Aircraft Collateral Valuation for Lenders and Lessors

Know What Stands Behind the Loan

An aircraft loan is only as strong as the collateral behind it. Market value can shift with supply, maintenance status, damage history, and records quality, and the value a lender can actually recover in a liquidation may be well below fair market value.

Western Aviation provides independent aircraft collateral valuations for banks, finance companies, lessors, and credit teams. Our founder ran an aircraft finance branch for GE Capital Aircraft Financing, so our reports answer the questions credit committees actually ask.

Collateral Valuations Across the Life of the Loan

• Loan origination and underwriting
• Refinancing
• Annual or periodic portfolio monitoring
• Loan modifications and workouts
• Default, repossession, and asset recovery
• Lease returns and remarketing

Collateral Risk Factors We Review

• Maintenance status and upcoming major events that affect value
• Engine program enrollment and its effect on value
• Damage history and records gaps
• Market supply and remarketing time
• Aircraft location and condition (onsite appraisals)

How Maintenance Status Affects Collateral Value

Two aircraft of the same model can support very different loan amounts depending on where they are in their maintenance cycles. An aircraft that has just completed a major inspection or engine overhaul is worth more to a buyer than one with those events coming due, because the next owner will pay for them. In a default, that difference shows up directly in what the lender recovers.

Engine maintenance program enrollment matters for the same reason. An enrolled engine usually carries its program coverage to the next owner, while an engine that is not enrolled leaves the overhaul cost with whoever owns the aircraft when it comes due. A collateral valuation should state which applies, and how it affects each value reported.

Records, Location, and Recovery Risk

Collateral is only as recoverable as its paperwork and its location allow. Incomplete logbooks, undocumented repairs, or missing back-to-birth records can lower value and lengthen the time needed to remarket an aircraft. An aircraft based or operated outside the United States can add time and cost to recovery.

Western Aviation notes these factors in the report so the credit team sees not only a value, but the conditions that could affect whether that value can be realized.

What Credit Teams Receive

• The values your credit policy calls for: fair market value, orderly liquidation value, wholesale value, and residual value forecasts where requested
• Maintenance status and upcoming events, with their effect on each value
• Records and damage history findings
• Comparable sales and current market supply
• Notes on remarketing time and recovery risk
• A certified, USPAP-compliant report signed by David Fisher, ready for the credit file

Your Appraiser: David Fisher, ASA

David Fisher is an ASA Senior Accredited Appraiser who appraises both fixed-wing aircraft and helicopters. As an FAA A&P mechanic with Inspection Authorization, he reviews component status and records with a maintenance professional’s eye. He served as a U.S. Air Force crew chief, later worked as a branch manager for GE Capital Aircraft Financing, and has bought, sold, brokered, and appraised aircraft for more than 30 years, across more than 300 transactions.