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The Future Of Flying Is Here
Financing a panel upgrade gives older jets today’s magic.
By Dave Higdon

The idea that many pilots live - openly or secretly - as lifelong gadget freaks probably won’t surprise anybody… Who doesn’t know an aviator that coverts the latest high-tech equipment for the flight bag; be it a stand-by transceiver- a new flight-planning program for their wireless smart phone- or maybe a sophisticated pocket-size satellite navigator that can also guide them from the airport to the hotel in a strange city.

Many the pilot of an EFIS-fitted corporate airplane finds appeal in these high-power/small-package tools because they use them to see nationwide weather images from a satellite system – a tool still absent on thousands of business turbine aircraft.

Operators- too- may find themselves desiring the new- high-tech equipment they see when writing a check for the renewal of old dials and gyros that adorn the panel of the company plane. Not only do such tools make going to work in a steam-gauge intensive business-turbine flight deck more tolerable; they can also make owning the aircraft more affordable over the long haul.

Generally- pilots seem to love sitting behind the multi-display integrated cockpit systems dominant in today’s new aircraft- while owners seem to appreciate the higher reliability- reduced maintenance load and the privilege of spending less to keep the panel productive. But focusing on the pragmatic for the average pilot- newer equipment also offers new utility- with more to come.

New instrument-approach types enabled by the Wide Area Augmentation System (WAAS) enhancement to the GPS system continue to expand the number of airports accessible in conditions that once commanded a ground-based Instrument Landing System (ILS) to safely navigate. The FAA is adding several hundred a year to the list of airports with L-NAV and V-NAV approaches and plans to continue into the foreseeable future.

WAAS itself enables more-accurate- higher-reliability en route navigation- as well as underpinning new RNAV arrival and departure procedures that improve access to airports in congested airspace under Required Navigation Performance standards – something older equipment can’t meet.

And technologies such as Synthetic Vision Systems (SVS) and Enhanced Vision Systems (EVS)- individually and together greatly improve on flight crews’ situational awareness and ability to navigate in terrain-challenged environments with a higher margin of safety and greater confidence on short final to a weather-impacted airport.

There is- of course- even more new technology headed our way too – technology that will be required by NextGen to continue using the system. Much of today’s new hardware will work with ADS-B and other NextGen technologies with little more than an additional- low-cost box.

Higher reliability; lower maintenance; improved access and enhanced safety: Make that a win to a factor of four. And on top of those benefits- new panels often help free up useful load- thanks to the lighter weights of the installed systems when compared to the old-technology equipment removed.

What is sometimes less attractive is that big one-time invoice covering the changeover costs. The means to cover those costs may be as close as the plane you plan to upgrade. But even lacking that option- avenues exist.

BEFORE THE CHECK- THE CHECK LIST
Believe it or not- making up an inventory of what you want to change may prove to be the toughest part of the process. So many options exist; there are so many ways to go. Here- we cover just a few basics that should be a part of any panel overhaul.

• Navigation: At least one GPS navigator - Instrument level- WAAS approved - either paired or internally equipped with one conventional VHF nav box with VOR/LOC/ILS capability (and dual indicators- to match). A second IFR GPS wouldn’t hurt. At least one should either sport- or drive a multifunction graphic navigation display (MFD).

• Electronic Primary Flight Display- to replace the so-called “standard six pack” of flight and air-data dials- as well as the navigation indicators – including the Horizontal Situation Indicator (HSI); options to consider- if available- should include any SVS or EVS capabilities- other terrain-avoidance options and traffic avoidance.

• Weather Datalink hardware and service compatible with the displays chosen- as well as lightning detection hardware (preferably a system that can play on the MFD along with the other hazard-avoidance inputs) are worth consideration. The Weather Datalink connection supplies high-quality NexRad digital-Doppler weather radar images from the National Weather Service network- and can be more valuable strategically than on-board weather radar.

• Digital Airborne Weather Radar- which today exceeds the utility and capabilities of older units – up to and including the display options.

• Dual VHF communications transceivers- the higher the power the better. Also consider digital datalink communications options; the FAA wants to move in that direction- as does the international community- and business-turbine aircraft operating in the same environment as much airline traffic will likely find it necessary over time; but waiting for more and better maturity won’t hurt.

• Digital electronic Stand-by Flight Instrument package is driven by its own independent sensors to deliver attitude indication- airspeed and altitude (at a minimum) should the PFD or its sensors fail; it adds an aircraft-independent power source for the stand-by indicator that should be a consideration if the instrument isn’t already capable of self-power.

• Last but by no means least- consider whether it’s also time to upgrade the autopilot or flight-management system; new digital technologies offer a higher degree of reliability and improved functionality – particularly when coupled with some of the new equipment mentioned above - especially the new solid-state- flat-panel PFDs and their sensors.

Most of these elements can be acquired and installed as a full-blown- wholly integrated package- a’la Avidyne’s Integra Release 9- Garmin G1000- or Honeywell Apex integrated packages- or they can be mixed and matched from a wide array of options. But that’s another article altogether. Nevertheless- the savvy owner should confer equally between flight crew- avionics shops and the finance folks to shape the upgrade sought.

MAKING SENSE OF THE DOLLARS AND CENTS
Where there’s a will- there’s a way. More true in this case may be an adaptation of that oft-used phrase: “where there are resources- there’s a way.”

‘Resources’ may need to be nothing more than the airplane you want to upgrade. But maybe not… Let’s examine some of them and the considerations applicable.

• Equity in the aircraft applies to those who may still be paying for the airplane they bought. Equity depends on market value and the principal amount left on the note. If market value is below the principal- that’s called being “upside down” on the asset and subject matter for an article on aircraft finance. If the value is well above the principal remaining- you’ll have something with which to work.

• Residual value or market value- if the asset is not loan-encumbered. The greater the difference between the value of the aircraft and the cost of the upgrades sought- the easier this should go.

• Other assets and financial capabilities can range from business credit lines to other business assets and personal assets - if the owner so desires to put them into play. We’ll now look at a scenario typical of many: financing an upgrade through refinancing or re-encumbering the airplane itself.

IT’S DOWN TO THE NUMBERS
Let’s imagine you bought your business turbine aircraft 10 years ago- and it came with a panel that bridged the gap between the age of mechanical and electromechanical instruments- conventional air-data sensing- and with the conventional VHF navigation and communications equipment of the era. It is paid for; it is worth about $1 million in today’s values-depressed pre-owned market – if you wanted to sell.

Presuming power- paint and interior is in average- or better condition- the only area in need of attention is the panel. Transitioning that flight deck to one with modern- solid-state flat-panel display technologies – with digital PFD and MFD – and WAAS GPS can run between $50-000 and $200-000- depending on the systems sought.

With the financing needed a relatively small percentage of the aircraft’s current value- finding a finance company willing to work with you should be relatively easy- according to loan executives from several financial institutions.

Expect the finance company to want you to write a check for a down payment equal to 20 percent to 30 percent of the total costs- which would leave the amount financed at about $35-000 to $140-000- with a term of no more than seven years.

At 7 percent (a nominal interest rate these days) the bottom-end payment would run $528.24 for seven years; interest costs would total $9-372.57. Using the same interest rate on the higher note would put these numbers at $2-112.98 per month for the 84 months- with the interest totaling $37-489.80.

Remember- those interest charges are deductible and the investment can be depreciated from your income- as well – both money savers. So if the numbers work- you may want to consider adding WAAS GPS- as well as those weather-avoidance capabilities.

Perhaps you were thinking about something more sweeping- though? Maybe your aircraft can take the new L-3 integrated system- SmartDeck- or an updated integrated solution from Rockwell Collins’ Pro Line- a Honeywell Primus- Garmin G1000- or Avidyne’s R9.

Pricing could run into hundreds of thousands of dollars- depending on the aircraft - and the extent to which you take the upgrade. Your million-dollar aircraft may still be able to carry the weight of being encumbered to finance the upgrade. The same 20 percent to 30 percent rules will probably apply- and seven years is the nominal term most often quoted – though less won’t make it a non-starter.

EQUITY SAVES THE DAY
What if the airplane is already encumbered- though? If your airplane is worth a million dollars- and you owe one quarter of that amount- finance providers will still work with you- up to about 60 percent of the value of the airplane- most say.

Simply put- if you started with $600-000 – 60 percent of that $1 million – subtract the principal remaining- in this case $250-000. That would put about $350-000 at your disposal for a panel upgrade. There’s not a lot you will not be able to acquire in the way of modernization with this sum- though it may not reach to the top-of-the-line choices.

To take our scenario further- let’s imagine you’ve selected the best $350-000 package you can get- and you’re looking to book the work. You should expect to put up $70-000 to $105-000 for the down payment. Then the finance company will refinance the entire airplane for $600-000 – as opposed to writing a second note for just the panel.

For that $600-000 at 7% for seven years- you’ll be paying $9-055.61 per month; but you will no longer be paying on the old note - so the difference may actually be more like $5-300 per month – and that won’t feel as bad.

The finance company gets a customer renewed in its system for a new seven-year term- and adds $93-724.74 to its income during the period. But now your flight crew is transporting you from behind a new panel with more capabilities and fewer down-days.

OTHER OPTIONS EXIST
A company that may not want to refinance its airplane – paid or still encumbered – may employ its depth in asset elsewhere to strike a similar deal. Its regular banker may be willing to do the deal through the company’s existing lines of credit- particularly for a longtime customer that moves a great deal of money through its system.

Alternatively- the business owner may be able to encumber another asset with sufficient value to make the deal attractive to a bank or financial institution. Regardless of the solution embraced- though- a clean credit history and the ability to make a 20 percent to 30 percent up-front payment will be critical to the success of the financing effort.

Companies that specialize in aircraft and aircraft upgrades often advise that the smartest way ahead is to involve only the airplane itself – whether the upgrade is a panel- a cabin or a powerplants upgrade. Additionally- specialists in aircraft finance may be more comfortable to work with since they’ll better speak the language of aviation.

In the end- though- it takes assets of one kind or another to invest in the improved assets a modern aircraft panel represents. Ultimately- when the pilot comes into the cabin at the end of a difficult approach- and tells you how much easier and safer that new equipment made the trip; or when the company accountant comments that the upgrade may have been expensive- but it is saving you money on maintenance and lost utilization – you’ll remember why being a gadget freak for the latest and greatest isn’t necessarily a bad thing.


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