What are the emerging trends and challenges in aircraft lease valuation and how do you keep up with them?

1 Lease valuation methods

There are two main methods of valuing aircraft leases: the discounted cash flow (DCF) method and the market comparison method. The DCF method calculates the present value of the expected cash flows from the lease contract, taking into account factors such as lease rate, lease term, maintenance reserves, end-of-lease conditions, and discount rate. The market comparison method relies on the market prices of comparable aircraft leases or sales, adjusted for differences in age, condition, configuration, and other features. Both methods have their advantages and disadvantages, and the choice of method depends on the availability and reliability of data, the purpose and perspective of the valuation, and the preferences and assumptions of the valuer.

2 Lease valuation models

Within each method, there are various models that can be used to estimate the cash flows and discount rates of aircraft leases. For example, the DCF method can use models such as the net lease model, the gross lease model, the full payout model, or the residual value model, depending on how the lease payments and maintenance costs are allocated between the lessor and the lessee. The market comparison method can use models such as the hedonic price model, the repeat sales model, or the income capitalization model, depending on how the market prices are derived and adjusted. The choice of model depends on the complexity and accuracy of the analysis, the availability and quality of data, and the consistency and transparency of the valuation process.

4 How to keep up with them

In order to stay ahead of the trends and challenges in aircraft lease valuation, you need to be proactive, flexible, and informed. To do this, you should stay up to date on the latest developments and data in the aviation industry, such as market reports, industry publications, news articles, webinars, podcasts, and conferences. Additionally, networking and communicating with other professionals and experts in the aircraft leasing field can help you exchange information and opinions on best practices and challenges. Furthermore, you should learn and apply new methods and models in aircraft lease valuation that can help improve accuracy and robustness. Lastly, regularly review and update your valuation assumptions and parameters to reflect any changes due to emerging trends or challenges.