By Rob Russell
No two similar aircraft types have the same value – many factors influence the value. Many airlines are not in a position to buy or lease new jets, so they are looking to the used market for aircraft. But how do you determine the value of a jet?
In essence, values are a combination of three factors:
Aircraft values have increased in the post-pandemic world due to supply chain issues and many bigger airlines retiring older aircraft during the pandemic. This was either to consolidate their operations or replace older types with more modern and efficient jets.
Many factors, including accident history, utilization, and market-related factors, will influence an aircraft's value.
World politics and uncertainties, as well as sustainability-linked developments, pose risks to aircraft values in the future.
Over the past few months, aircraft values have gone up. Especially in the post-pandemic world, supply chain issues are affecting the largest aircraft manufacturers’ ability to deliver enough aircraft in response to the demand and airlines retiring many aircraft over the past few years. The value of many jet types has recently increased, in particular the narrow body single aisle medium-range jets. In addition, previous transaction records for the same types of aircraft with similar ages will influence the value of an aircraft.
The supply and demand of an aircraft type and its performance in various areas and markets around the world can also hugely influence the value of a jet and its suitability for resale or leasing.
Another big factor is whether there has been compliance with the Manufacturer’s service bulletins and/or airworthiness directives. These play a huge and important role in the resale value of an aircraft and any non-compliance with affect a potential operator, when it comes to bidding for an aircraft.
There are cases where customers are advised against acquiring an aircraft, For example, throughout the appraisal process, the potential buyer examines redelivery conditions, such as when aircraft are sold on an ‘as is, where is’ basis. The “voetstoets” sale as we know it, also applies in aviation.
An example here is Thai Airlines trying to sell some of their older Airbus A380s. They have been in storage since March 2020 and many have not had C checks since 2017 Several have not had Service bulletins or airworthiness directives done to them, so a potential buyer will have to factor these costs in if they are looking to acquire any of these jets.
Valuing an aircraft is a short process, the appraisal consists of a desktop appraisal and then a physical inspection. During the desktop appraisal, all the paperwork and records relating to the aircraft are inspected. Compliance with necessary legislation plays a big part in this inspection. Once completed, the aircraft is inspected both inside and outside. This can take a few days, depending on the aircraft type.
The process is divided into four areas:
Data gathering. Companies will gather any data available, including from Original Equipment Manufacturers.
Data analysis. The data is analyzed including maintenance records and comparisons to the original aircraft specifications.
Comparisons to other similar types. The available data of an aircraft is compared to previous similar type valuations.
Review and determination of value. Once the above factors have been completed, the price, or value, of an aircraft is determined
At present the geopolitical uncertainties around the world are amongst the biggest risks and threats to the market and will play a significant role in determining future values of aircraft. These could severely negatively impact the value of an aircraft. An example here is that Boeing is still delivering the very popular Boeing 767 freighter, but proposed noise and emission rules being proposed by ICAO could potentially prohibit Boeing from building this popular jet from 2028. Stan Deal, CEO of Boeing Commercial Aircraft is on record as saying the Company might seek an exemption for the 767F.