How can buyers and sellers ensure their aircraft upgrades add value either to the aircraft, or to their operations? What should and shouldn’t factor in a decision to refurbish? Dave Higdon discusses…
When it comes to seeking out a good deal on a used business jet or turboprop, buyers often fall into one of two different camps. Each have their merits providing those buyers recognize the limitations of their plans.
One type of buyer looks for that ideal used jet or turboprop with everything up to standard, including the paint, interior, avionics panel and powerplants. This type of buyer wants a ‘turnkey solution’, requiring nothing but moving from Pre-Purchase Inspection to closing.
The other type of buyer is seeking a deal on a candidate aircraft – one that is priced in recognition of its potential. That potential is achievable with a little upgrade work. Buyers in this camp usually acquire their aircraft at a less-than-optimal price allowing them to spend improvement dollars as and when it suits them.
The trick for this type of buyer is to have a full understanding of the potential cost of the required work as well as the price of interim lift while the upgrades are accomplished, leading to an important question: What represents an over-spend by someone (whether buyer or seller) looking to improve a jet?
Bear in mind that nothing can more-completely overload good judgment than a seller or buyer wrapped around the axle of their own emotions – when the frenzy to own a particular candidate aircraft overwhelms all logic. In such a scenario, over-spending becomes a distinct possibility.
Inside Issues - Generic Questions
As mentioned above, aircraft upgrades fall under one of four headings: Flight deck; powerplant; interior; or exterior. Two (powerplants and flight deck) offer financial and operational benefits with improved fuel efficiency and routing capabilities.
Exterior and interior may provide little by way of performance gain, but their emotional impacts can effect a selling price. When it comes to making an impression, how does the interior present? Also, what is the current status of the interior?
Consider answering these questions before diving into your interior options which can make a strong head spin by their sheer volume.
1) How much refurbishment is warranted?Not all the interior materials age and wear at the same speed; headliners, for example, tend to wear better than carpets and seating surfaces. Consider the condition of the interior and refurbishing only those surfaces showing wear, potentially saving big bucks.
2) Durability:Generally, the better the materials are, the longer that ‘new’ look lasts. Manufacturers of interior materials typically offer a wide array of choices from the most-frugal of synthetic materials to the most-durable of natural substances at higher costs.
For aircraft flying above-average hours, the better the materials used the longer they tend to endure over long-term use; airplanes flown much less often may get by with less-durable materials.
3) Storage space:With a partial refurbishment, the operator may have few options other than to stick with the original floor plan (as opposed to the options presented by undertaking a full refurbishment which allows a complete redesign of the floor-plan and even expansion of available storage space).
4) Planning mobile office and in-flight entertainment (IFE) options:Take time on this option particularly if the candidate aircraft currently lacks IFE or airborne-office accouterments. Since the main cabin is where all but the flight crew spend most of their time, it's important that the cabin's functions merge with the travel habit of the passengers.
5) Know all your options:Much like cell phones and computers the options for cabin refurbishment continue to expand and rapidly evolve, with many new options available for older aircraft with new options continually emerging.
For example, your aircraft may already employ IFE hardware from a decade ago that weighs more and draws more power and the newest equipment available. On top of these benefits, the new equipment often works better, faster and more easily than the older products they replaced. Even though the existing system performs well, there could be plenty of advantage to replacing it.
The same often applies to the newest airborne-office equipment. So be sure you examine options for upgrading systems already installed – not merely for replacing old and worn materials.
What is naked excess for one operator may be a bare minimum for another, so it's difficult to advise someone on the nature of spending too much. Individual tastes and budgets vary widely.
Nevertheless, several interior specialists recommended setting a refurbishment budget based on a variety of factors, including how long the operator intends to keep the aircraft. For a so-called “keeper” aircraft defining overspending can be difficult; for operators flying a rapid-sale candidate, however, any amount of money represents excessive spending. Frame the project on that basis.
But what represents an over-spend for someone looking to sell a jet? Generally speaking, any upgrades beyond what's needed to keep the aircraft productive and operating efficiently – work for which little to no cost can be recovered in the sale.
Enter Upgrade Projects With Caution
One quick way to acquire a pig in a poke is to make judgments based solely on surface appearances. A fresh interior, particularly a budget re-upholstery, may hide other issues. It’s always advisable to hire expertise to investigate more fully.
Dirty carpets can be cleaned to look virtually new for far less than the costs of replacement; ditto for upholstery, metal bright works and wood finishes. They may look bad but still be serviceable and salvageable with a low-cost trip to the aircraft-detailing shop.
So Which Upgrades Pay?
Experts in the field advise that some upgrades offer a long-term improvement in market value, while others do little or nothing to enhance a sales price, despite costing a fair amount of money.
The older the aircraft and its finish, the more value the owner may gain from a full paint-and-upholstery upgrade. And even partial upgrades can deliver out-sized price boosts.
Avionics may not make the aircraft faster, but they can improve en route performance thanks to the wider array of new instrument approach procedures while saving fuel through more-direct routing available with WAAS GPS. And that upgrade would be a perfect time to resolve the ADS-B upgrade requirement, due by January 1, 2020.
Upgrading to new, more-modern engines – particularly on older jets and turboprops – may actually cost less than overhauling the original powerplants while also delivering life-long reductions in fuel consumption, thanks to the lower specific fuel consumption numbers of today's modern turbine engines.
And with longer overhaul intervals the owner who upgrades to modern engines ensures the operation of reduced fuel costs for the duration of those engines lives.
Timing is Everything...
Some upgrades, particularly partial improvements, can be accomplished during the downtime of an annual inspection, saving money and loss-of-aircraft time.
Other upgrades, such as powerplant changes, are most easily accomplished when the time arrives for an engine overhaul. The operator can compound the savings by planning the upgrade to coincide with when the overhaul becomes necessary.
Panel, interior and paint may be the most-challenging to time, but by grouping together multiple improvements in one shop visit the operator can at least minimize downtime – while waiting for that newly improved aircraft to return to service.
Read More About:
Aircraft Refurbishment |