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Q2 & Q3 2018 Blue Book Updates

HeliValue$, Inc. held its third-quarter Blue Book pricing review in October.  Resale pricing adjustments were made for the following models: 

Q3 Blue Book Pricing Changes

Model                                        Yrs. Of Mfg. Affected

Airbus AS-350B2                              1989-2015

Airbus EC-130T2                              2012-2017

Bell 212                                            1971-1998

Bell 407GXP                                      2014-2018

Robinson R44 Beta II                         1996-2018

Robinson R44 Clipper I                     2000-2018

Robinson R44 Clipper II                    2002-2018

Robinson R44 Raven I                       2000-2018

Robinson R44 Raven II                      2002-2018

Schweizer 300C                                1985-2008

 

Our second-quarter Blue Book review was held July.  Resale pricing adjustments were made for the following models:

Q2 Blue Book Pricing Changes

Model                        Yrs. of Mfg. Affected

Airbus AS-350B2               1989-2002

Airbus AS-350BA              1991-1999

Airbus AS-365N2              1990-2003

Airbus EC-130B4               2001-2011

Airbus EC-135P1               1996-2002

Airbus EC-135T1               1996-2002

Airbus EC-135P2               1998-2016

Airbus EC-135T2               1998-2016

Airbus EC-225                   2004-2015

Airbus SA-365C                 1977-1981

Airbus SA-365N                 1981-1986

Airbus SA-365N1               1987-1990

Bell 206BIII                         1977-1998

Bell 407                             1996-2014

Bell 407GX                         2011-2014

Bell 407GXP                       2014-2018

Sikorsky S-76D                  2012-2015

Resale pricing adjustments are based on actual sales transactions and current market conditions such as overall trends in asking prices, increase or decrease in supply, demand, and sales volume.  We obtain sales pricing data from owners and operators, lenders and lessors, brokers and equipment manufacturers worldwide. 

While we do review all models each quarter, frequently traded models are updated as soon as they begin to show variation from the previously published values.  Stay up-to-date on resale pricing changes by purchasing an annual subscription.  
 
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Helicopter Valuations in Turbulent Times

The dangers and uncertainties of an unstable market are plentiful.  Businesses struggle to find their footing and make all possible adjustments to survive the storm.  We are seeing some recovery, but it’s no secret that the helicopter industry is still trying to cope with a depressed market.  We’ve seen almost every possible situation play out during the downturn; from acquiring operational funds through the leveraging of assets, the sell-off of assets, returned leases, bankruptcy and restructuring, and some closing the doors completely.  In almost all cases, an appraisal is required and depending on the situation, the parties involved are either looking for the highest possible values or the lowest possible values.  

The pressures these businesses are experiencing are often passed along to the appraisal firm.  Frequently, this is manifested in the appraisal request itself: requests for certain “types” of appraisals that would be misleading in a given set of circumstances, requests for a guarantee of a clients’ pre-determined opinion of value, changes in the definition of a type of value, approaching an appraisal assignment for a purpose for which it will not actually be used, etc..  An appraisal performed for the clients’ desired outcome rather than actual market conditions and for the proper purpose is not only misleading to any end user and takes away any real value in the appraisal, but it is also unethical and comes with sometimes serious consequences.   

Most notably, it is the inflated values that will cause the greatest damage down the road.  Not only can inflated values skew an entire market segment, they can leave investors and lenders holding debt backed by assets that are worth much less than they think.  We’ve repeatedly seen, over the history of the helicopter industry, the devastation this practice causes for everyone involved. While values which have been overly discounted may have somewhat less harmful effects, they still have a negative impact on true resale value for a particular model or a whole segment of the market, especially for models that are not frequently traded.  They may also bring the wrath of the regulatory authorities with arguments of “bargain purchases” and the resulting tax implications.

Market perspectives will vary from one business to the next.  An operator may have a different opinion than a private owner, who may have a different opinion than a lender or lessor.  The appraiser exists to bring clarity to those varying perspectives by interpreting the value of the helicopter in relation to the market as it actually exists.  Appraisers should come from a completely unbiased position, free from outside influences, using only facts, knowledge, and experience to develop an opinion of value.  As a result, an appraiser will never be able to please every client’s value result expectations.  Professional and ethical behavior is the only way the appraisal profession can maintain the public’s trust. 

Appraisers and firms with inadequate qualifications or experience, or appraisers willing to purposely misrepresent values to satisfy the client’s specific needs tend to be more commonplace in a depressed market.  It is important to make sure that you are not only employing a qualified and experienced appraiser, but one that maintains the highest standards.  A reputable appraisal firm will not change their methodology and values to suit the needs of the client.

End users of an appraisal should take time to read the complete report. Note hypothetical conditions and assumptions, explanations of the methodology, definitions, and purpose used in the valuation process.  Are all of these parameters appropriate for the situation and purpose?  If the previous value results are available, compare them to the current value results.  Significant value changes from one appraisal to the next may help identify potential issues.  Watching for problem areas becomes even more important for lessors, lenders, and operators that require annual or bi-annual appraisals.  

 

Differing appraisal methodologies, governing bodies, regulatory authorities, certifications and accreditations, U.S. Standards (http://www.uspap.org/) vs International Standards (https://www.ivsonline.org/), are all factors that influence how values are determined.  Knowing your appraisal firm and its specialties is key to the accuracy of the values you will receive.  While true market realities can be painful, knowing those realities, accepting them, preparing and dealing with them will not only ensure that the industry continues to have a healthy recovery, but it will help it recover faster, and avoid future negative effects of improperly and unethically performed appraisals.   

About HeliValue$, Inc.
As pioneers of the helicopter appraisal process and methodology, HV$ has provided helicopter and parts appraisals for four decades. Our ASA accredited staff annually appraise over 2,500 helicopters. HV$ is the trusted advisor and industry-wide interpreter for an international clientele of manufacturers, vendors, helicopter operators, banks, leasing and insurance companies, and aviation law firms.  

HV$ has also continually published The Official Helicopter Blue Book® since 1979.  Information regarding specifications, current and historical resale values, current and historical manufacturer pricing, component overhaul and retirement intervals, and hourly maintenance costs are available for most of the 200 models covered in the Blue Book.

HVS Phone Lines Are Down

June 7, 2018

The HVS phone lines are down.  We anticipate repairs to be complete sometime this afternoon.  While we wait for the service provider to repair the lines, please contact us via email at info@helivalues.com.

Q1 2018 Blue Book Updates

HeliValue$, Inc. held its first quarter Blue Book pricing review on April 5, 2018.  Resale pricing adjustments were made for the following models: 

Model

Yrs. of Mfg. Affected

Airbus AS332L1

1987-2010

Airbus AS350BA 

1991-1999

Airbus AS350B2

1989-2002

Airbus SA365C

1977-1981

Airbus AS365N

1981-1986

Airbus SA365N1

1987-1990

Airbus AS365N2

1990-2003

Airbus EC130B4

2001-2011

Airbus EC135P1

1996-2002

Airbus EC135T1

1996-2002

 

 

Bell 206BIII

1977-1998

Bell 407

1996-2014

Bell 407GX

2011-2014

Bell 429

2010-2014  (Configuration Values Only)

Leonardo AW119Kx

2012-2015  (Configuration Values Only)

**Piston helicopters are still under review. Once updates have been made, a list of affect aircraft will appear in a new newsletter.

Resale pricing adjustments are based on actual sales transactions and current market conditions such as overall trends in asking prices, increase or decrease in supply, demand, and sales volume.  We obtain sales pricing data from owners and operators, lenders and lessors, brokers and equipment manufacturers worldwide. 

While we do review all models each quarter, frequently traded models are updated as soon as they begin to show variation from the previously published values.  Stay up-to-date on resale pricing changes by purchasing an annual subscription.  

 

 

Q1 Market Overview

The resale market, in general, has enjoyed an uptick in activity throughout the first quarter of 2018.  The single turbine markets are seeing more activity than we’ve seen in the previous four quarters.  Notably, older vintages of the Airbus AS350 series are experiencing the largest increase in activity as well as a bump up in sales prices.  The newer vintages are not experiencing the same level of activity.  However, as the older aircraft move off the market it’s likely that newer aircraft will begin to see similar activity.  Other models in this category that have seen an increase in activity this past quarter are the older Bell 206 Jet Rangers, Bell 206 Long Rangers, Bell 407 series, MD 500E, and Robinson R66. 

 

In the light twin category there has been sales activity with the Airbus EC135P1/T1 series, EC135P2/T2 series, EC145T1, Leonardo A109E, Bell 412EP, 429, and MD 900/902.  The medium market continues to be soft with some movement of VIP configured aircraft.  It’s worth remarking that there has been a noticeable increase of twin-engine offshore aircraft that are being sold and converted to alternate mission types such as SAR and VIP. 

 

After several years in the doldrums, the heavy twin market has seen a few resale transactions in the first quarter.  Two Airbus AS332L1 series, one EC225LP, and one Sikorsky S61N.  Any other movement in the heavy market was within the leasing sector.

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Q4 2017 Blue Book Updates

HeliValue$, Inc. held its fourth quarter Blue Book pricing review on January 8, 2018.  Resale pricing adjustments were made for the following models:

 

Bell 206B III

Airbus AS-332L1

Leonardo AW109E, AW119 Koala, AW119 Kx

MD 900/902

Sikorsky S92A

 

Resale pricing adjustments are based on actual sales transactions and current market conditions such as overall trends in asking prices, increase or decrease in supply, demand, and sales volume.  We obtain sales pricing data from owners and operators, lenders and lessors, brokers and equipment manufacturers worldwide.

 

While we do review all models each quarter, frequently traded models are updated as soon as they begin to show variation from the previously published values.  Stay up-to-date on resale pricing changes by purchasing an annual subscription.

 

Login or Subscribe Now (http://www.helivalues.com/)

 

Market Comments

After our fourth quarter meeting on January 8, our acting president, Jason Kmiecik and chairman, Sharon Desfor attended Helicopter Investor in London.  As always, it was a valuable opportunity to meet up with many of the of financial institutions, companies, operators, and individuals involved in helicopter finance.  The conference showcases the pressing issues and questions facing the current helicopter market, and this year was certainly no exception. For a list of the many interesting and informative topics covered at this year's conference, you can see the full agenda here.  It also turned out to be the most well-attended Helicopter Investor since its first stand-alone event in 2013.

 

Through various panel discussions and conversations with other attendees, it became evident that the finance and lease communities have mostly come to terms with the lasting recession in the oil and gas industry which has heavily impacted the demand and values of offshore equipment.  There were interesting discussions about the mixed opinions of the introduction of the super medium class of aircraft to the offshore market. Other interesting topics included shifts in various market segments, especially EMS, and the dominance of leasing as an option over purchasing and its impact on today's market.  All subjects which will be discussed in greater detail in our article to be released during HeliExpo.

 

The increased popularity of leasing continues to affect resale market activity.  More people leasing means fewer people buying.  However, light and medium aircraft tend to show more market stability because they are not as heavily impacted by leasing activity and oil prices.  Generally, the resale market continues to be weak mainly due to the unusually high supply of aircraft on the market.

Future of the Offshore Heavy Market

Oil prices are slowly on the rise, but supply still remains higher than demand and values continue to decline.  The face of the offshore heavy market has begun to shift.

 

While there are many heavy class models in various roles, the predominantly offshore AS332L2, EC225LP/H225, and the S-92A have generated the most questions about the current state and future of the heavy class of helicopters.  These aircraft have been impacted by multiple factors; a transition in the market from new purchase or resale to one largely influenced by the leasing sector, over purchasing of these aircraft by the lessors and operators during the boom of oil and gas, the slump in oil prices that has significantly decreased demand, and of course, the plight of the EC225 after its grounding and subsequent rejection by union oil workers. 

 

Although the S92A has fulfilled many of the obligations created by the absence of the AS332L2 and EC225, there continues to be an excess of S92As which remain idle or in storage due to a lack of contracts.  The chart below illustrates that there are 172 of these aircraft currently in abeyance.  This number of aircraft would not be easily absorbed in today’s market or even in the long term. 

 

Current Estimated Operational Breakdown

                                                      

 

As a result of this oversupply, there has been a transition of these machines from their primary market into secondary markets.  There has been some restored optimism for the EC225LP.  The aircraft is finding renewed interest in the utility, para-public (search & rescue, law enforcement, firefighting), and military markets.   Utility operators that hadn’t previously entertained using EC225 for their operations are now considering adding these aircraft to their fleet.  It has been purported by some in the industry that activity for the EC225 will continue to increase as witnessed over the past six months.  This is made evident by recent transactions and conjecture that there are several others pending.  Additionally, there has been interest in converting the offshore S92A into a Search & Rescue role.  Lessors have been acting on these interests and forming plans for placement of their aircraft.  However, both aircraft are suffering from a shortage of parts to perform the necessary modifications.  The unavailability of parts has resulted in extensive lead time for conversions to be completed.

 

Introduction of the Super Medium

The introduction of the 7/8-ton super medium class of helicopters poses a challenge to all heavy class helicopters.  The super medium class of helicopters includes the Airbus EC175, Leonardo AW189, and the anticipated Bell 525 helicopter.  These aircraft are capable of seating 16 to 18 passengers and perform the same work roles as those in the heavy class.  It has been indicated by some that the super medium class of helicopters is capable of performing 90% to 95% of the offshore missions currently flown by heavy class helicopters. 

 

Lessors have a large investment into the heavy class of helicopters, particularly the S92A.  Based on current supply and lease rates, it can be more economical to lease an S92A over purchasing a new super medium. It is likely that leasing companies will offer and promote the heavies over the super mediums as the lower cost alternative.  Ultimately, the demand of the operators and oil companies dictate the market. If operators/oil companies choose super mediums over the S92A, leasing companies would try to meet that demand and there would be an increase in the number of S92As on the resale market further impacting values.  However, the S92A cannot be completely replaced by super medium class aircraft.  The S92A would still have a significant market share of the offshore and search and rescue sectors.  

 

Fleet Diversity

Some operators and oil companies have started to ask themselves if they may be too heavily dependent on a single model.  Should a massive, long-term grounding like the EC225LP effect the S92A, the shortage would be devastating to operations. Diversifying a fleet with a mix of super mediums and S92As could lower some of the risks should such an event occur.  The idea of diversifying a fleet is further spurred by sustained low oil prices which have caused long-range exploration to drastically decrease.  Aircraft with a longer range will be in less demand until there is an increased need for long-range exploration. 

 

Impact of Leasing

The helicopter industry has experienced a boom in leasing activity similar to the commercial airline industry, only over a much shorter period of time.  Before the entry of the only dedicated helicopter lessor, Milestone in 2010, leasing activity was mostly between operators and on a much smaller scale.  Presently, there are six major helicopter lessors with combined fleets of 600+ helicopters worth an estimated seven billion dollars, a large percentage of which are comprised of heavy class helicopters.  Since a majority of heavy class helicopters are now owned by leasing companies, this means the lessors are essentially controlling the market for these assets.  As lease rates drop to move idle inventory, leasing becomes an even more favorable option over buying a helicopter in today’s market.  However, if lease rates continue to fall, asking prices and resale values will continue to decline and may not recover for many models.  

 

Exact numbers of heavies currently for sale is difficult to determine.  Based on publicly advertised listings, there are only four AS332L2s, fifteen EC225LP/H225s, and nine S92As.  Many have chosen to place their aircraft with brokers as off-market listings, which means these numbers are conservative.  Additionally, it is expected, over the next 12 to 16 months, an estimated 40-45 S92As will be coming to the end of their lease term.  It is uncertain how many of those leases will be renewed. In response to the continued decline in the offshore heavy market, lessors have expanded their business to include light turbines.  Lessor will likely put more focus in markets that are showing more stability and growth such as EMS, law enforcement, utility, and firefighting. 

 

Today operating leases remain an attractive alternative to traditional financing for operators looking to retain cash, maintain balance-sheet flexibility, and align lease terms with contract terms. These benefits are all the more important under the current market conditions.

 

Outlook

The heavy offshore market continues to face many challenges, but the helicopter industry as a whole is resilient.  It’s not certain how this market will evolve, but with time, it will adjust.  What number of these offshore heavy aircraft find opportunities in different work roles, and what impact the new class of super mediums will have, will determine how that future is defined.