Aircraft Innovation And What It Means To Fleet Planning – Aircraft Lifecycle Management
I recently had the privilege of speaking with a group of aviation directors. It was this regional group’s quarterly meeting and they invited me to speak about what we are seeing from our vantage point as aircraft brokers and the current state of our aircraft markets. I spoke about the fact that there are several bright spots including increased sales activity, more first time buyers and increased flight activity, as well as some challenges that we continue to face with further pricing pressure for many pre-owned aircraft. I also spoke about some of our thoughts regarding many new aircraft which have started delivering and others that have been announced and will start to deliver in the next several years. It is an exciting time in our industry to see this new innovation being implemented into today’s and tomorrow’s business aircraft. There are, however, real impacts of this fast paced evolution of business aircraft on future fleet planning discussions regardless of whether you operate a single aircraft or a large fleet.
Technological innovation is vital in aviation, and I am not aware of a time until now when a steady stream of new aircraft and aircraft systems have been designed and built at such a fast pace. Many manufacturers have already started delivering new aircraft that are revolutionizing how aircraft work and what they can do. It is this very innovation that is driving new aircraft sales. These new designs will make aircraft fly further and safer with increased situational awareness, more reliable systems and easier maintenance. Cabins will be more comfortable, easier to use and more functional. And, aircraft will be far more fuel efficient dramatically lowering their costs of operations; just look at the Gulfstream 500 and 600. In preparing for my recent discussion with this group of aviation leaders, I spoke to several major aircraft manufacturers. What I learned is that in addition to fulfilling new aircraft orders and announcing new aircraft which will start delivering over the next few years, they are also working on developing a continuous stream of improved iterations and new aircraft designs for the future. We are starting to see the same kind of constant evolution of innovation in aviation that we are used to in other technology like iPhones which is constantly evolving.
How will this constant flow of new aircraft impact future aircraft residual values differently than they ever have been before? And, how does a flight department help their principle or their company plan for the future?
This new reality of constant innovation and the regular announcement of new aircraft requires a new kind of asset management and some new math to account for it. We call this Aircraft Lifecycle Management (“ALM”). Future regulatory requirements and aircraft innovations must be part of the discussions about when to transition aircraft. Having a regular flow of new aircraft types or iterations entering the market will also have an effect on the residual values. The savings from improved fuel efficiency alone, however, could possibly offset loss in residual values. Our extensive relationships in the aviation community and with the manufacturers and our daily experience in the markets enable us to help you with your ALM. This new reality of constant aircraft innovation will require regular discussions with your principle or your company to plan your ALM and best protect the value of your aviation assets. We would welcome the opportunity to talk with you about Aircraft Lifecycle Management.
Faster paced innovation and aircraft change is exciting for all of us and one that I look forward to participating in from my position as an aircraft broker.