Aircraft Resale ValuesOctober 7, 2015
Understanding the Key Elements of Aircraft Resale Values
It’s been said that a buyer will purchase a specific jet because they either fall in love with the aircraft itself or they fall in love with the notion of a great deal.
Whatever the reason, if a buyer doesn’t love the jet itself, then the price must be attractive enough to compel them. There are important factors to pay attention to when talking about jet resale values. The dynamics of resale values are affected in different ways by these factors. The following are some of the key considerations to understanding how a jet’s resale value is established.
1. Well-Managed Maintenance Log Books
The FAA requires that every registered jet keep a maintenance logbook specifically to document all activity related to the maintenance work performed on each jet. Any and all work done, from removing and replacing parts to calibrating components, is recorded in each aircraft’s maintenance logbook and can reveal proper or poor aircraft management practices.
Maintenance logbooks that are managed accurately provide buyer confidence in the jet’s maintenance history and therefor the jet’s value is maintained. When managed incorrectly, buyer confidence in the jet’s value diminishes dramatically.
2. Manufacturers Maintenance Programs
Engine maintenance programs for business jets are commonplace today. An engine maintenance program provides comprehensive turbine engine maintenance and overhaul coverage at a fixed price per hour, offsetting financial exposure and improving the aircraft’s index value. These programs have proven to be so popular and so important to the value of the aircraft, reporting services began tracking the turbojet and turbofan engine programs over 40 years ago. The reports have consistently shown that the marketability of an aircraft not enrolled in an hourly cost maintenance program (HCMP) was clearly inferior to that of a similar aircraft in like condition that was in a program. Just how much the aircraft value is impacted is dependent upon the terms of the program in which its engines are enrolled.
3. Exterior Paint & Interior Condition
First impressions matter. Buyers are positively or negatively impacted by their first impression of an aircraft. Colors often make the first impression on a buyer. Non-standard colors often create much longer than normal resale time. Most buyers cannot look past colors they don’t like and instead of seeing an aircraft they can modify for minimal expense, they just see an aircraft they don’t like.
Also, interior installations require proper certification paperwork (often specific to each country). However, certain paperwork is easily accepted by numerous authorities worldwide. A Supplemental Type Certificate (STC) is one of the more widely accepted certification forms. The more widely accepted the interior certification paperwork is, the smoother the resale process.
4. Total Time Airframe / Engines
Perhaps the most common influence on resale value is the total time on the airframe and the engines. The closer an engine is to its recommended time between overhaul, the less its value. The number of hours an aircraft has flown can have a dramatic impact on its resale value, as buyers often mistakenly equate low-time aircraft with low-mileage automobiles, ignoring the continuous maintenance and inspections that assure an aircraft's airworthiness.
A reality to consider is that major inspections are performed on aircraft at specific intervals. A 11,000 hour aircraft has been through its 10,000 hour inspection, and discrepancies have been addressed. An 8,000 hour aircraft of similar vintage might be more attractive to the market, yet it will have to undergo a major inspection and the possible costs of replacement parts in just 2,000 hours. A professional evaluation of the aircraft can reveal the accurate impact these measures should have on a specific aircraft.
5. Avionics Improvements
The term Avionics refers to the computer hardware and software that makes an aircraft work. As with all computers, the technology advancements provide better performance and older versions of both hardware and software can become outdated or obsolete. Outdated avionics can impact the resale value significantly.
Research conducted by Aircraft Bluebook indicated that for most systems the chart below was a fairly accurate gauge. However, some brands or types of avionics retain more or less of their original value than others due to popularity, technology, and type of aircraft in which they were installed.
It is important to consider all of the variables when pricing an aircraft. The avionics package and its quality are areas that should be evaluated carefully. The chart below lists the percentage of new values corresponding to equipment age. After determining equipment age, add percent of new list price to the aircraft's value. This chart is intended to provide a general range of residual value of avionics equipment.
If you are in the market to buy or sell an aircraft — our experts are available to assist you with maintenance status evaluation and value appraisal. Call our office anytime to schedule your evaluation — 480-998-8989.