipton, ASA, ARM-MTS
Author:
Cameron Tipton, ASA, ARM-MTS
accredited senior appraiser
appraisal review & management - mts
National Aviation Day - A Look Forward
December 1903 marked man’s first true attempt to conquer the skies. Since then, we have flown passengers to every edge of the globe, gone supersonic and walked on the moon all in the last 115 years. So what will the next 50 years of progress look like?
Today is National Aviation Day!
December 1903 marked man’s first true attempt to conquer the skies. Since then, we have flown passengers to every edge of the globe, gone supersonic and walked on the moon all in the last 115 years. So what will the next 50 years of progress look like?
Supersonic Flight
As I type, there are men and women working to bring sustainable and efficient supersonic flight to both commercial and business aviation. Sure, the Concorde made the hop from JFK to Heathrow at twice the speed of sound, but it was never really economically viable. Aerion Supersonic has teamed up with Boeing and GE to produce a supersonic business jet (SSBJ) that is slated to enter service in 2025
Aerion AS2
Space Travel
Cities like Houston, Texas are already investing huge amounts of money into a future of space travel. The long-term goal of Houston’s Spaceport and facilities like it is the idea of orbital or sub-orbital travel. In a future where we have a safe and effecient way to get into low earth orbit, trips around the globe that currently take 15+ hours on air carriers can be completed in a little over an hour. Not to mention, trips to further locales, like Mars may become more routine.
Houston Spaceport
Urban Air Mobility
Uber has made it clear that they intend to take to the skies to provide air connectivity high above the traffic on the streets below. It may seem far-fetched until you understand that Boeing, Embraer ,and Bell Helicopter (to name a few) are all heavily involved in the research and development of the program. This project aligns with a similar objective to bring electric turbines to the aircraft market - promising a quieter, greener, more reliable alternative.
Uber Elevate
The Future of Aviation is Bright
Aviation has always pushed the boundaries of what is humanly possible. With a new onset of fresh ideas and creative vision, the next generation of flight is well underway. No matter what the future will look like, I know aviation will continue to be at the forefront of innovation and continue to make the world a smaller, more connected place.
Cameron Tipton, ASA, ARM-MTS
Author:
Cameron Tipton, ASA, ARM-MTS
accredited senior appraiser
appraisal review & management - MTS
What is Appraisal Review? (and why it's important)
Appraisers provide critical valuations across every industry. What are the safeguards against erroneous reports? Who is keeping the industry in check? Let’s explore the behind-the-scenes truth of the appraisal practice and what it takes to be an appraisal reviewer.
The Credibility of an Entire Profession
Appraisers of all disciplines perform a critical role in the financing, insuring and transacting of all sorts of assets. While appraiser’s do not create value in the assets they appraise, they do form the bedrock of how entire industries understand (and perceive) their monetary worth. As such, the responsibility of an appraiser to perform their job diligently is critical; errors can be catastrophic. So who really gets to decide whether an appraisal is valid? After all, everyone has an opinion about what something should be worth. Luckily, in the United States we have the Uniform Standards of Professional Appraisal Practice (USPAP as we call it in the biz). There is a long history to the creation of USPAP that revolves around a need to standardize the methods that appraisers use in reaching value conclusions to enhance the overall credibility of valuations that the public relies upon. This standard provides a minimum construct that accredited appraisers MUST adhere to when doing effectively anything that relates to valuation services. USPAP does a great job in providing appraisers broad flexibility in how they approach individual appraisal assignments while issuing a framework for ethical and professional standards that one should uphold. Ultimately, it is the adherence and certification to the adherence of these standards that allows the public to trust the valuations they use daily. Now that there is an understanding of why all appraisals should be credible and valid, let me explain what happens when they simply, aren’t.
Appraisal Review: Structured Oversight
Just as USPAP provides structure to those writing appraisals, it also provides the standards for reviewing someone else’s appraisal assignment. This is know as Appraisal Review. Let’s say a particular asset finds itself in the middle of a legal dispute (no fault of its own), and the prosecution hires an appraiser to determine the value of said asset, in this case, let’s call it a Gulfstream G650. Maybe this appraisal is 2 pages long with little explanation of how this appraiser reached their value conclusions and it also comes out $9 million higher than an appraisal that was ordered by the bank one year prior. Reasonably, this appraisal might be called into question and a designated Appraisal Reviewer would be engaged to review the assignment. This review might be purely for verifying compliance with USPAP or it may include an opinion of value, if the reviewer is qualified to provide an aircraft appraisal. The reviewer would review the work and produce a report that explains (in heavy detail) any issues that were identified. Not only does this aid the jury in understanding how much weight to apply to that appraisal but it could result in having a misleading report removed from the case entirely.
More Training and a Higher Standard
The American Society of Appraisers (and most appraisal organizations) has a path for senior appraisers to become appraisal reviewers. In the ASA it requires completion of two 30 hour appraisal review and management courses with comprehensive exams as well as approval from a board of examiners. This allows those appraisers to review the work of other appraisers within their discipline (in my case that is “Machinery & Equipment”) for USPAP compliance or to issue an opinion about the actual value conclusions if they are equipped to do so (longer story for another day). These reviewers are called upon to continue to assure the public that the appraisal profession as a whole is not only credible but that there is oversight for instances where there may have been a shortfall. After all, entire industries depend on us.
Author:
Cameron Tipton, ASA, ARM-MTS
accredited senior appraiser
appraisal review & management - MTS
Graveyards, Hotels, & Bars - The Truth Behind Aircraft Retirement
Retiring an aircraft out of service is a complicated decision, but for some, it’s a welcome moment. Let’s take a look at some of the most impressive uses for aircraft that have left the sky for good.
planes spend their life safely transporting people across the globe, but what happens after the last flight?
We talked about what puts perfectly good airplanes out of service, forever, but what happens to them once they’re grounded? Like everything else in aviation, it depends. The primary factors relate to the specific aircraft and the life left on the components and the activity of the remaining fleet - who has any use for the parts? Let’s say a high-time Pilatus PC-12/45 had a hangar collapse on the tail and it ripped the aft section of the plane in half. So we have a dramatic case of physical deprecation with some functional depreciation to seal the deal: the insurance company '“totals” the plane. However, in this case there is an active need for PC-12/45 parts and components so everything from the prop, engine, avionics and interior pieces can be sold to serve the remainder of the active fleet.
Let’s say the same scenario happens to a 1968 Beechcraft Queen Air. Odds are, it’s going to cost you (or your insurer) money to get rid of these parts. The avionics are obsolete, the engines have been out of production for over 30 years and it will cost more to harvest the metal than you could possibly gain from its sale. This means it’s going to the salvage yard. You may be familiar with aircraft “boneyards” where hundreds of aircraft are left sitting in the desert, their final resting place. Unfortunately, without some diligent planning retiring an airplane can be surprisingly expensive.
It isn’t all doom and gloom, occasionally, there are more innovative solutions for the hull like turning it into a cocktail bar, a house, or using it on a movie set!
El Avion
Manuel Antonio, Costa Rica
747 Wing House
Malibu, California
Jumbo Stay Hotel
Stockholm Arlanda Airport
727 Fuselage Home
Manuel Antonio, Costa Rica
If you own an older aircraft you may have wondered about what possibilities lie beyond the sky for your airplane. Clearly, the sky is not the limit, however, you may not be interested in opening a hotel in your retrofit Lear 35! If you think your aircraft may be approaching retirement it is probably a great time to speak with an expert that can help plan the next steps, because if there is one consistency in aviation - surprises are rarely good. Our team of aircraft appraisers can be a great resource for really getting into the numbers to truly understand the economics impacting your specific aircraft.
Fly To: Santa Fe
For many, aviation is about freedom. Whether it’s for work or for play, general aviation grants unparalleled opportunities to access locales that would otherwise be out of reach. In this “Fly To:” we are visiting the artist and ski town of Santa Fe, New Mexico. We discuss how to fly there, what to do, when to go and where to stay in this enchanting city.
Summer is Here! Head to the Mountains.
let’s take a trip from lively Santa Fe up through Southern Colorado
Summertime can be brutal in the south. Some people head to the beach to fully embrace the heat, but for others, the Rocky Mountains can offer a welcome reprieve with promises of cool, dry air and endless outdoor activities. This three part “Fly-To” series will start in picturesque Santa Fe and conclude with some mountain flying in Southern Colorado.
Exploring Santa Fe
There is no better place to begin a summer mountain adventure than Santa Fe, New Mexico. Santa Fe offers an atmosphere that is decisively different and has a little something for everyone.
Events You Shouldn’t Miss!
June 15,16 or June 22,23 2019
Santa Fe has a long history as an artist’s town and this free event draws people from all over to take an intimate look at the artist’s studios and most recent works.
Santa Fe Edible Art Tour
June 14-15 2019
Have you ever been walking through an art gallery and thought, “gee, I could really go for some food”? The Santa Fe Edible Art Tour is a city-wide event that allows you to eat your way through some of the top local galleries. Artists provide a curated culinary experience in their own workspace and are on-site to talk about their exhibits.
Santa Fe Bandstand
All Summer Long
The Santa Fe Bandstand runs from May through August and provides FREE live music on the historic Santa Fe plaza from local and regional artists. Bring a chair and listen to great music, or better yet, grab a patio seat at one of the restaurants nearby and sip on a cocktail with the best view around.
Flying into Santa Fe
Santa Fe Regional Airport (KSAF)
Santa Fe Regional Airport FBO
Open 24-hours
ILS, VOR, RNAV (GPS) Approaches
3 runways with maximum length of 8300 ft
Things to Know Before Takeoff
Watch that density altitude! The airport sits at over 6,000 ft elevation with rising terrain to the east. Those warm summer months can tack-on some serious length to your takeoff roll.
Heading East? Look at the charts! Terrain rises sharply east of the field, if you’re in a normally aspirated plane be prepared to circle, or take a lower altitude route to the south or north.
The airport is about 10 miles from the city - UBER/Lyft are reliable in the area if the crew car is taken.
What to do in Santa Fe?
Where to Stay?
Driving Forces Behind Aircraft Retirement
Aircraft frequently outlive the manufacturer life estimates, sometimes by multiple decades. This is great news for owners and operators who are looking to stretch their investment and helps maintain lower cost options in the used marketplace. However, as some of these aircraft approach 40+ years of faithful service, the shadow of retirement grows larger. So what happens if you’re holding onto an aircraft that is ready to make its last flight? How do you know it’s time? Let’s take a look.
All Good Things Come to an End
Aircraft frequently outlive the manufacturer life estimates, sometimes by multiple decades. This is great news for owners and operators who are looking to stretch their investment and helps maintain lower cost options in the used marketplace. However, as some of these aircraft approach 40+ years of faithful service, the shadow of retirement grows larger. So what happens if you’re holding onto an aircraft that is ready to make its last flight? How do you know it’s time? Let’s take a look.
Walking a Fine-Line
The decision to retire an aircraft is not always as simple as a life-limit on the airframe, in fact, it’s usually a complex decision. There are three driving forces that drive the depreciation of an aircraft (in appraiser terms: “obsolescence”) that are worth explaining.
Physical Depreciation
This is the factor that is most obvious. As a plane ages, so do its parts. Sure, we can replace or rebuild a majority of the components, but things like the actual airframe will continue to wear down over time. Having an aircraft remain outside of the hangar for extended periods or failure to properly preserve the aircraft during inactivity can accelerate physical depreciation.
Economic Depreciation
Economic depreciation is best categorized by the loss in value by factors that are external to the aircraft. A great example is the FAA NEXTGEN requirements for 2020. For some older (but perfectly good) business jets, the cost to equip ADS-B Out by 2020 outweighs the value of the aircraft. Some older Learjet’s may have a “hull” value of $250,000 and ADS-B compliance may cost over $200,000 or there may not be an upgrade path at all.
Functional Depreciation
Functional depreciation is (basically) the loss in value of the aircraft when compared to a newer, more efficient model. A Citation II manufactured in 1980 will cost substantially more to operate than a newer Citation Bravo with more advanced components and more fuel efficient engines, therefore that value will be lower on the less desirable model.
when should you retire your plane?
It isn’t usually one single factor that forces an aircraft into retirement, but a growing number of each of these forms of depreciation until it is simply not economically viable to operate the aircraft any longer. Sure, that 40 year old biz jet may absolutely be airworthy and fly your ideal mission, but add in the growing cost of maintenance and a multi-hundred-thousand-dollar ADS-B Out solution and that value proposition quickly fades away.
Understanding the specific depreciation factors affecting your aircraft is complicated and retiring an aircraft without some advanced planning can be costly. If you own an older aircraft it’s critical that you maintain a pulse on the marketplace specific to your aircraft. Older aircraft can be a great value, but being blindsided by an expensive retirement can quickly wash away any money you saved.
If you own an older aircraft, here are 4 tips to stay ahead of the curve
Check model-specific trends quarterly. Did 10% of the fleet get retired in the last few months? That could be a sign that it’s time to sell.
Understand your maintenance schedule. Is your plane coming up on a heavy maintenance item (“D-Check”)? It might not be worth investing hundreds of thousands of dollars if the aircraft will need to be retired before the next major maintenance event.
Have a plan. Understanding your options ahead of time can save you a huge amount of heartache in the end. Do you want to be the last owner of this aircraft? Do you plan on donating this aircraft to a charity? Parting it out for salvage? Moving it to the desert? Answering these fundamental questions will help guide your ownership and will drastically improve your experience.
Talk with an accredited appraiser. Having someone in your back pocket with a constant pulse on the market is invaluable when your aircraft is near the end of its life. Appraisers are also connected with huge swaths of resources like salvage centers and museums and can provide solid unbiased guidance to help you make these tough decisions.
In the next blog, we’ll take a look at some of the uses aircraft have beyond the sky and the desert graveyards where thousands of aircraft rest untouched.
Author:
Cameron Tipton, ASA
co-founder/accredited senior appraiser
Flight level partners
How to Choose an Aircraft Appraiser: Comparing Appraisal Credentials
There is a lot of confusion around the different appraisal organizations. ASA, NAAA, PAAO, ISTAT - what do all these letters mean to you? We take a close look at the organizations that credential aircraft appraisers and what it takes to become one for each.
Aircraft Appraisal Organizations
In our previous article we gave our top 4 things to know before getting an appraisal. Hiring an accredited appraiser is critical and there are only 3 major accrediting organizations for aircraft appraisers. The next reasonable question is, which organization’s appraisers are best for your valuation?
Here are the facts:
American Society of Appraisers
The ASA has been in existence since 1936 and was one of the founding members of the Appraisal Institute, which created and continues to disseminate the Uniform Standards of Professional Appraisal Practice (USPAP) which is the congress-recognized guideline for appraisal development and reporting. Today, the ASA is the largest, multi-disciplinary, non-profit appraisal organization and its members are recognized worldwide as a cornerstone of ethical and professional appraisal practice.
The ASA has a specialized program for aircraft appraisers taught in conjunction with Embry-Riddle Aeronautical University. The ASA requires successful completion of 4 Principals of Valuation courses for a total of 120 classroom hours, which each have an exam component that tests for comprehension of aircraft systems, finance, and valuation methodology. Candidates must then submit verifiable proof of experience in the aviation appraisal field, a 4-year college degree, and an appraisal report that all is reviewed by an international board of examiners. After receiving an accreditation, ASA appraisers are required to comply with USPAP and the ASA’s code of ethics. Appraiser’s must also fulfill the 120 hour continued education requirement every 5 years, proof of which must be submitted to the society. Flight Level’s appraisers hold their designations with the ASA.
International Society of Transport Aircraft Trading
ISTAT was founded as a non-profit educational and networking organization for professionals working in transport aircraft trading in 1983. Since then, ISTAT has developed an appraiser education and credentialing program for the valuation of transport category aircraft (think: airliners, commuters, etc…). ISTAT has varying levels of credentials that each require different levels of experience, and examination. At minimum, ISTAT Appraisers must have 5 years of experience in aviation with 2 years of full-time appraisal experience, pass a series of exams, provide proof of a 4 year college degree (or equivalent) and provide an appraisal that will be reviewed by a Board of Governors. After credentialing, Appraisers must complete on-going mandatory continued education.
ISTAT requires its members to adhere to the Uniform Standards of Professional Appraisal Practice (USPAP) development and reporting standards and uphold societal ethics.
Professional Aircraft Appraisal Organization, LLC
The PAAO was created from the remnants of the now defunct National Aircraft Appraisers Association (NAAA). PAAO was founded at the end of 2018 and is currently only accepting appraiser membership from former NAAA Appraisers. The NAAA previously certified appraisers at varying levels dependent on experience in aviation and after attending in-person training courses. The PAAO is currently working on an education pathway for future appraisers, but does not have one in place at the time of writing. The PAAO requires its members to adhere to a societal code of ethics and states that its members should adhere to USPAP development and reporting guidelines when valuing “turbine” aircraft. There is currently limited information regarding what requirements there will be for incoming candidates and what will be required for re-accreditation.
Picking an Appraiser
It’s important that the consumer understands what type of appraiser they are hiring since it may influence the credibility of a given report. An appraiser that has a credential restricted to valuing piston aircraft is probably not the best match for a Gulfstream valuation. Knowing the ins-and-outs of the different organizations empowers you to make well-informed, smart decisions. With money and assets on the line, mistakes can be catastrophic.
We believe the ASA holds the highest standards for their credentialed appraisers. Not only is it the oldest of the appraisal organizations, it also is the only multidisciplinary one; ensuring that appraisers of all fields are interconnected and have a pulse on not only their industry, but the economy and appraisal environment as a whole. The rigorous education, testing, credentialing and continued education requirements are recognized as the gold standard, worldwide. Flight Level is proud to have two aircraft appraisers accredited by the ASA.
Corey DeWitt, AM