In working to understand the areas of pain and opportunity around the subject of aviation teardown and consignment SellUe invited a number of the Leasing Community to take part in an interview and survey. We had the pleasure of hosting several companies including; ABL Aviation, KV Aviation, AeroVista, Sirius Aviation, Metis Technical and GTLK Leasing, as part of this process and are very grateful for the time and clarity that they brought to this process.
The interview included a question-and-answer session across a number of key areas and a survey that worked to quantify how well the key processes are set up, are being managed, and are performing. We will present the scoring first and then talk about some of the key points that came through the Q&A.
The survey covers the five key areas of teardown consignment, Partnering, Modelling, Marketing, Contracting and Reporting (as a key representative of Program Management). Interviewees were asked for their own and their companies experience of teardown consignment, and in particular about the experience concerning the different elements of these areas. Each area is made up of 6 to 7 elements and a score is registered for each. Not all companies have had the full Teardown & Consignment experience, and the purposes of this article, we have published the score range, and average score for each element, as well as an average score for each area.
| Survey Results | Line | Line | Section | |
| Range | Average | Average | ||
| A | Partnering | |||
| 1 | Consignee engagement with asset owner | 2 to 5 | 3.3 | |
| 2 | Level of clarity on competing assets | 2 to 4 | 2.4 | |
| 3 | Material programs being served by the consignee | 2 to 4 | 2.8 | |
| 4 | Geographic spread of Customers purchasing your asset material | 2 to 4 | 2.8 | |
| 5 | Alignment of reporting systems | 2 to 3 | 2.5 | |
| 6 | Process through which your consignment partner was chosen | 2 to 4 | 3.0 | 2.8 |
| B | Modelling | |||
| 1 | Consignment model accuracy | 2 to 4 | 3.0 | |
| 2 | Consignee commitment to model forecast | 1 to 4 | 2.3 | |
| 3 | Sharing of asset model | 3 to 4 | 3.5 | |
| 4 | Clarity on what model values were built on | 2 to 4 | 3.0 | |
| 5 | Built in model adjustment guidelines | 2 to 3 | 2.3 | |
| 6 | Value to timeline options | 3 to 4 | 3.5 | 2.9 |
| D | Marketing | |||
| 1 | Consignee strategic approach to optimise performance | 1 to 5 | 2.8 | |
| 2 | Consignee engagement with market | 3 to 4.5 | 4.0 | |
| 3 | Non-direct sales approach, such as exchanges, loans and leases. | 1 to 4 | 3.0 | |
| 4 | Geographic Strategy | 3 to 4 | 3.5 | |
| 5 | Tier Strategy | 2 to 3 | 2.5 | |
| 6 | Agreement on key market metrics | 0 to 2 | 1.0 | 2.8 |
| C | Contracting | |||
| 1 | Clarity and agreement on monitoring and reporting | 3 to 4.5 | 4.0 | |
| 2 | Clarity on how competing assets will be managed | 2 to 4 | 3.0 | |
| 3 | Consignee resourcing of asset sales & management | 2 to 4 | 3.0 | |
| 4 | Escalation policy | 2 to 3 | 2.8 | |
| 5 | Escalation experience | 1 to 3 | 2.0 | |
| 6 | Cost reduction focus | 2 to 4 | 3.0 | |
| 7 | Flexibility and decision-making procedures | 2 to 4 | 3.0 | 3.0 |
| E | Reporting | |||
| 1 | Reporting clarity | 1 to 5 | 2.7 | |
| 2 | Alignment of reporting systems | 1 to 3 | 2.0 | |
| 3 | Appropriateness of metrics | 2 to 3 | 2.3 | |
| 4 | Reporting Timeliness | 3 to 4.5 | 4.0 | |
| 5 | Reporting accuracy | 3 to 4.5 | 4.0 | |
| 6 | Decision making ability | 3 to 4 | 3.0 | |
| 7 | Decision making process | 3 to 4 | 3.5 | 3.0 |
On the face of it, it all looks…, well, a bit average. Of course, to get to average the probability is that there will be scores either side of it, and that it is exactly how it was. From the survey it is clear that there are a number of consignments companies who are doing a good job, or at least doing a good job on certain elements of consignment. As we delve a bit deeper into the Q&A around the 5 areas of Teardown and Consignment, we get a view of the elements that could be carried out more proactively and more procedurally to significantly increase the value achievable;
- Partnering; The process of partnering is done more in spite of ourselves rather than because of ourselves. The element information is built on straight experiences, is not a deliberate process, and in effect happens within the other processes. The number of consignment companies considered is narrow, rarely identified through a detailed search, and often there is little in the way of deliberate due diligence done. So, while the data gathered is decent to good, it is gathered loosely and within far too narrow a band.
- Modelling; There is an acceptance that consignment companies will not give up the detail where the devil lies. This is fair enough, however with one leasing company advising that the model they received for a well-worn engine was driven by the revenue generated on a much better engine it is clear that more interrogation of a model is necessary to identify scenarios such as this. In addition, more interrogation is achievable to validate the model make up without getting the numerical data, such that the clarity leads to sales target setting, whether that be by segment, program, geographic area, or otherwise.
- Marketing; Interestingly getting an understanding of a consignment companies market plan is not a central facet used by most leasing companies. To be fair most consignment companies have one – and used in line with the model it supports model interrogation and leads to sales target setting. It is also helpful to understand the resources that are in place to achieve not just the market plan but the resources that are in place to optimise the sales on your asset. Key in here is an understanding on likelihood and timing of new programs into which your material will be sold.
- Contracting; This area represents the one best scored by leasing companies and for the most part rightly so. The potential in this process is the addition of the outcomes coming from the prior areas covered. In addition to those, items such as re-forecasting, re-modelling, reducing inventory, sales campaigns, should be part of the commitment that the consignment company make to the contract – in terms of regularity and/or timing.
- Reporting; The most impactful area of program management. Here was the area of biggest scoring range, with clarity being the stand out range. The biggest bugbear here is having the data required to make decisions in a simple clear presentation. Getting the right metrics in place to allow the leasing company easy pictures on how things are going, bring more urgency, tenacity, and drive to the program management of the consignment.
There is so much more that has come from the Q&A on subjects outside of the central areas within this article and these will be dealt with in the next article. A few things that have become very clear through this process are as follows;
Teardown & Consignment, is not a leasing company’s area of expertise, it is not where a leasing companies value proposition exists, it is not where a leasing companies premium earnings comes from, and consequentially it is not resourced properly.
The area of Teardown and Consignment has become more complex. There are a higher number of competing assets coming into the market and more critically competing assets from different leasing companies within the same consignment company.
This results in increasing conflicts of interest and a need for leasing companies to have the right people who can focus on and drive the areas of value for their asset profit optimisation.
If you have comments or questions, we would love to hear from you. DM us on LinkedIn, give us a call on +353 831 456 617, or send an email to [email protected]. Please, share this piece with your network, and if you want to access prior editions, visit the SellUe blog page.