One of the more specialized areas of equipment valuation involves aircraft. Whether it’s a fixed-wing, helicopter, private, or commercial plane, the need to obtain regular appraisals for aircraft is critical to the industry and the markets in which they trade. Here are a few reasons why, along with the key variables that go into an aircraft valuation.

Buying or selling an aircraft will almost certainly require a proper appraisal that ensures buyers do not overpay and sellers list their aircraft at a competitive yet fair price.

Financing and leasing are very common in the aircraft industry. Lenders use appraisals to ensure they are not underwriting more than a plane’s actual worth. Aircraft leasing is very popular and requires extensive knowledge of value, along with maintenance requirements, remaining useful life, and residual value.

Insurers will require a current appraisal that assists in setting appropriate coverage levels and determines reasonable and accurate payout amounts in the event of a loss. Aircraft appraisals are also essential for tax and accounting purposes, estate planning, and litigation involving asset division.

Accredited equipment appraisers need to understand the intricacies of valuing aircraft. Although the methodologies involved remain consistent with other machinery types, there are specific requirements to consider that will greatly impact the value of these assets.

The appraiser should engage with a knowledgeable aircraft inspection service or have access to recent reports regarding the aircraft’s exterior, interior, avionics, engine condition & hours, as well as overall maintenance history.

Understanding how to review maintenance records requires special experience and knowledge that industry experts have, as well as those involved with the day-to-day operation of the aircraft being valued. Examining logbooks, service bulletins, airworthiness directives, and compliance with regulatory requirements are all important to understand.

Once this is completed, the appraiser can conduct an independent market analysis while considering current trends, availability of similar aircraft, and recent sales data to determine the aircraft’s fair market value. They should also include cost approach variables such as effective age, depreciation, and remaining useful life.

Factors such as engine hours, avionics upgrades, and modifications should be taken into account to adjust the value accordingly.

When selecting an appraiser, it is essential to choose one who is certified by reputable organizations such as the Professional Aircraft Appraisal Organization (PAAO) or the American Society of Appraisers (ASA). Whether you are a buyer, seller, financial institution, or anyone else involved in the industry, having a current aircraft appraisal can help protect your investment and lead to well-informed decisions.

Many appraisers, buyers, and sellers involved in the aircraft industry consider the valuation of these assets unique in comparison to the rest of the equipment markets, with many businesses only willing to engage “experts” in this industry to complete the appraisal work. While it is true that the aircraft marketplace has a plethora of companies solely dedicated to working in this industry alone, when it comes to valuation, the methodologies, approaches, and data required to perform effective appraisals are very similar to the rest of the machinery & equipment markets. In fact, the very “uniqueness” in which this industry is viewed, opens the door to any number of independent sources and data points in which to gather the information required to complete a solid valuation.

Specific to aircraft appraisal, it is very common, and generally required, that for any sale, leasing, bank financing, or similar transaction, there be made available from the aircraft owner or broker, a detailed “spec sheet” that provides important data including the airframe time and landings, engine make, model, hours and cycles, avionics, interior specs, maintenance programs, ownership history, recent refurbishments, and related information. This document is above and beyond what an appraiser expects to collect during a valuation for most other types of machinery & equipment and encompasses the key parameters in developing your valuation.

Additional benefits when performing aircraft appraisals include the ability to find any number of third-party sources familiar with the industry, specific market, and make/model aircraft you’re researching, that will openly discuss and provide their opinions on. There are databases available to provide historical sales and estimated values on most types of aircraft that are built on quality information, developed over decades, by industry experts. You can also find plenty of articles written about important topics such as annual operating costs, historical fluctuations in markets, future trends based on technology advances, and any number of related areas.

In many ways, because of the constant global focus and overall significance of the aircraft industry, the amount of data available to consider when completing an appraisal is more abundant than in many other markets. An experienced, accredited equipment appraiser has all the tools available to complete a reliable, supportable aircraft valuation.

While being an “expert” in any one industry can have its advantages, the methodologies and approaches of completing an appraisal assignment are consistent across every business sector. The key components involve the collection and review of data, both specific to the asset you’re valuing, and from a reasonable number of external sources within the marketplace itself, to make the appropriate comparisons and adjustments. In all of these ways, the aircraft industry is essentially one of the most complete markets to perform appraisals in.

When it comes to machinery valuation, there are a number of aspects that set aircraft appraisal apart from other types of equipment appraisal. These differences can make a serious difference in how your aircraft equipment is valued, so it's important to have a decent grasp of what happens during the process. This allows you to use the appraisal to ensure that you can leverage the value of your equipment for a wide range of purposes, such as expansion, upgrades and sales. Here's a quick look at what happens during the appraisal process to help you know what to expect.

Exactly what happens during an aircraft appraisal?

To start, as with many pieces of equipment, the appraiser will look at the number of hours the aircraft has been used. This provides them with a baseline of information of what to expect as far as wear and tear on the engines, the time until the next overhaul and similar aspects. However, unlike other equipment, they'll also look at the number of takeoffs and landings that the aircraft has undertaken. Why? This involves the wear and tear on the aircraft's structure, as this portion of the operation cycle can take a toll on the structure itself. Generally speaking, when comparing two aircraft that are similar in hours, the aircraft that has had a recent engine overhaul and fewer takeoffs and landings will have a greater value than one that is approaching an engine overhaul and numerous takeoffs and landings.

The appraiser will also look at how well the aircraft has been maintained over time and the demand for both aircraft in general and that model in particular in the market. If demand for jets are up and you have a turboprop, that may decrease the value of your aircraft, but if it's a good model that has a constant demand, it may mitigate the depression in the market, allowing you to realize a better asking price compared to similar turboprops of different models. This allows you to maximize your equipment value without having to follow every minor shift in the market, making it easier for you to focus on doing your job.

An appraiser considers a wide range of aspects of your aircraft that you may not have even considered. Has your aircraft had a custom paint job or interior design to match your brand or style that will need to be redone to suit another client? Does it have features, such as a medical bay, which works well for your company's use but will have to be removed or renovated for a commuter company? What about the condition of the landing gear, cockpit or fuselage? These different features of your aircraft may benefit your company's marketing, purpose and bottom line, but may not benefit a future owner, aspects that must be taken into consideration by an equipment appraisal specialist.

By having a good grasp of what happens generally during an aircraft appraisal, you'll be able to leverage the value of your equipment for business growth, upgrades to your aircraft or to make an effective sale. If you don't understand the process, you'll have a harder time understanding whether the appraiser you're working with is providing you with the information you need. However, the easiest way to ensure you'll get the results you need is by working with a certified equipment appraisal specialist.