Not long ago I was examining a single engine piston aircraft for a banking client. At that time, the aircraft was six years old and it was clear that it had been kept outside for an extended period. During the appraisal process the aircraft was undergoing an annual inspection and corrosion was reportedly found on a couple of internal components. None of the areas required "major surgery" as the items were easy to replace but given the coastal location where the aircraft was kept (outside), the corrosion was not a surprise. In addition, an evaluation provided by the banking client used an analysis from one of the popular publications and the evaluator (their identity was unknown) added to the overall value of the aircraft because it was considered to be a Prime Condition Aircraft (PCA) - but was it really? As part of my analysis for my client, I dug into this aspect of the previous evaluation to determine if the PCA adjustment really applied. Here are the criteria along with the attributes I observed - for the subject aircraft and for others I have appraised over the years.
The publication stated that to be considered as a Prime Condition Aircraft, the aircraft in question had to possess one or more of the following SUPERIOR characteristics when compared to an identical aircraft with normal wear and tear.
- New Aircraft: Although a six year old aircraft obviously is not new, as an appraiser I would challenge the presumption that a new aircraft would be a PCA simply because it is "new". Using the age alone will mean that essentially all "new" aircraft are PCAs which they are not and all new aircraft would be unjustifiably overvalued. New aircraft, relatively speaking, would all be "typical" and should be rated or evaluated accordingly.
- High Quality Paint and Interior: The term "High Quality" could apply to a number of attributes all of which may be in different stages of condition and for this reason, the criteria is unclear. For example, the quality of workmanship for the interior could be excellent but the condition of the items in question could show higher than normal wear or vice versa. Or, the interior may be of "high quality" but the paint job is "low quality". It is unclear how many of these attributes should be considered using the guide alone to determine if this category actually applies. In the case of the subject aircraft, the "quality of workmanship regarding the paint job" was high however the condition of the paint itself was well below the norm for this year model as the upper surfaces had lost their shine and were, in my opinion, in the early stages of oxidation. As a result, this characteristic did not apply.
- Significant airframe and avionics upgrades/modifications: This rating too is somewhat vague because it is unclear what "significant" means. In other words, is the number of upgrades is to be considered or the value? And, during the evaluation process, the avionics upgrades along with the value of the mods should have already been captured! It is also important to note that not all mods on fixed wing aircraft add value nor does the addition of a new piece of avionics gear increase the overall value. In some cases, the overall value of the avionics can actually DECREASE in a particular aircraft due to the equipment being replaced. It is simply a "one box versus many" situation. In this specific instance, there were no avionics or airframe mods applied to the subject aircraft and this characteristic did not apply.
- A high-level restoration if the aircraft is more than 35 years old: The subject aircraft was not 35 years old but it is unclear what a "high-level" restoration actually entails. Restoration shops really take advantage of this attribute because they put quite a bit of time into restoring an older aircraft. In reality, they tend to be making up for deficient maintenance that resulted from years of neglect OR they are actually installing newer equipment to replace the outdated equipment that no longer functions (think about Loran units here).
- An unblemished history with excellent and complete records: Here again, it is unclear what "unblemished" really means. Are we talking about "thin" maintenance entries which do not address routine issues? Are we talking about a lack of damage history or the fact that no entries were found in the log books? The rating alone would indicate that a number of aircraft have a "blemished" history or missing records and while a good number do, I would hesitate to characterize ANY aircraft having no damage history or complete records as a PCA and in the case of the subject aircraft, it would be expected to have complete records and an unblemished history with only a few hundred hours accumulated thus far in its brief life.
Of course, there are exceptional aircraft on both ends of the spectrum that need special attention and consideration as part of a normal appraisal process. Typically their respective attributes will push them "over the line" in one respect or another and I highlight these attributes in my reporting along with the appropriate observations and documentation. In the case of the publication however, a case could be made that ANY aircraft could be considered a PCA given the criteria described along with their unclear ratings and it is one tool normally used to double count items that have been (or should have been) captured as part of the field visit and related appraisal process. The PCA criteria appears to be more of an effort to unjustifiably inflate or overvalue an aircraft more that representing it fairly - but how would the typical banker with no experience or background in aviation know this to be the case?
Mike Simmons is a frequent contributor to InsideBanking.net. Mike Simmons, President of Plane Data, Inc., has been a member of the National Aircraft Appraisers Association (NAAA) since 1992 and holds the rating of - - the highest rating offered by the NAAA. In addition to this rating, he is also an NAAA Qualified Buyer's Agent, an NAAA instructor and a member of the NAAA Ethics Board. He holds a Bachelor of Science Degree in Engineering from North Carolina State University. firstname.lastname@example.org