How Does Maintenance Status Impact Jet Value?

When considering the value of a private aircraft, how does its maintenance status factor? David Wyndham provides a basic overview...

David Wyndham  |  13th June 2022
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    David Wyndham
    David Wyndham

    David Wyndham has extensive expertise in aircraft sales and acquisitions, asset management, cost and...

    A jet's maintenance condition has a significant impact on value

    When evaluating pre-owned jets for sale, there are several factors that determine price, the first being demand. Popular aircraft in high demand will command higher selling prices than less popular models. Aircraft age is another factor: assuming all other things are equal, an increase in age corresponds with a decline in value.

    It’s much the same for total hours on the engines and airframe. As the hours increase, the price tends to decrease.

    Where maintenance status is concerned, however, it all depends... Why is this? – and how does an aircraft’s maintenance status impact its value?

    Understand the Systems

    Firstly, it is important to understand that an aircraft is a system of systems. At a high level there’s the airframe and engine systems. Then there is the avionics system. Making everything come together are further systems, such as fuel, hydraulics, electrical, environmental, and more.

    For example, the airframe cannot be operated without the flight control systems, which rely on hydraulics and electrics. All of these are interrelated and require maintenance at some point.

    The Cyclical Nature of Maintenance

    The second major point is to understand the cyclical nature of maintenance. When we look at operating costs of an aircraft, we tend to look at the variable hourly cost per flight hour, and the fixed costs per month/year.

    For example, fuel is consumed in a mostly linear fashion. At cruise, the engines burn fuel at a steady rate, whereas for take-off and climb the fuel burn will be higher. By taking the average fuel consumed on a typical flight and dividing it by the time taken for the flight, you will determine the average fuel burn per hour.

    Multiply that value by the cost of fuel per gallon and you can calculate the fuel cost per flight hour. Meanwhile, the full-time flight crew gets paid a salary in equal instalments over the year, and regular payments are also made for insurance and hangar fees.

    Maintenance is also frequently shown as a cost per flight hour. Unlike fuel, however, the cost is not always consumed in equal instalments. Nor is it equally consumed over a month or even a year. If you elect to enrol on a guaranteed hourly maintenance program, you accrue and pay for the cost of the eventual maintenance in a linear pattern, but the actual events occur over varying intervals.

    When a component is close to wearing out (or moves beyond a safe tolerance level), it requires repair or replacement. Brakes and tires are replaced as needed, or ‘on-condition’. Other parts and components have hard life limits, based on their usage (a pre-determined number of hours of operation), and allowing for safety tolerances are repaired or replaced on a set schedule.

    The interval limits of these ‘Life Limited Components’ are based on a unit of time or unit of use, and the life limits can be based on flight hours, months, or ‘cycles’ (landings).

    One example is an airframe inspection that must be undertaken every six months, or every 300 flight hours. Another is a landing gear overhaul, required every 10,000 cycles. The maintenance intervals are developed by the manufacturer with the goal of maintaining safety in an efficient manner.

    In addition to these maintenance intervals, the FAA may require additional maintenance during the life of an aircraft when required for safety of flight, or airworthiness. These mandated maintenance events are called Airworthiness Directives, and generally occur infrequently.

    Counting the Cost of Maintenance

    All these maintenance events happen on varying schedules. Their cost per event varies considerably. A 300-hour airframe inspection, for example, may cost $3,000 (plus any repairs needed). Every 96 months, however, a major airframe check can run well into several hundred thousand dollars.

    Engines tend to have the most variance in maintenance costs. An engine’s borescope inspection may cost $4,000 every 2,000 hours. Then, at 8,000 hours, the same engine could require an overhaul costing $1.5m each.

    An accrual of $188.50 per engine, per flight hour, does not tell the cost story well – nor does it help with valuation of the aircraft... If you’re evaluating the purchase of a business jet, just looking at its age, or total flight hours, doesn’t give enough detail to ascertain the aircraft’s value.

    To illustrate, which of the following aircraft would be the more desirable?

    • Aircraft A: Age 14 years, 4,200 Hours’ Airframe Total Time
    • Aircraft B: Age 16 years, 8,100 Hours’ Airframe Total Time
    • Aircraft C: Age 10 years, 4,400 Hours’ Airframe Total Time

    While Aircraft C is the youngest, and Aircraft B the oldest, Aircraft A has the fewest flight hours. Evaluating the value of an aircraft goes well beyond these factors and requires an understanding of both ‘condition’ and exposure to future maintenance events and their associated costs. 

    Sometimes the older aircraft may be the best value, and at other times not. The same applies to higher or lower flight hours.

    In Summary...

    An analysis of the maintenance condition in terms of current status and upcoming events, and the physical condition of the aircraft itself, is required to arrive at what the fair value is. The inclusion of a guaranteed hourly maintenance program helps.

    Ultimately, how does one aircraft compare with the competition on the market, or the possibility of acquiring a (higher-priced) new aircraft with zero time, and almost zero flight hours?

    Next time, we’ll dive deeper into maintenance condition and look at what has been done, what is to be done, and the cost of those events in relation to an aircraft’s value.

    Read the concluding Part 2: Determine a Jet’s Value by its Maintenance Status

    Do you have a specific aircraft maintenance, upgrade or repair need?

    Use Advantage to outline your maintenance requirements by completing our quick form, and your enquiry will be passed to qualified service providers. Receive the feedback you need to help you choose the right partner and the best deal.
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    David Wyndham

    David Wyndham

    Editor, Ownership & Operating Costs

    David Wyndham has extensive expertise in aircraft sales and acquisitions, asset management, cost and budget analysis and finance fundamentals. With several decades supporting aircraft owners and operators in making fully-informed decisions about their aircraft needs, his expertise spans from the flight department to the executive boardroom.

    David is the founder of David Wyndham + Associates, and previously he was a Co-owner and President of Conklin & de Decker where he consulted with large corporations, individuals, and government agencies on their aircraft needs.



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