Expert Commentary

Aircraft Appraisal Dos and Don'ts

Adam Webster, Mike Simmons, and Rich Thompson take a look at points to consider when obtaining an aircraft appraisal.


Corporate Aviation
March 2017

If you are a big-boy airline, you have a team of people that really know the market of the 3000+ Boeing 737s that are out there. If this is the case, you don't need appraisal help. On the other hand, if you are the rare person or corporation that can afford its own business jet, there are no consumer advocacy groups for you. Yes, this is true despite what the National Business Aviation Association (NBAA) or others may tell you. The reality is, when it comes to appraising the value of a plane, you are on your own. So, consider the following points as a minimum in your risk management quiver.

Know the Purpose of the Appraisal

Not all appraisals are created equal—in short, an apprised appraiser is a more effective expert in your corner. You might be refinancing a loan, looking at an insurance policy value, or simply guiding an owner to give them a current marketplace snapshot of what an aircraft might sell for. This is important to the appraiser, since the "purpose" of the report tends to impact what areas are discussed and analyzed. Down the road, appraisers need to be able to justify what they said, when they said it, and in the context of the "purpose" for the report.

Understand Your Appraiser

When it comes to a framework for building a value that is defensible, consider who you are hiring to perform the appraisal.

The aircraft appraisal industry is unregulated, meaning that anyone can provide a value number for a given aircraft as there are no industry standards regarding the training or experience that an individual must possess to do so. Two professional aircraft appraisal organizations are well known in the industry because of their reputation. Both organizations provide training for their members and encourage professional development. The oldest organization is the National Aircraft Appraisers Association (NAAA), which has been in existence for over 30 years and has a membership of over 200 members around the world. The other is the American Society of Appraisers (ASA), which developed an aviation specific discipline as part of their Machinery and Technical Specialty about 15 years ago and has about 56 members.

When interviewing a prospective appraiser, make sure that a field visit is part of their process and that the individual is qualified and experienced for the type of aircraft under consideration. When turbine aircraft are involved, desktop reporting and inexperience simply don't cut it.

Another factor to consider is the market database being used in the analysis, as there are important differences. Publications tend to be consulted by many in the aircraft appraisal industry, but the publishers are in the business of selling subscriptions. They are NOT in the aircraft appraisal business, and, as a result, unique situations such as airframe condition (dents, dings, deformations, corrosion, etc.), damage history, and/or missing logbooks can be problematic for some appraisers using publications alone. Many years ago, the NAAA developed its own database for the sole purpose of appraising aircraft due to the inaccuracy and limitations of publications—and this is still the case today. The NAAA data is based on actual selling prices of aircraft (as tracked by the NAAA) and updated monthly versus quarterly for publications. The NAAA process and database are different to be sure when compared to the use of publications alone, but the process offers credible, reliable results.

No matter what appraisal association you feel may be the best fit for the job, a critical component is their credibility along with their training, experience, and any "standards" they may follow. Adherence to the Uniform Standards of Professional Appraisal Practice (USPAP) guidelines is a good start. USPAP provides a methodology and standardized reporting (recognized by the Appraisal Standards Board) that covers a variety of disciplines. Make sure the appraiser of choice is current with the USPAP training/testing and that the appraisal focuses on aircraft.

Pay a Visit: Consider Real Estate

Buying a home comes with the benefit that there are disclosure laws. In every state, most buyers retain qualified inspectors to identify hidden defects. These inspections range from radon testing to an aging water heater to show-stopping foundation issues.

The same can be said for turbine aircraft—but the stakes are frighteningly higher. Yet, the technical review portion of this process is often not a serious consideration. Some buyers accept the representation of value, subject to a prepurchase inspection. And often this situation happens without the lender being aware of their position. As a result, the buyer can easily be an 80 percent owner of an overvalued, preowned, rapidly depreciating asset (presuming that the bank does not require an appraisal report prior to financing). Sure it is airworthy and legal. But the owner was way too keen to close for a reason.

Be sure the individual sent can read logbooks and determine aircraft history. Where was it mostly based ? (Home was Colorado, but the wife loved Florida.) Was the environment corrosive, and is there a history of corrosion in the logbooks? Does this or other questions lead to further questions? One small shortcoming can swing the value by hundreds of thousands of dollars, if not more. Get every detail. Desktop reporting without field visits simply don't cut it.

Avoid Subjective Feelings

You don't like Elvis? Fear not, it won't color the value of the airplane, since cosmetics are subjective. Components, times, cycles, and listed equipment, however, don't lie. You are building a true balance sheet for the airplane. Remain objective, and take solace that the tire kicking technical process, including a historical review of the aircraft's maintenance history via documentation, is the key to a quality appraisal.

Look for Hidden Deficits

The problem with being an airplane owner is that you tend to make decisions about your asset based on your own comfort—without the foresight of realizing that someone else may not want a couch that does not fold into a bed or a flat screen TV that is not stowable. Highly customized interiors that cater to personal preference relative to utility and ubiquity can adversely affect the aircraft's value, marketability, and flat-out ramp appeal. Subtler versions of the same hidden type of words are one-off field approvals (this is a Federal Aviation Administration shortcut from a more documented procedure) for such things as beds and, believe it or not, exercise bikes.

Ultimately, you want to know the history of the caretaker, pilot, and the director of maintenance. Determine whether the logbooks tell a story of progressively staying ahead of problems or chasing them after they caused an unscheduled event. Even more mundane are things like subscriptions to services such as CAMP or equivalent tracking tools that have a fixed annual cost but provide tremendous ease in sharing information about the aircraft's history, status, and upcoming spending that should be disclosed to the next owner. In the end, your appraisal process should provide a narrative of how the airplane got to where it is today and how its history affects both its current and potential value.


Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.

Like This Article?

IRMI Update

Dive into thought-provoking industry commentary every other week, including links to free articles from industry experts. Discover practical risk management tips, insight on important case law and be the first to receive important news regarding IRMI products and events.

Learn More



User ID: Subscriber Status:Free