Why an Aircraft Appraiser is Crucial for Your Aircraft Acquisition

In the world of business and private aircraft acquisitions, it is crucial to ensure that you are getting a fair and accurate price for your purchase. Nobody, especially aircraft owners of a business jet, turboprop or helicopter wants to discover after the fact that they could have paid much less for their acquisition. In the business aviation industry, this is where the expertise of aircraft appraisers comes into play.

An aircraft appraisal is an impartial assessment conducted by a certified appraiser to determine the current market value of your aircraft. These appraisers, who in the United States are often accredited by the American Society of Appraisers (ASA), consider various factors that can affect an aircraft’s value. By consulting with an appraiser on a regular basis, sellers can establish a fair and accurate value, ensuring transparency and an optimal sale price during the transaction process.

When assessing the value of a business or a private aircraft, appraisers spend considerable time and hard work leaving no stone unturned. They consider factors such as make and model, year of delivery, airframe time, engine times, avionics, equipment and geographical location. In addition, they will check if the aircraft is enrolled in an engine, airframe and/or avionics program because enrolling in a maintenance program will have a strong positive impact on the aircraft value.  Another key factor is the maintenance. What major expensive maintenance items have been recently carried out or will soon be due? For instance, the Hot section inspection or the overhaul for an engine or the heavy airframe inspections. Appraisers also consider the interior and exterior condition of the aircraft. The interior condition will include any refurbishments, the presence and quality of cabin management systems, satcom, internet service etc. The appraiser will also check for corrosion on the airframe or engine, as this will have a devastating impact on the value. Two other very important factors which often are not easy to evaluate are the aircraft pedigree and the diminution in value resulting from a damage history. In parallel to the aircraft condition, appraisers will study the market situation which indeed strongly influences its value. Is the aircraft being in an active market? Is it a seller, buyer or a balanced market?

There are three approaches to value: the cost approach, the income approach and the sales comparison approach.

In business aviation, the sales comparison is the most widely used approach to appraise aircraft. The purpose is to determine the value of a subject aircraft through an analysis of recent sales or offerings of similar aircraft (the comparables) to arrive at an indication of the most probable selling price for the subject (appraised aircraft). The comparables are adjusted to reflect the characteristics (year of delivery, airframe time, engine time, avionics, equipment etc..) of the subject asset. If the comparable is superior to the subject, a downward adjustment is applied; if the comparable is inferior to the subject, an upward adjustment is applied. The resulting adjusted sale prices give an indication of the value of the subject.

An appraisal in which the value of an aircraft is assessed without physically inspecting the asset is called a desktop appraisal. On-site appraisals, the most labor-intensive option, require an in-person assessment of the aircraft being appraised and a review of all log books and maintenance documents. The value obtained through a desktop appraisal may or may not be different compared to an appraisal with a physical inspection.

There are several situations where conducting an aircraft appraisal is necessary. For potential buyers of preowned jets, turboprops or helicopters, appraisals are standard practice, especially when it comes to financing. Sellers may also hire an appraiser to ensure the asking price meets current market conditions. Aircraft lenders may require annual valuations handled by the credit department as part of their loan-to-value covenant reviews. Additionally, sellers wishing to sell a share of their aircraft through fractional ownership or jet cards may want to request an appraisal to ensure they are maximizing the value of the shared ownership. Finally, reassessing or modifying insurance coverage may require an appraisal since aircraft insurance is partly based on its current value.

The process of valuing an aircraft involves establishing the purpose of the appraisal, determining which approach to value will be used (in most cases the sales comparison approach), conduct a desktop or an onsite appraisal and generate an appraisal report. This report is then delivered to the client.

At Freestream, we understand the importance of fair and accurate pricing in aircraft acquisitions and sales. Our team of qualified business aviation consultants can help you identify the best option for a qualified appraiser or you may utilize our in-house Certified Senior Appraiser, Gerald Robert, who will conduct a comprehensive assessment complying with the Uniform Standards of Professional Appraisal Practice (USPAP) and the most up-to-date market data. Whether you are a seasoned buyer or new to aircraft sales, consult our comprehensive buyer’s guide, “Questions You Should Be Asking Before Making Your Next Aviation Decision,” and feel free to reach out to us for further guidance.

Our aircraft brokerage services and our service providers are at your disposal. As the jet brokers of excellence, we guarantee only best-in-class sale and acquisition services for your unique requirements and travel needs.