Aircraft / Equipment Appraisal and Valuation

What is an appraisal?

The act or process of developing a credible opinion of value; either an opinion of value for a given asset or pertaining to appraising and related functions such as appraisal practice or appraisal services.

The process begins when we fully understand and identify the appraisal problem at hand and concludes when we report the solution to the client.

Who is an appraiser?

An entity who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective.

Valuation Process

The valuation process comprises systematic and analytical procedures employed by appraising entity to provide solutions to its clients’ question(s) about value.

Asset Valuation

Our valuation of aviation businesses follows different approaches or a combination of them depending on the factors specific to the company. Whichever of three general approaches of asset, income or market adopted, the purpose of determining the appropriate value of your aviation business is always achieved. And we show you what steps to take to maximise the value of your business.

An asset approach is appropriate for airline and MRO businesses that are asset intensive – that is they own most of the assets in their operations. The income approach is applied to businesses that are capable of high asset turnover – the ability to turn assets into incomes. Our market approach is used when valuing aviation businesses of similar characteristics and the value may be higher or lower than peers.

Our valuation meets the needs of lenders and borrowers by the rigorous processes we pass through to establish fair market value of an aviation asset.

Our Appraisal and Valuation Service Focus

The growing requirement for adequate disclosures in financial reporting and standards is central in the act of achieving good corporate governance framework, therefore, our appraisal and valuation solutions come readily to meet such standards.

We have also developed solutions that are available to support the processes required during business combinations, when adjusting for impairments, fresh start accounting / bankruptcy, tax, asset depreciation analysis, foreign jurisdictional needs, estate and gift, lending / financing, insurance and loss settlement, litigation and specific legal purposes. Etc.

Both the US GAAP and the IFRS have some reporting requirements, with values deduced and reported by a competent independent appraisal entity. The need for an adequate disclosure is an essential part of good accounting practice. In supporting different categories of entities with our robust appraisal and valuation solutions, we demonstrate the highest level of ethical standard and we are firm on remaining as a disinterested third party/ entity that provides credible opinion of value to asset owners, third parties, and governmental agencies.

- Financial Institutions

With respect to asset based lending, the collateral that is pledged by the borrower must be professionally appraised. This follows some set of strict rules which usually govern the amount that may be borrowed under the credit terms, expressed as a percentage sum, duly stipulated, and which usually may not exceed a specified percentage of the appraised value. At specific instances, lending institution may allow a credit facility to be based on some type of market value premise e.g. cash flow-based financing.

To protect the lending institution and to ensure a full recovery of the credit facility in the event of default, the appraised value is often, though not necessarily, based on a Liquidation Value premise‐ The recoverable sum from the distress sale of the assets being pledged to guarantee such a credit facility.

- Insurance & Loss Settlement

The determination of an insurable value is a common purpose for which an appraisal task is undertaken. Insurance appraisals are required to establish a value for coverage, which indemnifies the insured against specified losses. The insurable value remains a critical concern to owners, lessors, lessees, insurers, agents, financing entities, and brokers, and because many insurance policies covering commercial machinery and equipment include a coinsurance clause, therefore, a quality appraisal conducted by a reputable entity such as ours is essential to ensuring financial recovery in case of loss.

Either appraisal done for an insurance loss settlement or risk management asset insurance has a very special purpose in ensuring that asset values are in compliance with insurance policy requirements.

- Aircraft & Engine Assets Planning

Quality management of a given asset is of great importance to the owners of such assets. Management or owners may want to determine the economic worth of their assets and businesses by engaging our professional service team, who will then conduct extensive market research, deploy various analytical tools and hypothetical assumptions as the basis for analysis in order to obtain a credible opinion of value. The value premises would depend on the client’s objectives such as the determination of net-worth, intended sale of a particular asset, purchase of assets, and dissolution of corporations, whether at a partnership level, fractional ownership, or corporations. These are often carried out based on a fair market value basis towards establishing an equitable distribution to partners or stakeholders commensurately on monetary values.

COPTERJET Appraisal and Valuation Model:

The effect of physical depreciation and economic forces on any asset is critical to value at any given time, therefore, the systematic processes required in correctly appraising aviation assets (aircrafts, components & Life limited parts- LLPs, engines, associated equipment. Etc.) are quite extensive. Ranging from the determination of the fair market value of a given asset to the estimation of the cost of: Replacement of an existing asset by purchase or production of an equivalent property, or reproduction of an existing property by purchase or production of an identical property is a professionally daunting task.

Our understanding of the economic forces that contribute to the prevailing value of any asset enables us to carefully determine and extract the non‐monetary benefits or characteristics that contribute to value (the rendering of judgments as to age, remaining life, condition, quality or authenticity of physical property), and economic obsolescence. In any appraisal assignment we undertake, our goal in the valuation process is to produce a well‐supported opinion of value that shows that we have carefully considered all factors that affect the prevailing value of the asset being appraised.

Our value extraction models are extensively built around the following areas:

Forecast or the extraction of the earning power of the asset with the application of the Required Rate of Returns -RRR
Comparative Sales Model with comprehensive value adjustments
Cost Approach using a Tri-dimensional Depreciation Analysis (Physical deterioration, Functional obsolescence, and Economic obsolescence)

Concepts of Age / Life Applicability

Economic Useful Life (EUL) is the estimated period of time over which it is anticipated an asset may be profitably used for the purpose for which it was intended. This time span may be limited by changing factors such as functional/economic obsolescence, and physical age.
Normal Useful (physical) Life (NUL) is the life, usually expressed in terms of years that an asset will be used before it completely deteriorates to an unusable condition or is retired from service. NUL is derived from mortality data and the study of specific assets under actual operating conditions.
Estimated Remaining (physical) Useful Life (RUL) is the period over which an asset or groups of assets will remain in use before deteriorating to an unusable condition.
Effective Age (EA) is the estimated age of an asset in comparison with a new asset of like kind and often calculated by deducting the remaining useful life of an asset from the normal useful life- It is therefore the age indicated by the actual condition of an asset.
Chronological Age (CA) is the number of years elapsed since an item of property was originally built.

Appraisal and Valuation Service Value Proposition

A credible process to determine the fair market value of an asset, appropriate for diminution and other economic factors is critical. In achieving this painstaking task, an extensive market research, proven methodologies and approaches, application of knowledge, experience and sound judgment, backed by different sets of analytical tools and systematic processes are often employed by our team towards achieving a credible results at all times.

Whether to meet pre-purchase / pre-acquisition needs or asset leasing processes (pre, during, exit), including a quest to achieve correct financing road-map and asset tracking, the deployment of a reputable professional entity to achieve any of these needs is vital. Copterjet maintains a compelling brand reputation and leading competencies in achieving any appraisal and valuation assignment anywhere in the world with our strategic presences in six (6) continents.