What’s the Real Value of an Aircraft Upgrade?

Can an aircraft upgrade pay-out beyond the initial cost? How does a business jet operator assess the ultimate value in the options available to them? Andre Fodor draws on some of his own experiences as an aviation director...

Andre Fodor  |  15th January 2019
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    Andre Fodor
    Andre Fodor

    With a focused approach on global excellence and creativity, Andre Fodor has managed flight operations...

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    MRO for Business Jets

    Can an aircraft upgrade pay-out beyond the initial cost? How does a business jet operator assess the ultimate value in the options available to them? Andre Fodor draws on some of his own experiences as an aviation director...
    I couldn’t help but stare. The aircraft parked on the ramp at the FBO had shiny, brand new paint and glistening chromed bright work that had been polished to perfection. The pilots were busy with their pre-flight preparations, and a fuel truck fed the jet’s thirsty tanks for an upcoming flight.
    What was it that caught my interest? I was looking at a Sabreliner 65 (circa 1980), and it looked brand new. What ever could have been the rationale leading someone to spend some serious money upgrading an aircraft that had long passed its prime?
    Days later I had the opportunity to meet the chief pilot of that Sabreliner’s operation and ask first hand. He explained that there were three reasons the decision had been made to invest on upgrades:
    • First, the asset had been fully paid years ago and was also completely depreciated. The residual value of the aircraft (in this case) was equal to its scrap value.
    • Second, since this was an old aircraft, there were no trade-in opportunities and no interest from charter operators to use it to generate revenue.
    • Third, the owner’s travel requirements represented one hundred hours of annual utilization (mostly on regional flights) with an occasional vacation trip to the Caribbean.
    Essentially the owner enjoyed his aircraft and had (thus far) had a positive ownership experience. What made all that possible, however, was the accumulation of years-worth of in-house expertise on that aircraft. The chief pilot and the director of maintenance had both been with the jet since its purchase and were, without question, experts on its upkeep.
    There were of course challenges, including the limited availability of training, replacement parts and avionics upgrades, but they felt confident in the success of keeping the aircraft airworthy with its low annual hours of demand.
    Although this scenario represents a niche opportunity to extend the useful life of an older airplane, it serves well as a primer for discussion about the benefits of investing in upgrades.
    Where’s the Value in Upgrading?

    With the deadline for ADS-B approaching, many operators will have to consider the value of an upgrade. Looking back to when RVSM was mandated, there were a number of aircraft that made their final flights to the salvage yard, owing to the high cost of upgrading air data computers and installing the equipment that would deliver compliance.
    Other operators opted to stay below FL290, accept higher operational costs and reduced range until they had used all remaining hours prior to their next major maintenance event.
    Today things are a little different, though. Advancements in technology have reduced costs and helped speed products’ entries into the market. Attending a recent aviation trade show, one vendor promised an ADS-B solution that was self-contained within the wingtip nav light.
    The vendor claimed it would require just three wires and less than six hours for installation. Moreover, the system would come with an opposite matching nav light for aesthetic purposes. Products such as this may breathe new life in the economics of upgrading older aircraft.
    Upgrade packages for aging airframes have been (and continue to be) developed with the aim of resetting the expiration date of an aircraft’s obsolescence. Today, those upgrades that blend new navigational technologies and NextGen compliance with older airframes are very aggressively priced.
    Moreover, when combined with a powerplant enhancement offering new engines, longer TBO and greater performance and fuel savings, plus new exterior paint and interior refurbishment, aircraft can essentially be branded as ‘zero-time’.
    For operators who already own an upgradable airframe (or even for those with managed expectations who are looking to buy one), there’s value in a lower cost like-new aircraft experience.
    Adding Value With Less Capital

    One of the greatest challenges in managing corporate aircraft is to add value with less capital. As an example, during scheduled maintenance it’s good practice to look for the low-cost ‘good-to-have’ upgrades that can be completed within the scheduled down-time.
    Just recently, I opted to change the internal look of one of our jets by adding stitching and pipping to the passenger’s seats as we waited for a phase inspection to be completed. Previously during a strip and paint project we’ve opted to pull all inspection covers while the aircraft skin was paint-free to inspect for any signs of corrosion. It certainly pays to think outside the box!
    Upgrades provide a fresh look that can give new life to older aircraft. The upgrade could be as simple as adding a wireless hard drive to feed digital media to iPads; an off-the-shelf wireless printer to enhance in-flight productivity; a massage seat cover; or a fancy coffee machine.
    It’s about the cost versus the benefit and thinking creatively for ways to bring value, excitement, freshness, and an outstanding service experience to the owner. They will return the effort with a continued commitment of flying privately and reward us with new opportunities for growth.

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