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Ensure A High Aircraft Resale Value!

A lesson in good rationale in aircraft maintenance- avionics- equipment upgrades and overall custodial care.

Here is the scenario: You are the director of aviation for a medium-size manufacturing company in a Midwestern state in the United States. Your company has opened several new plants and now the CEO has sent you on the hunt for another business aircraft to add to your fleet and provide the additional lift required by your company’s expansion.

To guarantee a smooth integration of the additional aircraft into service- you and the CEO have agreed that it is best to try and match the aircraft that you already have- therefore you are looking to purchase a used aircraft... That will prove a task that is not as easy as it first appeared!

Almost certainly- when you search the internet you will find what appear to be hundreds of your target make and model advertised for sale. Beyond the practicality of eliminating the aircraft that have more flight hours than you are willing to consider- how do you disseminate which are candidates that should be considered above the rest? How can you possibly make an educated decision when there are so many aircraft seemingly immediately available for purchase?

The obvious and most important decision that you can make at this point would be to commission the services of a professional aircraft broker...

So now that you have me on board with your project- let me guide you through the many issues that we must consider before arriving at a short-list of two or three aircraft that must be visited before making a final decision.

AIRCRAFT RECORDS
As much as half of the total value of an aircraft is tied up in its Records (log books- tags- receipts- etc). On face value the previous statement may sound like an exaggeration - some could argue that it is merely a case of perspective: Records are of much higher importance to a buyer with a charter certificate in mind- as opposed to a private-use-only buyer.

Regardless of your perspective -buyer or seller- eventually there is likely to come a time when the aircraft must be re-sold. Buy with an exacting mentality- because you are very likely also buying for a future re-sale of the same aircraft.

Here are some important questions to ask relating to aircraft records:

• How are the records stored?
• Are they organized neatly in a consecutive filing system?
• Where are all of the airworthiness tags (8130s- etc.)?
• Are invoices being retained as part of the records?
• Are the records all kept in a fireproof filing cabinet?
• Are there back-up or hard copies being kept if the originals are lost or damaged?
• Is there at least a photographic scanning or digital picture policy in place as a catastrophic last-line of defense?

TRACKING
At the very minimum- total time- landings/cycles- flights (pressurization cycles- etc.)- starts- components- overhauls- repairs and inspections should all be tracked.

Another consideration relates to how the tracked records are kept. Are they in a hard copy format (un-computerized) which is both outdated and requires a large storage and organization bin (index cards)- or are they tracked with a computer program employed (CAMP- CMP- Flightdocs- BART- etc.)? Are the tracked records transferable for integration into your home system?

Some of the older systems require that either the records are transcribed into a newer program- or the whole computer must come with the aircraft- which in this modern age of interconnectivity is just not sensible.

STORING OF THE AIRCRAFT
Fact: Hail damage is not a value enhancing event. Does that sound a little obvious? Here are a few questions such a fact should lead you to consider:
• Has the candidate aircraft been hangared whenever possible?
• Have covers- including Sunshields always been employed by the owner/operator?
• Is the aircraft normally kept locked? (It is amazing how many line personnel are hangar pilots on third shift with no arrivals to disturb them).
• If the aircraft has had long periods of storage (equating as inactivity)- was it properly stored- i.e. were the engines run every couple of weeks and the avionics turned on for at least a day each week with a power-cart in attendance?
• Was a desiccant employed for long-term storage?

CLEANING
One of the cheapest and easiest methods of extending the life of the cosmetics of an aircraft is to be prudent in how it is cleaned. For example don’t ever use commercial leather cleaners as they will dry the leather out and harden it. Instead use extremely hot water and a lamb’s wool mitt.

Use a waterless cleaner on the exterior and if this cleaner doesn’t already incorporate it- have a Teflon coating applied to the exterior paint finish. Keeping the aircraft out of the sun when it is parked will go a long way towards maintaining the finish. As previously mentioned keep a desiccant in the aircraft- for long-term storage after (of course) all liquids have been drained out of the cabin and flushed (coffee Mapcos- ice-drawers- sink-wash water- lavatory water- etc).

WHO HAS BEEN WORKING ON THE AIRCRAFT?
If the aircraft has been taken outside of its home flight department for any scheduled maintenance- from a re-sale standpoint- an FAA Repair Station is preferred to an A&P. Other issues that come into play once a third party is about to lay its hands on an aircraft are:

• Does the maintainer have all of the required experience- training- technical manuals- tools and data to support the maintenance operation that is proposed?
• Is there sufficient insurance coverage in place to cover any mistakes if they occur- especially an allowance for diminished value- if the aircraft is damaged?
• Who will be watching the aircraft while it is there; has it just been dropped off awaiting the call to come pick it up?

That last point is bad business! An aircraft is rather like a child or elderly person. There must be an advocate in attendance to ensure that the best possible care is always available and used. Additionally the end invoice will always be less than if the process is left unmonitored.

MAINTAINING THE AIRCRAFT
Good Maintenance is actually more of a philosophy- as opposed to just following a standard practice. When choosing a maintenance program (schedule) to follow- the factory program is always best. However be judicious in choosing the version that is to be followed- (e.g. high volume use with inspections broken-up into monthly or weekly bites- or low use with less frequent inspections- but a much longer downtime period for their performance).

If the aircraft has been managed on a 135 certificate- ask what type of maintenance program the aircraft has been subjected to? An Approved Aircraft Inspection Program (AAIP) may be to the benefit of the operator- but I assure you that it is to the detriment and loss of the owner.

Pertinent questions to consider relating to the aircraft maintenance could include:

• Has the aircraft been kept clean- and does it smell?
• Have the rotating components - wheels- fan disks- propellers- rotors- etc. - all been regularly checked and adjusted for proper Balance? (This is a cheap assurance program that is often over looked even by the most fastidious owner/operators).
• Staying with engines- have desalination or power recovery washes been undertaken regularly?
• If not then what are the potential problems that you might be faced with when buying this aircraft (corrosion- etc.)?

SELF INSURANCE
When it comes to making the decision about either enrolling an aircraft onto an engine- avionics and/or airframe maintenance service plan- or just ‘self insuring’ with your own bank account- it is very important to remember that all re-sale aircraft buyers like to buy aircraft that are enrolled and fully paid-up on a service plan subscription.

Unfortunately when you run the math on most subscriptions which are based upon hourly usage- if you as an operator have three or more aircraft- it is fiscally responsible to self-insure. Just remember that when it comes time to resell the un-covered aircraft- it will probably be necessary to pay for a subscription prior to selling it- otherwise it may not sell- especially in a bear market like we are living under now.

From a buyer’s point of view- it is absolutely vital to understand with your ‘eyes wide open’ exactly what ‘100% coverage’ means from one program to the next. Budgeting to own- operate and maintain an aircraft is not brain surgery- but sufficient money must be allocated otherwise the aircraft value- and possibly the occupants’ safety will be compromised.

BIG DECISIONS
When a seller is considering placing his/her aircraft onto the market- and if the engines or undercarriage are coming due for an overhaul- or if the airframe is coming due for a major 4-- 6- or 12-year inspection- should they spend the money first before selling- or pass this expense on to the buyer?

Generally the above is an easy question to answer- especially if you look at the selling proposition from the buyers’ point of view. When faced with a large field of candidate aircraft to choose from- a buyer will most often eliminate the near run-out aircraft from his/her list of purchase candidates- and instead choose a freshly overhauled aircraft - hence the time-worn adage of “Pay me now- or pay me later”.

Applied to the above problem- the aircraft shall take longer to sell- and it will sell for much less than the actual expense that could be invested in it prior to selling by performing the overhaul first.

As a seller- you will normally always get your money back from engine overhauls within your ultimate selling price. When you do overhaul- don’t fall into the ‘honey-trap’ that might be laid for you by a service plan provider by being cheap on the replacement of life cycle components like engine disks. All you are doing is trying to pass on an obscured later problem to a potential buyer. If they are savvy then they will see through this cheap approach instantly.

When it comes to scheduled maintenance like an airframe inspection- it is usual that you may not realize the full cost/value of the inspection; but as I stated before- you will sell faster if you advertise your aircraft with a fresh inspection. Further- you may have more suitors if they know that this major inspection event can be used as their pre-purchase inspection. Normally the buyer will pay for the flat-rate- while the seller pays for all ‘un-airworthy’ discrepancies that are found.

Lastly if a seller is looking to better position his/her aircraft within the marketplace based upon an avionics upgrade- it must be realized that only somewhere between 50-80% of the cost will be recouped back on this expense. However in a highly competitive ‘bear-like’ market condition- a seller must not think in terms of recuperation- and instead base the decision-making process on market position instead. The best aircraft always sells first!

REPAIRS
Any damage history will prove to be a ‘nasty black mark’ against an aircraft. The issue then must be rationalized into value terms. If the damage repair was done last month- then you can expect to see a 50%-ormore loss/drop in value. Alternatively if the repair was accomplished ten or more years ago- then maybe there will only be a 10% loss/drop.

However remember that 10% equates to $100-000 perceived discount for every $1-000-000 of value that is assigned to the aircraft. Damage history never goes away.

Remember my assertion about a third party maintenance facility having sufficient insurance? This also applies to the FBOs- cleaning companies and other vendors that come into contact with your aircraft.

Don’t get blindsided by a ramp or hangar incident. Unfortunately cfr 14- FAR 145 - the regulation that governs FAA Certified Repair Stations (FAA CRS) - allows that the need for an FAA form 337 is eliminated- and instead a reference to the details be contained within the FAA CRS’ own work order to be made. It is easy to forget that the same chapter of the regulations requires that an FAA CRS only needs to retain its records for two years.

From a buyer’s standpoint- when faced with a damaged aircraft that has been signed-off with just a work order number given in place of a formal FAA form 337 filed permanently with the FAA registry- then this situation must be treated the same as missing records- and the best thing to do is pull up stumps and move on to the next candidate aircraft.

As an owner/operator- in future always demand an original 337 (and 8110-3) is provided by an FAA CRS for any major repairs accomplished on your aircraft. Take pictures and make sure that the repairs are properly documented. If it’s a serialized component like a flight control- don’t allow the use of the words: ‘Repair’- if it is to be ‘Replaced’.

UPGRADES
Be absolutely certain of an aircraft’s value; before and after the fact. What do I mean by this? Does a 1971 Falcon 20 really need Pro Line 21 to achieve RVSM? You will never recoup your money on this bad-bet- unless of course you are planning to fly this same aircraft all the way to the salvage yard- decades from now!

If you are removing passenger seats or seat-belts to comply with equipment or operational law; what’s the best decision that you can make from a value standpoint? Maybe you are better off stumping up for the equipment required by a six-seat or more regulation- and keep the aircraft in a standard configuration.

What STC are you going to use to remove the seat or seat-belt? Staying on this topic- but realizing that this subject is allayed to the section within this article that is titled ‘big decisions’- cabin and entertainment system upgrades offer no real merit in terms of re-sale value apart from possibly gaining you a slightly better position within the marketplace.

AFTER-MARKET MODIFICATIONS
The best advice that any aircraft owner can receive if all others are ignored is this: NEVER- I repeat NEVER willingly be the first or the last to own any gadget or product that is not normally offered by the manufacturer as an option on your aircraft.

A ‘stagger-wing Hawker 800’ might look good on paper; but how will this modification effect the subject aircraft’s value?

Whenever I see the word: EXPERIMENTAL in an aircraft’s records- I immediately start to ask questions! Buying an ‘experimental’ single-seater is probably appropriate- but for a properly certified business aircraft- these words might have serious consequences for value.

Lastly consider aesthetics before agreeing to move forward. This most definitely applies to:

• Hushkits;
• Winglets;
• Lockers;
• Antennas;
• Fairings;
• and many- many more items.

Note: Be especially careful with any Weight Increases here.

BUYING AND SELLING
Remember that nothing is forever! To achieve the best possible value when buying your aircraft; or conversely- the highest possible selling price when selling- you are strongly advised to follow the points set out for you in this article. Always be absolutely certain of the Marketplace and where the candidate aircraft fits into it.

Never ship your Records; always carry them on-board the aircraft to and from a pre-purchase inspection or maintenance- etc.

Finally - as stated above - always commission a professional Aircraft Broker to assist and advise you- and your company in this complicated transaction.

Jeremy Cox is vice president- JetBrokers- Inc. If you have any questions regarding resale values- or would like to receive some free advice- you are invited to contact him at JetBrokers- Inc. at +1.636.449.2833- or email: jcox@jetbrokers.com


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