The appropriate depth of appraisal is essential for strategic deals, says IBA

Published on : Tuesday, January 17, 2017

download (3)IBA, a leading independent aviation consultancy, has responded to Avolon’s Head of Strategy Dick’s Forsberg’s report assessing aircraft appraisers. In his response paper, Phil Seymour, IBA’s CEO and the current chairman of the ISTAT International Appraisers’ Program, agrees that the appraisal community needs to better highlight the complexities between types of appraisal so that purchasers have the appropriate depth of research for the specific project. Seymour also highlights that a broad range of values against complex assets such as aircraft is only to be expected given the variables in play.

The appraisal community, says Seymour, must endeavour to conduct full, thorough appraisals even when experiencing “resistance to conducting the appropriate level of appraisal for strategic deals.” There is, he explains, a “perception that desktop research will suffice when, in our view, more effort should be made to match appraisal type to tactical or strategic need.” Whilst desktop and online valuations are an essential component of the aviation industry, they are “rarely adequate for lease-adjusted appraisals, portfolio acquisitions or capital market activity.”

Seymour also calls for appraisers to consider the full range of opinions which may come into play during an appraisal, concurring with Forsberg that more transparency would be helpful for all parties involved: “All large privately owned assets, from a car to a house to an oil tanker or aircraft, experience a range in values driven by a myriad of internal and external market forces. Aircraft are expensive, so a 1-2% fluctuation in values often equals millions across a portfolio. I firmly believe that it is healthy therefore to have a range of opinions to consider, agreeing with Dick that more transparency around the methodology would be helpful.”

Whilst agreeing with the need for more transparency and welcoming “clients requests to lift the lid on how we develop our values,” Seymour perceives double standards in the way that “the very same community that will not share essential aircraft information protests about the lack of accuracy, yet is often unwilling to invest in a deeper dive that far better reflects an asset’s current and future value,” describing this as a “vicious circle we all need to break.”

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