Aircraft appraisers use the market approach as one of the methods to determine the value of an aircraft. The market approach relies on the principle of comparing the subject aircraft to similar aircraft that have recently been sold in the market. This method is based on the economic principle of supply and demand in a competitive market.
The market approach reflects the real-world transactions that have occurred in the marketplace. By analyzing recent sales of comparable aircraft, appraisers can assess how the market values similar assets.
In the market approach, appraisers look for aircraft that are similar in terms of make, model, age, condition, and other relevant factors. This allows for a more accurate comparison and valuation.
The market approach is adaptable to different types of aircraft and market conditions. It can be used for a wide range of aircraft, from small general aviation planes to large commercial airliners.
Using recent and actual sales data provides transparency in the valuation process. It allows stakeholders to see how the appraiser arrived at the valuation by referencing real market transactions.
The market approach helps appraisers identify trends in the industry. For example, if there is an increasing demand for a certain type of aircraft, it may be reflected in higher market values for that category.
The market approach provides an objective benchmark for valuation. By comparing the subject aircraft to similar ones that have recently sold, appraisers can establish a fair market value.
While the market approach is valuable, it is often used in conjunction with other approaches, such as the cost approach (based on the cost of replacing or reproducing the aircraft) and the income approach (based on the income the aircraft is expected to generate). This approach is part of a comprehensive appraisal process to arrive at a well-rounded and justified aircraft value.
