By Fred Workley
The maintenance you perform on an aircraft has an impact on its value. Appraisers use the maintenance records as well as visual evaluations to determine value. The availability of maintenance records and their completeness related to the accomplishment of the maintenance program, life-limited parts, and damage history also has a bearing on the appraised value of an aircraft.
The primary objective of an aircraft value appraisal is the determination of a numerical result, either as a range or most probable dollar amount of a value now, or at some specific point in the past or future. A good source for these details about aircraft appraisals is the International Society of Transport Aircraft Trading "Transport Aircraft Appraisal Program."
Base value is the appraiser's opinion of the underlying economic value of an aircraft in an open, unrestricted, stable market environment with a reasonable balance of supply and demand. It assumes full consideration of its "highest and best use." An aircraft's base value is found in the historical trend of values and in the projection of value trends and presumes an arm's-length, cash transaction between willing, able, and knowledgeable parties, acting prudently with an absence of duress, and with a reasonable period of time available for marketing. In most cases the base value of an aircraft assumes its physical condition is average for an aircraft of its type and age, and its maintenance time status is at mid-life, mid-time (or benefiting from an above-average maintenance status if it is new or nearly new).
Base value pertains to a somewhat idealized aircraft and market combination. It may not necessarily reflect the actual value of the aircraft being appraised. Rather it may serve as a starting value to which adjustments may be applied to determine the actual value. Base value is related to long-term market trends thus it is often applied in terms of projections of residual values and historical values. There are times when the value of an aircraft is not reflected in long-term market trends, when projected future profits or discounted rental streams may give a better value.
There are essentially five types of appraisals. A desktop appraisal does not include any inspection of the aircraft or review of its maintenance records. It is based upon assumed aircraft condition and maintenance status, information provided to the appraiser, or from the appraiser's own database.
The extended desktop appraisal includes consideration of the maintenance status information provided to the appraiser from the client, aircraft operator, or another appraiser's report but not any on-site inspection of the aircraft or its maintenance records.
A full appraisal includes an inspection of the aircraft and its maintenance records. This inspection determines the overall condition of the aircraft and records to support the appraiser's opinion of the value. The full appraisal normally does not require that inspection panels be opened or that any record archives be reviewed in detail.
A comprehensive appraisal includes a detailed inspection of the aircraft and records. Sufficient detail is required to ensure that the records are complete and in good order to allow for the re-registration of the aircraft in a different country.
A financial appraisal determines the value of an aircraft to an investor upon the income earning potential from its lease and residual value. It may be done in conjunction with either desktop or full appraisals.
The Value of Words Understanding terminology used in aircraft appraisals By Fred Workley November 2000 The aircraft maintenance profession has a set of terms and vocabulary that is...
Understanding the cycle.
Around The Hangar Maintenance Records, Part 3 Smart management = complete records By Joe Hertzler September 2004 Joe Hertzler This is the...
Around The Hangar Maintenance Records, Part 2 What do I need to keep? By Joe Hertzler July 2004 Joe Hertzler This is the second of a three-part series discussing...