It seems like every day we are asked to help in evaluating the viability of an aircraft purchase. Our experience with aircraft maintenance records requirements and the fact that we really got our start doing aircraft maintenance record prepurchase evaluations has made our company a logical first choice for aircraft buyers. In the past couple Around the Hangar issues, we have discussed the maintenance record requirements along with all of the regulations that mandate those requirements. Putting that information to practical use, we will now discuss the impact that records, or lack thereof, can have on the value of an aircraft.
The single most important part of buying an aircraft is the prepurchase evaluation. Actually, an aircraft prepurchase evaluation (prebuy, tech appraisal, etc.) would really be more properly termed “aircraft value verification.” You see, by the time a prepurchase evaluation is requested, the seller has convinced the buyer that his/her aircraft is their best choice over all similar aircraft currently available for sale, and the task at hand is merely due diligence. A prepurchase evaluation really consists of two major elements: The aircraft physical inspection and the aircraft maintenance records audit.
The Aircraft Prepurchase Inspection
In order to establish/verify the physical condition of the aircraft an inspection must be performed. The selection of a maintenance provider who will perform the inspection is extremely important. Since the aircraft buyer is generally the person who pays for the prepurchase, it is important that the buyer play the lead role in selecting the maintenance provider to perform the inspection. We recommend choosing a maintenance provider with an outstanding reputation for knowledge on the make and model aircraft you are purchasing. Many maintenance providers have the certificated authority as granted by the FAA to perform inspections and maintenance on several different aircraft makes and models. However, certificated authority does not mean expertise and when making a buy decision on a multimillion dollar aircraft you must have an expert help in the evaluation.
The predominant belief is that the best maintenance provider choice will be the OEM (original equipment manufacturer), but there are several non-OEM maintenance providers who are very capable as well. We have found that most critical in the selection is the mechanic or team leader who will actually perform the work. That is truly where the expertise lies. Use your network to find someone known to be an expert on the aircraft make and model being purchased. Every maintenance organization has its strengths and weaknesses and you want to be certain that the maintenance provider you choose really knows the aircraft and can look for the problems common to the aircraft.
As for the scope and detail of the inspection, we like to keep it simple. The equivalent of a 100-hour/annual inspection must be performed as part of the prepurchase in order to uncover any possible damage or corrosion. The 100-hour/annual inspection performed on small piston aircraft is intended to be a tip-to-tail inspection that, when performed, will uncover possible airworthiness concerns. In the case of large or multi-turbine powered aircraft (Ref: 91.409 (e)), a 100-hour/ annual inspection is not readily available in the maintenance program provided by the manufacturer. However, it is not too difficult to find the equivalent of a 100-hour/annual inspection within the manufacturer’s inspection program. Generally, the manufacturer will have a group of inspections that, when combined, consist of a tip-to-tail inspection of the aircraft. Whenever an aircraft is imported into the United States the regulations require that the equivalent of a 100-hour/annual inspection be performed (Ref: Part 21.183 (d)(2)). Because of this regulation, most manufacturers have established what group of inspections is equivalent to a 100-hour/annual type inspection. Usually, the calendar term that coincides with a complete aircraft inspection is 24 months for these larger aircraft. Because each manufacturer creates inspection programs for each specific aircraft model, the actual inspections that will need to be accomplished to cover the entire aircraft vary so we can’t really say specifically what they are.
A common shortcut that a buyer will take is to perform an abbreviated inspection based on the fact that a major inspection was just accomplished. We are opposed to that approach and have seen several instances when the shortcut came back to bite the new owner. In all cases, a complete tip-to-tail inspection must be performed on the prospective aircraft. Similarly, in all cases, a detailed engine inspection must be accomplished. Prior to beginning the inspection, the aircraft should be flown and an “at altitude” engine power check performed. Then ground runs including an avionics systems functional check and engine ground power checks must be performed. We recommend that your mechanic participate in both flight and ground runs. Engine runs can tell a good engine mechanic a lot. Any discrepancies found during the aircraft operational checks should be recorded on the work order so that during final runs, complete correction of the discrepancies can be verified.
The physical inspection of the external and internal components of the engine is also a must. The external part will be included in the tip-to-tail inspection; however the internal inspection will mean, at minimum, a borescope inspection of the hot section and gas generator sections of the engine. We encourage the buyer to have the engines disassembled enough for the mechanic to look directly at the hot section components and check for damage. For engines where disassembly is not practical, a borescope may be the only option. The fact is that borescope technology has come a long way and problems are easier to see with the newer scopes. In all cases the inspection must be complete and detailed. Engine components are extremely expensive and if a serious problem exists, it needs to be uncovered as part of the prepurchase.
The Aircraft Maintenance Records Audit
The second element of the prepurchase is the aircraft maintenance records audit. Please do not underestimate the importance of this element. Just as worn parts or hidden damage can come to the surface later in life and cost the buyer significantly, so can undocumented scheduled maintenance and inspections. The value of an aircraft can be dramatically affected by missing records or hidden damage to the aircraft. Sometimes as much as 15 to 20 percent of the value of the aircraft can be lost simply by maintenance documentation problems. When you are dealing with a multimillion dollar aircraft even 1 percent is significant.
The maintenance record audit consists of the following checks at a minimum.
- Verification of the aircraft/engine/propeller total time in service
- Verification of all scheduled inspections and maintenance checks specified by the aircraft manufacturer (including the engines, props appliances, and emergency and survival equipment (Ref: Part 91.409 (e))
- Identification of the chosen maintenance program for the aircraft
- Comparison — if necessary to the manufacturer’s inspection program
- Verification of compliance with all applicable airworthiness directives
- Complete status of compliance with applicable service bulletins
- Evidence of possible damage history hidden within the records
- Completeness of all maintenance records including all FAA Form 337’s and required supporting approved data for major alterations and major repairs
- Compliance with all instructions for continued airworthiness (ICA’s) associated with any major alterations or supplemental type certificates.
These checks are to be accomplished by conducting a complete and thorough examination of the maintenance records. Oftentimes to complete the audit, the technician must first organize the records to facilitate the audit. We often receive records in such disorder that half of the first day is spent organizing the records.
The audit begins by starting with the most recent logbook and the most recent logbook entry and moving backward through the records reading each entry carefully. It is important that the person performing the audit be very familiar with the inspection and maintenance program for the aircraft. This will be very helpful in making the maintenance records audit efficient since there are often several hundred scheduled maintenance or inspection tasks that must be documented in the records.
As the audit process continues and the information is found in the maintenance records, the technician must accumulate the findings in a format that will allow presentation of a summary of the data and the current status (next due) of each scheduled item, airworthiness directive, service bulletin, etc. In addition we also need to find any major alterations and/or major repairs. Major alterations are required to be recorded using FAA Form 337, however, the major repairs may be recorded using a signed copy of the work order if and only if the work was preformed by an FAA certificated repair station (Ref: Part 43 Appendix B (b)) and the repair station meets all of the criteria in Part 43 Appendix B.
Upon completion of the prepurchase records evaluation, the buyer should be presented with a list of maintenance records deficiencies. Since the messenger usually is the first one to get shot at, we suggest that the proper approach be taken regarding the deficiencies. The deficiency in the records does not mean that the work has not been accomplished; it simply means that the work was not documented. There may be a simple explanation, but the records do not provide proper documentation.
The deficiencies are then either listed on the work order to be addressed by the maintenance provider or until further documentation is provided by the seller. Once all questions can be answered or otherwise addressed, the records are completed and brought up to speed and will then reflect accurately the status of all maintenance performed on the aircraft.
Most aircraft purchase agreements include a prepurchase section that spells out the responsibilities and limitations of the prepurchase inspection. Usually the buyer pays for the inspection and the seller pays to have discrepancies that affect airworthiness corrected prior to the closing of the sale. Another detail to understand is that there is often a limitation to the time allowed to perform the inspection. Make certain that you have ample time to complete the necessary inspections and evaluations so that you know what you are buying.
Don’t Cut it Short
The prepurchase inspection is too often cut short. The buyer either falls so in love with the aircraft that it doesn’t matter what is wrong with it (“It’s the most beautiful aircraft I have ever seen.”) or the buyer doesn’t see the need to spend the money (Why should we do that inspection? The aircraft just came out of a major inspection.”). We believe that the time at which the aircraft transfers from one owner to another is the best time to spend the money. That is the only time when the buyer and the seller are both at the table with their checkbooks and that an agreement on the airworthiness of the aircraft indicates who is responsible for what expenses. We have never seen a prepurchase that didn’t uncover airworthiness related concerns; however, if the prepurchase evaluation is completed and there are no discrepancies on the aircraft, then the buyer can rest easy knowing that all that could be done was done to uncover unknown future risk.