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.