How can you get a realistic valuation of your materials?
In the Aviation industry accurate valuation of aircraft parts and materials is essential for ensuring the cost efficiency, maintenance planning, and profitability. The Aircraft components involves complex pricing dynamics due to their material, market demand and condition. Valuation helps to make an informed decision when purchasing, selling, or maintaining aircraft, and it ensures compliance with industry standards.
Factors to consider while making valuation :
• Identify the Type of Material:
Different materials have different market values. The material’s supply and demand in the market will impact its price. For instance, materials like titanium, which are harder to source and process, typically have higher prices compared to more abundant materials like aluminium.
• Research Market Prices
Carbon fibre is increasingly popular in modern aircraft due to its strength-to-weight ratio, especially in models like the Boeing 787, where it makes up around 50% of the structure. This year , the industry size of carbon fibre is evaluated at USD 6.34 billion as per the Fortune Business Highlights and registering 11% CAGR during the forecast period 1.e 2024-2036.
Aluminium alloys remain a key material in aircraft due to their balance between strength and weight. Its current pricing fluctuates around $2,400 to $3,000 per metric ton, depending on the alloy and market conditions.
Titanium is used in critical aircraft components like landing gear and engine parts due to its corrosion resistance and high strength. As of 2023, titanium’s price was around $30 per kilogram but fluctuates based on purity and demand
• Varying prices based on Location
North America and Europe are the dominant regions for aerospace material production and consumption, with a strong focus on composites and aluminium alloys. In these regions, aircraft manufacturers push for higher usage of lightweight materials to improve fuel efficiency and reduce emissions
Asia-Pacific, particularly China and Japan, is seeing growth in both aerospace manufacturing and carbon fibre production, with increasing demand due to urbanisation and government investments.
• Using Professional Valuation Services
Professional services like Appraisers can measure an aircraft’s performance using cycles, landings, and total flight hours. International Society of Transport Aircraft Trading (ISTAT), National Aircraft Appraisers Association (NAAA) who specialise in aircraft and components certify valuations.
• Depreciation of the parts
Valuations are also based on the degree of wear and tear factor. As aircraft reach the end of their service life, materials may still hold value if they can be reused or repurposed, particularly with certifications proving their continued airworthiness. However, obsolescence due to newer materials or manufacturing processes can reduce value more than physical wear alone
• Cost-Based Valuation
Cost-based valuation uses the original purchase price or production cost of an asset as the foundation for determining its value. For example, if a company purchased a batch of carbon fibre for use in the production of an aircraft, the cost paid at the time of acquisition would serve as the baseline for evaluating the material’s value , of course by also including the factors like current market price value , changes in production efficiency, material depreciation and inflation and supply chain fluctuations.
• Supply and Demand
Materials that are harder to obtain or produce often see higher market prices due to their limited availability. For example, titanium is rare compared to aluminium, leading to higher costs because of its scarcity and the complexity of extraction and processing. This material is prized for its strength-to-weight ratio and corrosion resistance, making it essential for certain high-performance components like aircraft engines and landing gear
• Condition of the Aircraft parts
In aircraft parts valuation, the condition of the part significantly impacts its market value. Following are the conditions on different aircraft parts and their breakdown.
• AR (As Removed): Parts are sold as they were removed from the aircraft, without inspection. These have lower value due to uncertainty about functionality.
• ARGR (As Removed, Guaranteed Repairable): Parts are removed but guaranteed to be repairable. These are valued higher than AR parts but still include repair costs.
• SV (Serviceable): Inspected and tested parts that are ready for immediate use. These fetch a higher price because they eliminate the need for repairs.
• RPR (Repaired): Parts that have been repaired and restored to operational condition. Valued higher than AR/ARGR but lower than overhauled or new parts.
• OH (Overhauled): Fully restored to like-new condition, overhauled parts are the most valuable due to their reliability and extensive certification.
Hence a detail evaluation of the materials is crucial considering all of the above factors for accurately determining their value. At XS Aviation, we specialise in helping you evaluate your inventory with precision. Our expert team is equipped to assess the condition and market trends, ensuring that you get the best possible valuation for your aircraft parts. Whether you’re selling or managing your stock, we provide comprehensive support to maximise the value of your assets.
