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Upgrading Older Aircraft

by David Wyndham 1. March 2005 00:00
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Upgrading an older aircraft can be one way of enhancing performance or functionality while delaying the cost of replacing the aircraft. Even so, the costs can be substantial and they may outweigh the benefits.

Upgrades are different from conversions. An upgrade enhances what is already there while a conversion results in major changes to the systems or design of the aircraft hopefully improving the aircraft substantially. Replacing the engines with newer, different engines such as Honeywell has done with the Falcon 20 and Falcon 50 would be a conversion. Adding an aft fuselage baggage locker to a Lear is an upgrade.

Upgrades can be divided into several different areas – airframe, interior cabin & comfort, avionics and other systems. Engine & propellers tend more to the conversion category. An airframe upgrade will include things such as winglets to increase climb or cruise performance or ventral fins to improve handling. Interior cabin & comfort upgrades include better soundproofing, added baggage compartments and enhanced cabin entertainment systems. Avionics upgrades include safety related ones such as terrain awareness and warning systems (TAWS) or GPS for navigation. Other systems would include air conditioning and de-icing systems (mostly piston models).

Some upgrades are actually mandated by law. Due to the cost and or complexity of some of these modifications, some operators of much older aircraft may elect not to upgrade and will sell their aircraft or "part it out" for the value of its spare parts.

The basic issue involved when evaluating whether to upgrade an older aircraft involves the cost versus the benefit. For example, a set of winglets for a Gulfstream II costs about $495,000. They save fuel and improve climb performance. The 7% fuel savings is about a $125 per hour savings. It would take nine to ten years' normal flying to earn back the cost of those winglets from fuel savings alone. However, with the improved fuel burns, you add range and with the enhanced climb performance and thus will be able to better utilize high altitude airports. For a GII operator who flies short distance trips from long runways at sea-level, the winglets may not be worth the expense. For a GII operator who flies long trips and needs the flexibility to get fly out of many different airports, the winglets are well worth evaluating.

Upgrades also can add value. They key issue there are (1) whether the aircraft is desirable by the buyer and (2) whether the upgrade is desirable by the buyer. While it is doubtful you will get every dollar back, you could see 30% to 90% of the money "back" in resale value depending on the age of the upgrade and its desirability.

Back to our GII with Winglets example. Winglets will add value to the GII. While neither Vref nor the Aircraft Bluebook Price Digest list an "adjust for winglets" price, those items are mentioned. A recent winglet installation to a GII will most definitely will add to the aircraft's value. According to AMSTAT's list of aircraft for sale, there are 42 GII currently for sale or lease – or 22% of the active fleet. Given that percentage, it is a buyer's market for the GII. The GII faces aging, RVSM and noise issues and that is part of why so many used GII's are for sale. Selling a GII with winglets may add some value, but given the number for sale, the added resale value may not be much but it may reduce the time it takes the aircraft to sell.

If an upgrade can pay for itself in added performance, comfort or functionality, then it is clearly worth the expense.


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