Do your aircraft borrowers maintain a diminution of value rider to their Hull Insurance policies?

//Do your aircraft borrowers maintain a diminution of value rider to their Hull Insurance policies?

Do your aircraft borrowers maintain a diminution of value rider to their Hull Insurance policies?

If (or when) your aircraft is damaged, appropriate hull insurance coverage will pay to physically restore the aircraft to a serviceable condition. If you intend to keep that aircraft for the duration of its useful life, repair is probably sufficient.

But what if you want or need to sell the aircraft and the repair work was documented in maintenance logbook entries or the damage was severe enough to require the filing of an FAA Form 337? What is the impact on the Market Value of that repaired damage when similar aircraft with no damage history are on the market at the same time

Recently a Gulfstream G-IVSP was undergoing a pre-sale 72 month inspection at a well-known MRO facility. The aircraft was up on jacks, and two experienced mechanics were working on the landing gear assemblies with the nose gear partly disassembled.

The tech working on the main gears entered the flight deck to test the gear operation without advising the tech working on the nose gear. When the landing gears were cycled up, the tech in the flight deck was surprised by a loud bang and the nose gear drag brace had penetrated and was now sticking through the forward bulkhead.

It was ultimately determined that the damage, even though completely repaired to Gulfstream Engineering specifications caused a $1.25 million reduction in the value of the G-IVSP given the large number like aircraft with no damage history that were on the market.

Appropriate aircraft insurance coverage is a complex, ever-changing matter and you should advise your clients to review their (and your) coverage with a knowledgeable broker on an annual basis or as circumstances and value change.

By |2017-01-23T10:56:58+00:00January 30th, 2015|insurance|0 Comments

About the Author:

Bob is co-founder and Managing Director of AvRisk. He has been engaged in aviation finance and consulting for more than 30 years. In addition to his own consulting practice, Bob was Vice President of Business Development for Jet Support Services Inc (JSSI) and held Director of Finance or Portfolio Management positions with Boeing Capital Corporation, Bombardier Aerospace, GMAC, CMI Corporation, Michigan National Leasing Corporation and the National Bank of Detroit. Bob earned a BS Degree in Accountancy at Western Michigan University and a MBA in Finance from the University of Detroit. He has been a Guest Lecturer at Embry-Riddle Aeronautical University and Michigan State University and an Instructor of Corporate Finance for Davenport University.

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