News From the NAAA

From Brian Jacobson, Operations Director of the NAAA - written after AirVenture in Oshkosh, WI earlier in August: 

Another successful Oshkosh show is over.  The show attracted a large number of people many of whom approached the NAAA about the services we offer.  At first it seemed like there were more people looking to sell their airplanes, but as time went on we spoke to those who were looking to purchase new aircraft as well. 

Our job at the show is to represent our members and to hand out information to those who are seeking it.  This show was not unlike other years in that there were plenty of people looking for assistance.  I say it that way because we are all aware that there are a large number of piston engine airplanes for sale.  Those who indicated they were buyers were well aware that values on many piston engine aircraft have been declining.  Most of those felt that the aircraft they were interested in were getting to a pricing level they felt comfortable with.

The issue buyers have is that they no longer want to buy an airplane and have to put more money into upgrades.  So, the aircraft that sell quickly are those that have been very well maintained, have a low to mid-time engine, at least a Garmin 430, and good paint and interior. 

Many of those I spoke to didn’t seem to mind doing paint and interior, but they did not want to do an engine overhaul and avionics upgrade.  The problem is that many of the piston singles and twins that are out there have original avionics, and you’d be surprised at how many have high time and even run out engines.  Of course, the owners put them up for sale when it’s time to do the engine(s) because they don’t want to shell out the bucks either.

By now you have probably heard about Cessna’s plans to build their Light Sport Aircraft (LSA) ‘Skycatcher,’ and Cirrus’ announcement that they will build and sell an LSA as well.  In my opinion, Cessna had little choice but to build an LSA because traditionally the majority of their piston engine business has always come from those who learn to fly in their aircraft.  Without a new trainer they would have lost that edge.  In fact, Cirrus is probably thinking along the same lines.

In any case, having those aircraft built here in the states instead of having to wait for them to be built and shipped from overseas, as is now being done with many LSA aircraft, is going to have a positive effect on marketing.  Once those aircraft are placed into production you can expect to see good sales results.  At the show there was a rumor floating around that Cessna took 400 orders during the first two days.  A recent news report indicates that the company now has 720 orders for Skycatchers.

Strong hand needed now for FAA, aviation leaders say

From the Aircraft Owners and Pilot's Association (AOPA): 

General aviation and the airlines don’t agree on the FAA funding issue, but when it comes to choosing an FAA administrator, all of aviation is flying in formation.

Aviation leaders across the board have joined in a letter to President Bush, urging him to quickly appoint a new individual to run the FAA for five years when Marion Blakey’s term expires on September 13.

The leaders said that there is a “vital need to nominate a strong individual who can be confirmed as the next administrator of the Federal Aviation Administration. Our nation cannot afford a recess appointee as we face the time-critical challenge of modernizing our nation’s aviation infrastructure.”

More than a decade ago, AOPA lobbied for a five-year fixed term to get away from the revolving door of short-term leaders who were tied to the political process and never in office long enough to learn enough to truly run the agency. Blakey is the second FAA administrator to serve a full term.

“We need an FAA administrator who understands aviation from the grassroots to flight levels, who is a strong executive and a visionary leader,” said AOPA President Phil Boyer. “At this critical point, we cannot afford to drift off course with an interim hand on the controls.

“The president cannot allow this appointment to slide or be consumed by partisan politics.”

Eclipse Speaks On First Charter E500 Flight

From AVweb: 

Eclipse Aviation on Monday told AVweb that "we are excited to see the aircraft being used in the way we have always envisioned," referring to the first Part 135 charter flight of an Eclipse 500 last Friday. North American Jet Charter flew two passengers round trip from Chicago to Baltimore on one of the very light jets. Eclipse, which in 2005 won the Collier Trophy for "the greatest achievement in aeronautics or astronautics in America" for the small jet, congratulated North American Jet "for their historic first commercial flight using the Eclipse 500," adding that the charter operator "is the first of a large group of customers who will benefit from this great aircraft." The flight is the culmination of eight years of work by start-up Eclipse. North American Jet was the first to receive Part 135 approval for commercial use of the Eclipse 500, but Florida-based DayJet might not be that far behind since it plans to start on-demand, per-seat service with the VLJs later this week.

Report: Fatal Snowbird Crash Caused By Seatbelt

From Avweb:

A Snowbird pilot who was killed during a practice in Montana last May fell from his seat when his lap belt became unfastened during a roll, according to a preliminary report from the Canadian Air Force Directorate of Flight Safety. The Tutor CT-114 jet was rolling inverted for an inverted photo pass in a four-ship formation when the aircraft was seen to dip low, waver and depart the formation. Still inverted, the aircraft climbed and then rolled upright. Upon reaching a nearly wings-level attitude, at about 750 feet above ground level, the aircraft nosed over. The aircraft hit the ground at approximately 45 degrees nose down. The pilot, Capt. Shawn McCaughey, 31, a two-year veteran of the team, did not eject and was killed on impact. The investigation is continuing, focusing on how the lap belt became unfastened. Preventive measures taken to date include modifications to the pilot-restraint system, as well as enhanced training for aircrew and passengers. New procedures, as well as changes to the aircraft operating instructions, have been implemented to reduce the likelihood of a recurrence, according to the Flight Safety Directorate report.

Risk Management - Desktop Reporting or a Real Appraisal Report?

A Vice President from one of the larger national banks called me to appraise a piston twin that his customer was purchasing.  Normally the appraisal is completed within a few days but in this case, the Purchase Agreement was still being negotiated and the prepurchase inspection was being completed.  During the normal course of the assignment, the bank's Vice President wanted to discuss a few details and elected to add the client manager to the discussion.  One point that came up during our conversation was the use of a "desktop appraisal" and was there really a need to physically examine the aircraft and records. 

I explained that many of my competitors use "desktop appraisals" extensively or exclusively but these reports are based on very limited information (such as a sales brochure or the details from the selling broker) and this is an unbalanced view of the aircraft.  Knowing very little about this specific aircraft at the time I indicated that items such as missing log books and damage history can have a significant impact on the overall value of the aircraft and the bank should have an appraisal report that is fair and unbiased in order to make an informed lending decision.  During my explanation, I remembered the bank's client manager chuckling and I presumed that his belief was that there really was no difference between desk top evaluations and a certified appraisal report.  After all, they had a good relationship with their customer and the customer's pilot had indicated that the aircraft was worth the amount being paid.  In addition, the aircraft was already in the shop and all maintenance issues had been identified.  However, the bottom line was that the bank's Vice President wanted an on site examination of the aircraft because the bank was lending a larger than normal percentage.

I arrived at the airport and completed my physical examination of the subject aircraft.  I also talked with the maintenance manager who filled me in on what was found during their inspection as well as items they did not see.  The next step was to review the aircraft's maintenance records.  Right from the start, I knew something was wrong as the first log book was missing and in its place were copies of work orders.  Several entries later, there was an entry describing repairs for major damage history.  What was surprising about all of this was that the buyer's pilot had missed these details as had the maintenance facility.  It should also be noted that a typical "desktop appraisal" would also have missed these items either as log books are normally not reviewed and desk top reports presume that all log books are original and complete which is not always true.  Even if these entries had been caught by the pilot or the maintenance facility, these individuals were really in no position to provide an opinion of value.  In fact, the buyer's pilot later communicated that the major damage history had no real impact on the value from his perspective.  Of course this opinion was incorrect and cannot be supported by any market data.

Needless to say these two items impacted the aircraft's overall value quite a bit but not quite as much as you might think.  In the case of the missing log books, the work order copies did not meet the FAA's requirement for log book entries but several copies had the airframe total time (AFTT) recorded and the AFTT is one of the concerns with missing logs.  Since the airframe time could be traced to some degree, this lessened the impact to the value.  Overall, the initial negotiated price was about 15% higher than the final appraised value (it would have been closer to 20% without the work orders) meaning that the bank would have been lending to a limit outside of its normal policy.  Not that they shouldn't but at least the bank is now making an informed decision to do so.

The typical "desk top report" always has disclaimers that no one ever examined the aircraft or the log books - but the real issues are found through research of the aircraft's documents and records.  Sales brochures and statements from the seller cannot be relied upon to provide critical details and it is always left up to the buyer to verify the contents and condition of the aircraft in question.

When selecting an appraisal company for your next aircraft deal, make sure you rely on someone who will perform an on site examination of the aircraft and records.  Otherwise, the appraiser could be missing key details and the bank could be lending much more than the aircraft is worth.