Rick Durden’s article about hidden damage and other sales lies (December 2022 Aviation Consumer) is one of the better articles I’ve read on the subject in some time, and I thought readers would benefit from more real-world advice on damage history.
After 30-plus years of appraising aircraft, I continue to be amazed at the buyers who never read through the aircraft’s logbooks or take any interest in the aircraft’s past maintenance and repair history. This is true for both piston and turbine buyers. In the case of “damage,” it is important to understand that what mechanics see in terms of the levels of damage and what aircraft appraisers see are different because FAA categories are safety and regulatory in nature, while appraiser categories are more for valuation based on observations and research.
I am not an A&P or IA and I will stand to be corrected but for mechanics, repairs are generally covered in the manufacturer’s structural repair manual. Therefore, issues that are generally considered “minor” (or not covered in the manual) could be considered “major”—and documented as such in the related FAA Form 337s, if they are even filed. Using only two categories of damage can lead many evaluators down an incorrect path when attempting to understand the related diminution of value—if any.
The Aviation Consumer article points out that part of the repair effort includes how the repair was addressed. To expand, I like to use a damaged wingtip as a good example here because there are several repair options. The existing wingtip could be repaired, which would carry some diminution of value, albeit superficial. The other option is a complete replacement of the wingtip with either a new or serviceable component. Presuming that there are no other airframe damage issues, a new wingtip would remove the damage and address the diminution of value question, just as was pointed out in the article. There are still questions about a component’s serviceable life, however.
For the purposes of this example, let’s say that there was no repair methodology for the wingtip in the manufacturer’s structural repair manual, or the wingtip was integral to the overall wing versus a separate bolt-on item. To repair this wingtip, the mechanic would most likely need to obtain direction from the manufacturer on the repair methodology and document the effort as a “major repair.”
Some aircraft evaluators will take the term “major repair” as the phrase to use in their analysis and assign an unreasonably high level of diminished value. I tend to see this type of analysis and reasoning in legal cases when a fairly minor damage event has a large dollar impact, when it ultimately doesn’t after the details are examined.
In contrast, PAAO certified aircraft appraisers have six levels of damage to consider (including ones with no impact to aircraft value). The level of damage and related financial impact is related to “what” was damaged, how it was repaired and whether the repair was obvious and detectable at the time of the field visit. One problem is many aircraft evaluators are untrained in how to perform an effective field visit (or how to review logbooks) and records. If the expectation is to rely on publications, then the typical evaluator will tend to use flat percentages to determine the level of diminished value. Here’s the problem with that approach.
I was involved in a legal case where the aircraft was in the shop for avionics work along with some routine inspections. At this point, I will simply say that the shop created a damage event that was fairly superficial (in my professional opinion) but it involved a composite part of the aircraft and the manufacturer had no repair process in their structural repair manual. The evaluator on the other side of the debate took this to be a major damage event and used a fairly large percentage value deduction, resulting in millions of dollars. In my report, I pointed out that the aircraft had just been retrofitted with hundreds of thousands of dollars’ worth of avionics equipment and firmware. This approach took a certain percentage off, or all that equipment (including the firmware) that hadn’t even been placed in service yet.
Then there were the engines that were on a maintenance plan. This analysis took that same percentage of value off those engines, which were not even involved in the event. It is examples like these that can provide misleading results and in day-to-day transactions kill a deal that may be otherwise fairly reasonable.
Finding a damage event is one thing and while the event may be important, what is more important is how it was repaired (in accordance with the manufacturer’s recommended practices or something else?) and were the repairs actually carried out? Functionally, the repaired area may be fine and the aircraft is certainly in an airworthy condition. However, the diminution of value is the financial penalty the market places on this aircraft due to the event. This isn’t so much a “buyer beware” environment as it is a “buyer be aware” one.
Contributor Mike Simmons is the president and chairman of the Professional Aircraft Appraisal Organization (PAAO) and an aircraft owner based in North Carolina.
