Get extra lift from AOPA. Start your free membership trial today! Click here

Aircraft valuation: What’s in a number?

Gulfstream G280

What’s an airplane worth?

The simple answer is what someone will pay for it. But the price you pay doesn’t carry much weight when you come looking for a loan. When a business aircraft buyer comes to a bank for financing, the bank may call in someone like American Society of Appraisers Senior Accredited Appraiser Richard Berkemeier for a valuation.

Berkemeier said many factors go into the appraisal of a business jet—but what the buyer or bank wants isn’t one of them. Appraisers come in as independent third parties. “I’m going to appraise it at what the value is, not what someone wants it to be,” he said.

So what is the value? First an appraiser has to find out what kind of value you’re looking for. Depending on the client, which is typically a bank or insurance company, it may be the fair market value, the orderly liquidation value, the forced liquidation value, or even the scrap value. In financing, the type of value depends on a bank’s policy.

Now, imagine two jets of the same model and year. Can you expect them to be valued at similar amounts? No, says Berkemeier. One might have an engine program while the other doesn’t. One may be sitting on the ground while the other is flying. Even a hideous paint job could affect an aircraft’s value. “They could be completely different values,” he said.

An appraiser will look at logbooks and paperwork, checking for incidents like a heavy landing that could cause structural damage. Recordkeeping of maintenance can play a big role in the aircraft’s valuation. “In theory, if you have no logbooks, the plane has no value, so it’s important the chain of documents is preserved,” he said.

Not many people have the expertise to appraise an aircraft, Berkemeier said. The American Society of Appraisers recently announced it is offering two valuation courses in partnership with Embry-Riddle Aeronautical University and Jet Support Services Inc., part of the path to membership in the society and accreditation. The organization is offering a scholarship to an Embry-Riddle student to attend the two courses.

Most aircraft appraisers come from an aviation background, Berkemeier said, although many also come from the finance industry. While appraisal is a specialized skill, he added that aircraft owners can benefit from having a basic understanding of the process.

“If you know what … goes into an appraisal, you can better manage the process,” he said.

Sarah Deener
Sarah Deener
Senior Director of Publications
Senior Director of Publications Sarah Deener is an instrument-rated commercial pilot and has worked for AOPA since 2009.
Topics: Financing, Aviation Industry, Ownership

Related Articles