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Making an Upgrade Decision

by David Wyndham 9. August 2017 09:53
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The owners of a turboprop were facing the possibility of significant avionics upgrades in the next few years. In addition to adding in ADS-B, they were considering a major upgrade to their avionics suite. They also had a good offer on a new aircraft that, when delivered, would have everything they were looking for, albeit at a higher initial cost.

The upgrade would add value to their current aircraft and might make it easier to sell.  What path was best for the owners? When does it pay to do the upgrade, and when doesn't it?

The FAA requires ADS-B to be installed by 2020 to allow aircraft to use the air navigation system. If not done, the aircraft is essentially no longer flyable in its current capacity. Avionics installers have been warning that there is not enough capacity to complete ADS-B installs in all the remaining aircraft before the deadline. With residual values already low for most models, an older, non-compliant aircraft in 2020 may be unsellable except for parts.

Some long range turbine aircraft may require even more avionics upgrades to operate globally, especially in Europe. These FANS requirements and similar also can add considerably to install. But, as with ADS-B, they won’t add value but just allow you to retain the value in the aircraft and keep it flyable in the future airspace.

When to Do the Upgrade

After keeping the aircraft compliant with air navigation standards, upgrades fall into two categories:  adding new safety features and adding new capabilities.   If you need the advantages of a new aircraft, such as more range, speed or cabin volume, but don’t want the acquisition expense, the upgrade path may work.

There are a number of avionic upgrades available from companies like Avidyne, Garmin, Honeywell, Rockwell-Collins and others. Third party specialists are also doing modifications that range from updated navigation gear to a full (glass) panel replacement. When looking at new systems, consider what the current variant of your aircraft (or closest relative) has for its avionic system. Done right, these systems enhance both safety and reliability.

Possibly you may seek to add performance, such as better fuel efficiency or range.  Companies like Aviation Partners, Raisbeck and Blackhawk have been quite popular for many years.  They, and others, have aerodynamic and engine upgrades that allow your current aircraft to fly faster, further, or both. Sierra Industries offers Williams engine upgrades for older Citations that add speed and range. 

In between refurbishment and new is remanufactured. Nextant Aerospace is remanufacturing older Beechjets into Nextant 400XTi's - complete with new engines, new avionics and a new interior. Nextant is being joined by an engine upgrade from Textron. Other companies offer engine modifications as well.

For the passenger cabin, interior specialists offer all sorts of options for in-flight entertainment and airborne Internet as well as new seat designs and modern materials. If you need "more" as in seats, payload or room, your only true alternative is acquiring a larger aircraft.

Considerations

Before you undertake such a major project, consider your current aircraft’s age. Older aircraft cost more to maintain than newer ones. Wear and tear items, aging aircraft issues, and engine overhauls all drive costs up. Your aircraft must be in excellent mechanical condition and essentially free of corrosion, otherwise don't consider the upgrades.  

Do the upgrade if it has value to you. If it has value in the market place, so much the better but do it primarily for you. Unique is great with art, not with aircraft. Stick with established programs with a successful track record. Do equipment upgrades that mirror the new models or closest equivalents. Those will tend to have the best impact on resale value and also maintenance supportability.

For example: upgrading the engines on a King Air C90 can run to over $700,000. Adding in a new avionic system can run to another $750,000 or so.

A stock 20-year old C90B sells for about $1 million.  Looking at today's market, its doubtful that the upgraded C90B can recoup 100% of the upgrade at resale. The engine upgrade will add to the aircraft’s value, but don't do it just to resell the King Air after the retrofit.  The avionics are great and add to the capability and situational awareness of the pilots.  

If you are planning to sell in the next few years, these major upgrades won’t pay a full return and you won’t enjoy them long enough to benefit. Best just to do the ADS-B and start shopping for a replacement. Budget carefully and talk to other operators who have done the same upgrades. Look at the tax considerations as these upgrades may need to be capitalized. Consider the cost of borrowing the funds needed to upgrade or replace.  As long as your current aircraft is in excellent mechanical condition and you plan to keep it for the next few years, the added utility and flexibility of the upgrade may add all the value you need.

The turboprop owner above elected to acquire the new aircraft and retain the current turboprop while adding just the ADS-B.

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David Wyndham | Maintenance



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