Economic and Functional Obsolescence Part 3
01.19.2016 • • Appraisals
Can You Fly Away Smiling in an Older Airplane?
Previously, we considered economic and functional obsolescence in older aircraft and when it makes sense to shop for an older aircraft. Yet there are still many factors to ensure that you are ultimately happy with your older purchase, warns Elliott Aviation’s Jim Becker.
Let’s assume you’ve decided to take advantage of the low purchase-price for an older aircraft. What can you do to a) determine whether follow through with the purchase, and b) avoid the potential minefields associated with shopping for this class of aircraft? Once you have decided which aircraft types fit your mission profile, you really need to do your homework to determine which models are practical to operate.
Operating Costs: First, get a good idea of what the operating costs will be. There are several services that specialize in determining operating costs for the various models available, including Conklin & de Decker, Aircraft Cost Calculator, and several other online resources.
Maintenance Costs: Next, decide where the maintenance will be done. Just because there is a maintenance facility in your area, it doesn’t mean it will be capable – or even willing – to work on your prospective vintage aircraft.
A suitable maintenance facility should have technicians who are experienced in your model of aircraft. They will also have the tooling and maintenance manuals necessary to maintain your aircraft. Identify that suitable maintenance facility before buying the aircraft.
Parts Availability: Another issue for older aircraft can be parts availability. In some cases, the OEM is no longer in the business of building corporate aircraft. It is always a good idea to determine parts availability before you commit to buy. You can do this by contacting flight departments who operate that model of aircraft – these are probably your best source to find out just how abundant parts are for that particular model.
Bear in mind that the available parts will likely be more expensive than those for newer aircraft. Depending on the aircraft, you might investigate the availability of spare parts to stockpile. For example, items such as EFIS tubes are becoming increasingly difficult to find as no new ones are being manufactured.
Forecast Expenses: This is also the time to get a handle on future expenses. Some aircraft are more expensive to maintain than others. Find out the maintenance schedule for your prospective purchase and determine what the expensive events will be. The engine manufacturer or authorized overhaul facility will be helpful in determining engine expenses. Maintenance facilities and aircraft operators of similar aircraft can also be a good source in determining maintenance costs.
Do some research online, too: many of these models have pilot forums where they discuss various issues regarding their aircraft – pilots, especially, love to talk about their aircraft and are usually a good source of information.
Telling the Time…
When a specific model is identified, there are many factors to consider. One of the most obvious is airframe time. Typically, the lower the better, but on an aircraft of this class, that may not always be true. While abnormally high airframe times can be a red flag, the same can hold true for abnormally low airframe times.
For example, if the average fleet of what you are considering has 12,000 airframe hours, a 2,000-hour machine may look highly attractive. Scratch below the surface: if that particular aircraft has been sitting around for an extended period of time without having been run or flown, it could be a particularly troublesome buy!
Engine times are another factor to consider. The lower the time since overhaul or mid-life inspection, the better. And consider the retables: examine the log books to get an understanding of the amount of time and cycles remaining on critical (i.e. expensive) engine components. If the engines are enrolled on a maintenance service program, be sure to contact the plan administrator to check that the account is fully paid.
The aircraft’s service history is another key factor. The inspection status of an aircraft at this price point can have a huge effect on the aircraft’s overall value. Have the logbooks and maintenance status reviewed before making an offer on the aircraft. It is imperative to get a clear picture on what inspections are coming due. Some of these inspections may cost more than the purchase price of the aircraft.
Following are some important questions to ask:
• Who has been maintaining the aircraft?
• What are their qualifications?
• Where is the aircraft being operated?
If possible, get copies of the work orders for the last few inspections. This will give a good indication of whether the aircraft has had good maintenance care. You don’t want to be the one who is paying for someone else’s deferred squawks.
Some of the usual factors of aircraft value actually have little influence on an aircraft of this vintage. For example, the age of the aircraft, damage history, and certain missing records will not have the same effect on this class of aircraft as it will a much newer and more expensive one.
Other Key Considerations
Consider the avionics and other equipment installed in the prospective aircraft. It can be more cost-effective to find an aircraft that has the avionics and equipment that you want already installed. For an aircraft of this vintage, these upgrades can add marginal value, regardless of what the owner spent to have them installed.
The final thing to consider is price. For an aircraft of this vintage, the prices can vary hugely. For example, a Beechjet 400s lowest published ask price currently is $249,000 while the highest is $950,000. Be sure to fully analyze the reasons why the aircraft are priced as they are, and take the items we’ve listed above into consideration.
Once you have identified a specific serial number, it is time to involve your maintenance facility, and it would be a good idea to have the same maintenance facility that will perform the regular maintenance undertake the pre-purchase inspection. This way you won’t be caught between two shops if there are squawks that were missed in the pre-purchase inspection.
Keep in mind that you may only be allowed to perform a limited scope inspection. The values of these aircraft have fallen so low that many owners will not allow their aircraft to have the full exposure of a traditional pre-purchase inspection. You need to consider this when budgeting for future expenses.
As we have discussed in this article series, if it fits your mission profile and budget there is no reason why you can’t continue to operate, or purchase, an older jet aircraft. If you do your homework, you can obtain a safe reliable aircraft at an unbeatable price, and fly away smiling!