Appraisers say that Hawker Beechcraft’s debt restructuring will not affect aircraft values

CJI Team

[nonmember]Leading aircraft appraisers say that Hawker Beechcraft’s debt negotiations are unlikely to affect the values of either Hawker or Beechcraft aircraft even if the company was forced to file for bankruptcy protection.

“People are going to buy a Hawker because it’s an outstanding airplane,” says Ken Dufour, president of Aviation Management Consulting. “Service should not a problem; there are a lot of approved vendors who can support that airplane.”
::join::[/nonmember][ismember]Leading aircraft appraisers say that Hawker Beechcraft’s
debt negotiations are unlikely to affect the values of either Hawker or
Beechcraft aircraft even if the company was forced to file for bankruptcy
protection.

Ken Dufour, president of Aviation
Management Consulting, claims that his company conducts “more aircraft
appraisals on a day-to-day basis that anybody in the world” from its office 100
miles west of Chicago.

Dufour says the quality of Hawker’s product will see it
through its financial difficulties. “People are going to buy a Hawker because
it’s an outstanding airplane,” he says. “Service should not a problem; there
are a lot of approved vendors who can support that airplane.”

“If they do file for reorganisation, in the short term, I
don’t think there’s going to be much ramification on values,” he adds. “There’s
not a direct correlation that I’ve ever seen, and I’ve been in aviation for 40
years. What concerns me more is the long term. If they go into long term
restructuring and start to lay off people and dispose of assets – that would be
more concerning.”

Richard Berkemeier, a Connecticut based appraiser, also
agrees that the problems facing the company may have been exaggerated. “I do
not think it will be too awful, but there will be an immediate effect,” he
said.

In the UK, Paul Leighton, appraiser
at the Aircraft Value Analysis Company, largely agrees but is less optimistic.

“An entry into Chapter 11 is not
necessarily a major negative if the objective is to reorganise and find ways of
cutting debt and allowing a re-emergence,” says Leighton. “There have been a
number of instances where a business jet manufacturer has struggled but has
since been revived. As the manufacturer will no longer be able or willing to
accept trade-ins, potential customers may seek to order
from other manufacturers. Consolidation with another manufacturer is a
possibility but the mid-sized market is not
the most attractive.”

All three appraisers agree that the factor
most likely to impact the values of Hawker Beechcraft’s aircraft will be
whether the company is able to continue providing customers with support and spare
parts if it filed for Chapter 11.

“In the short term, if I was to acquire a product, what I’m
interested in is will they have the product support to help me?” says Ken
Dufour.  “Will they be able to continue
the parts supply and the support in general of my product, whether it is a King
Air or a Hawker or a Premier? That’s my concern. And if they can’t do that, and
it becomes more problematic for the industry, then it could have an effect on
values.”

Paul Leighton agrees. “For those aircraft
no longer in production the major problem will be in terms of product support, and values will likely be adversely affected for a time before stabilising. With no trade-ins or the sale of pre-owned aircraft by the manufacturer at
premium prices, the reported average pricing will also likely fall, compounding
the fall in values and making sales more difficult. As a means of generating
revenue, the administrators may seek to complete aircraft in production and
offer them at a very attractive price.”

Leighton adds: “The propeller segment of
the business may actually be acquired as a separate entity as there may be more
potential for an investor or new funding from existing owners, given the
prospect of an earlier recovery in global markets, rather than having to rely
solely on the US.”

[/ismember]

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