One of the most important services a good broker can provide is accurately identifying the fair market value for an aircraft. Whether you are buying, selling or just budgeting, failing to take into account all the variables which impact what a particular aircraft is worth can be a very costly mistake.
Turbine powered aircraft are an extremely complicated piece of machinery and many factors must be considered in a proper evaluation. The process is made even more challenging by the fact that aircraft sales prices are not a matter of public record, so there is no database available which references the sales prices of comparable aircraft. But, a good broker can get those prices.
There are some features that are a part of every aircraft evaluation, including: Year of Manufacture / Airframe Time / Engine Status / History of Damage or Incidence / Condition of Paint & Interior / Avionics & Equipment / Pedigree. From here, things get a little more complicated and specialized.
Every make and model has specific features which make a particular unit more or less valuable and the list of these features is constantly changing. Valuation tools like Aircraft Bluebook and Vref Aircraft Value reference do a good job of summarizing a few of these features, but they certainly do not include all of them and are unable to keep up with how quickly the markets evolve. Following are a few examples of costly value adjustments I have faced during recent transactions that some buyers might not have considered.
The first year of production of the 604 was 1996 making the earliest units 19 years old. Because of the significant work scope of the 16 year inspection, many operators elect to do the 20 year inspection items in conjunction with the 16 yr, but not all. If the 16 year, 20 year and gear overhaul are completed together, the cost can range from $500K – $850K or even higher in some cases. These inspections can total 15-20% of the value of the aircraft, which is much higher than any “add on” identified in the evaluation books and must be factored in to the value of the aircraft.
Two seats can make a big difference on a Falcon 2000. If a Falcon 2000 is configured with 8 seats, no Flight Data Recorder (FDR) is required. However; if the aircraft has 10 or more seats, a Digital FDR must be installed, which can be very costly. We recently worked with a client to evaluate the cost to change the configuration of a Falcon 2000 from 8 to 10 seats and the cost ends up approaching $1.0M, about half of which is the cost of the DFDR installation. Again, this can impact the value of the aircraft by 15-20% or more.
Every make and model of aircraft has examples like this that can significantly impact what an aircraft is worth. A good broker will have a working knowledge of the particular market and will take the time to dig into the specialized issues that are currently effecting value in that market.
As Warren Buffett says “Price is what you pay, value is what you get”. The services of a good broker will help ensure you are getting a good value and not just a good price on your next aircraft transaction.
If you would like to know what some of the issues currently effecting the value of your aircraft are, please contact one of the professionals at JB&A Aviation.
Toby Smith – Vice President
JB&A Aviation, Inc.
Toby Smith is Vice President of JBA Aviation and has been helping customers buy and sell turbine aircraft for 17 years. He operates a satellite office located at the Atlantic Aviation FBO in Tulsa, Oklahoma