A Guide to Aircraft Valuation
How can the value of an aircraft be appraised?
The worth of an airplane is the amount that someone is paying for it. The price that you are paying for an aircraft does not affect your loan application. Banks usually call accredited aircraft appraisers for the valuation of an aircraft if you are applying for financing to buy a business aircraft.
Appraising a business aircraft involves many factors which the buyer or the bank does not want. Appraisers are an independent party. Appraisers are independent and is not influenced by any other so they are able to appraise the real value of the aircraft.
The kind of value the client is looking for is first determined by the appraiser. There are many types of values that clients, who are usually the bank or an insurance company, can look for including orderly liquidation value, the fair market value, the scrap value, or the forced liquidation value. In financing, the type of value the banks looks for is determined by its policies.
If there are jets of the same year and model, you cannot expect them to have the same value. It will depend on the condition of the jets. The value of an aircraft is affected by whether it has an engine program or not or if it is grounded or flying. Even the difference in paint jobs affects the aircraft’s value. So, the same year and model of 2 aircrafts does not give them the same value, but there are many different factors that need to be considered.
There are paperwork and logbooks that appraisers inspect. Incidents that affect the structural integrity of an aircraft is looked for by an appraiser in the files. If the records reveal that the aircraft had a heavy landing, then there is a possibility that the aircraft’s structure is damaged. Maintenance records are inspected by appraiser since this also affects the aircraft’s value. In theory, there will be no value given to an aircraft that does not have a logbook or records. And this is the reason why aircraft owners need to keep records.
A true appraisal of an aircraft’s value can only be done by a few people. Taking valuation courses is important to be an accredited appraiser and be able to be a member of the American Society of Appraisers. Although most aircraft appraisers are from the aviation industry, there are also some who belong to the finance industry. The appraisal process is a specialized skill but every aircraft owners should understand the appraisal process. They can better manage the process if they know what is involved in an appraisal.