AVITAS’s SAVI (Scenario Analysis & Value Index) System provides a set of integrated models that can conveniently produce demand and supply forecasts and their impact on the value of aircraft.
SAVI is ideal for scenario analysis, allowing customers to define inputs to the system and generate consequent market forecasts. SAVI is updated quarterly but can accommodate more frequent updates if necessary. Aircraft future market value impacts are presented in three broad aircraft categories. Alternative scenarios using customer inputs can be produced in a matter of days.
Integrated Modeling System
SAVI is composed of five inter-linked econometric/mathematic models, predicting traffic, capacities, retirements, deliveries, and values annually for the next twenty years.
The Traffic Models forecast passenger traffic for six major geographic regions: North America, Europe, Asia Pacific, Latin America, Middle East, and Africa. It is a system of econometric equations taking consideration of input such as GDP growth, population, fuel price, yield, and other related variables.
The Capacity Models are used to convert the traffic forecasts by region are into a measure of Market Demand using Load Factor analysis combined with assumptions about future aircraft utilization and productivity.
The Retirement Models forecast number of aircraft to be retired based on the current fleet size, fleet age and AVITAS’s assumption of aircraft’s economic life. As airlines usually retire more when traffic is stagnant, the pattern of retirement is also constructed with a linkage to the traffic pattern.
The Delivery Models predict new aircraft deliveries with consideration to historical patterns for deliveries and order backlogs as well as the life cycle of various aircraft models.
AVITAS describes the impact on passenger jet values with a value index curve. This curve does not show actual values but the relative relationship between projected market demand and supply. The Value Models convert the market demand into the “desired fleet” considering aircraft productivities under normal conditions. The value index curves are derived based on the relationship between the “desired fleet” and projected fleet size calibrated with data from thousands of actual transactions of historical aircraft sales.
Why Update Quarterly?
When the market is undergoing dramatic changes, it becomes necessary to frequently assess the current situation and update the forecast. Take 2008 as an example. As the economy and traffic figures became progressively worse throughout the year, previous value forecasts fell out of line with reality, as shown in the graph.
By re-estimating the models frequently, customers will have more up-to-date, higher quality inputs to their business decisions and will have predictions more in tune with rapidly changing realities. Perhaps the most valuable feature of the SAVI System is the ability to conveniently run scenario analyses. Customers may ask “what if …” type questions such as those below and see the implications to the forecasts in a timely manner.
- What if world GDP growth doesn’t improve next year?
- What if the price of oil increases?
- What if manufacturers cut their production rates significantly?
Customers may also consider a situation combining several economic market conditions or other more specialized scenarios. AVITAS will work with you to properly quantify your inputs and provide the set of revised forecasts using the SAVI system.
The SAVI publication can be ordered via GURUDUDE™ and costs $5,000 which gives you the current GURUDUDE™ Analysis, 3 Quarterly Updates and one custom analysis. Further custom analyses can be purchased at $2,800 each.