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ADS-B Trouble? What's the Scrap Value of Your Jet?

With less than 18 months until the ADS-B Out mandate requires it, what are the alternatives that you can plan for now? Mike Chase and Mike Foye weigh up the options in this JETNET >>Know More feature…

Mike Chase   |   9th July 2018
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Mike Chase Mike Chase

Mike Chase has thirty-five year's extensive global managerial experience in marketing,...
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With less than 18 months until the ADS-B Out mandate requires it, what are the alternatives that you can plan for now? Mike Chase and Mike Foye weigh up the options in this JETNET >>Know More feature…
 
 
The Federal Aviation Administration (FAA) requires all aircraft flying in controlled airspace to be equipped with ADS-B Out technology to modernize the US national airspace system by January 1, 2020.
 
If you can fast-forward to January 1, 2020, let’s imagine you have missed your opportunity to get your aircraft ADS-B compliant in time.
 
Your aircraft is effectively grounded. What can you do now?
 
Perhaps you will arrange to have your aircraft equipped with ADS-B Out sometime after January 1, 2020.  But you’ll be joining a queue – it’s by no means going to be a quick fix. Part of that may be exacerbated by the following...
 
 
ADS-B: All US Aircraft Equipage & Avionics Performance data
 
 We learned from the FAA website that not all installed ADS-B Out systems have been tested. As shown in Table A, 6,702 (or 11.7%) of the ADS-B Out installs are not compliant as of June 1, 2018.
 
Don’t get caught out. The FAA has a tool called Compliance Monitor for checking ADS-B functionality once installed and determining whether the system is working properly.
 
Learn more at: http://adsbperformance.faa.gov/PAPRRequest.aspx
 
 
Selling Unequipped Aircraft Abroad

Alternatives to equipping for ADS-B could include trying to sell your aircraft to an operator in another country that does not require ADS-B equipage. However, ADS-B is not just a US mandate.
 
Australia was the first to implement full ADS-B Out coverage and Europe will require it on used aircraft by June 7, 2020 (June 8, 2016 saw Europe’s mandate for new aircraft come into effect).
 
Accordingly, you will need to research the countries that are willing to register your aircraft without ADS-B Out and find a willing buyer, which poses its own challenges.
 
 
Private Jet Scrap Value
 
 
Scrappage: Is Breaking Up Hard to Do?

Perhaps the option to scrap your aircraft appeals. If so, where do you turn to get this accomplished? How many aircraft of a particular model can be scrapped and what will the demand be for harvesting parts to keep the remaining fleet aircraft flying?
 
Assuming that there are 100 business jets in operation and 50 have the ADS-B equipment installed, of the remaining 50 the question becomes, what percentage could be scrapped to keep the remaining 50 survivors in the air, while being profitable for the salvage and parts companies?
 
The answer will help an aircraft owner decide whether they are more, or less likely to receive a satisfactory quote.
 
It all depends on which parts are in demand, and how many parts need to be kept in the salvage company’s inventory for future use.
 
 
Status of ADS-B Compliance for Business Jet Models
Table B sets out the number of business jet models historically produced, banding them by the percentage of the fleet that are ADS-B compliant. There are currently 50 models of business jet (from a total of 222 produced) that have 0% ADS-B compliancy. If your jet is one of these, there is likely to be very little demand for parts from your jet, should you choose to scrap it.
 
 
To Store or Retire?

Many factors can affect the decision to store an aircraft irrespective of its age. However, one key factor – aircraft value – affects whether an aircraft comes out of storage and is placed back in service.
 
The value of an aircraft depreciates over time while the cost to operate and maintain the aircraft is always increasing. Eventually the aircraft depreciates to a point where it is worth less than the value of its parts, and the decision is made to dismantle the aircraft.
 
As we have established, ADS-B equipage is becoming an increasingly important factor at play regarding the decision to scrap. Those aircraft not equipped are candidates for storage or retirement, and eventually subject to sale for scrap and recycling.
 
 
What is Usable?

Aircraft have technical limitations which prevent them from being operated beyond a certain threshold. This is typically expressed in aircraft flight cycles or flight hours (though OEMs can offer modification programs to extend these thresholds).
 
After the aircraft is retired, many of its parts (such as the engines, landing gears or avionics components) continue to have a useful life.  Unfortunately, the fuselage is considered to be scrap metal and has little value beyond the scrap value.
 
Among the items that have value beyond the life of the aircraft are its engines, landing gear, wheels, brakes, avionics, radios, control surfaces, actuators, and (generally speaking) anything that can be unbolted. Heated windows in good condition can also have value.
 
 
Do Used Parts Come With Warranties?

Table C is an example of a quote with pricing options and warranty for two gauges based on an exchange of parts for a 30-plus-year-old business jet. As depicted, the value of a used part will depend on the time remaining on the warranty.
 
Eqample Quote with Pricing Options and Warranty
 
Fixed-Wing Aircraft Retirements, by Type

Table D depicts the number of aircraft (by type) retired from the worldwide fixed-wing aircraft fleet as of June 6, 2018.
 
 
Worldwide Fixed-Wing and Rotary Wing Retirements and Storages
 
The Big Aircraft Salvage Question…

In order to have a General Aviation salvage company provide a bid for your aircraft, the first question that needs to be answered is whether the aircraft is flyable. If it’s not, then this will impact the overall price that a salvage company will offer you, because it will need to hire a hauling company to bring the aircraft to its facility to dismantle.
 
There are four major General Aviation salvage companies in the US. These include Alliance Air Parts; White Industries; MTW Aerospace; and Dodson International Aircraft Parts.
In Summary

Many aircraft owners have been slow to react to the ADS-B mandate, hoping the FAA may extend the deadline beyond 2020 or that the price of the equipment will fall. The impact of a potential grounding of non-compliant aircraft, however, will be both costly and time consuming, especially when coupled with the potential loss of residual value.
 
 
 
 
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Read more about: Airplane Scrappage | ADS-B | Avionics Mandates

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