Flight Simulator Valuation & Pricing - Evaluation & Appraisal...

By Alexander Schaffler With no comments

When purchasing flight simulators, your most pressing questions may be for example: “What is the price of a flight simulator? Will my asset have a reasonable residual value in the future? What do I have to do to keep simulator values constant? Do pre-buy considerations influence simulator values? What about technical aspects such as upgrades and qualifiability?”

In short, looking at the world of professional Flight Simulation, values will directly depend on the fidelity level, scope of operation and the regulatory rule as those have a very prominent influence on the future values of a flight simulator. But there is more to it and definitely there is more to valuation of Flight Simulator compared to the valuation of an aircraft. In my work, I often am contacted by aircraft appraisers, who do hard in valuating assets as they just have not enough experience with actual flight simulation and cost involved. Some assume you can transfer and register a simulator like an aircraft, but this is definitely not the case, especially when you cross into other regulatory systems. This requires the work of specialists in this field.

Just to give you an example: Once we had been called into appraising a Flight Simulator for a potential purchase. The device was not only in a desolate state when we inspected it, the maintenance crew was not up to speed with what their duties were and the best to come was that they had been throwing the Master QTG Document into the trash or could not find it. That detail de-valuated the asset completely, as this simulator under grandfather rights was so old, that a requalification was impossible to achieve. This would have meant a complete initial evaluation of the asset, thus making the project cost-inefficient.

Another customer approached us to ask for pricing for an old Full Flight Simulator we had advertised. He found the residual ridiculous and told me he would get an asset at 10% of our advertised price. But he did not know that relocation a FFS is not only a six-figure job, but also that his 30 year old asset was not qualifiable under the regulatory rule he wanted to use it. We think this project never happened and if it had then surely this would have meant burning some money for the customer.

So what should a simulator appraiser do for you to prevent surprises and additional costs which had been unaccounted for?

Well, first he should provide different ways of evaluating the asset(s)

The cost-efficient way of valuation/ appraising: for example a desktop appraisal with an initial order of magnitude and range for current market value & preliminary facts as base for decision-making and ensuring the basic parts of the simulator are available.
The detailed approach for pre-buy or sales considerations – A detailed appraisal/ inspection of Flight Simulator such as frame, instrumentation, avionics and all related systems (Software: Instructor Station, Flight Dynamics, Visual System, QTG , etc.).
A careful review of all related FSTD documentation, log books, and associated maintenance records to ensure the device was treated in the right way through its life-cycle.
An analysis of other relevant value data, for example on how the device was embedded in the Management System of the training facility.

Secondly, he should provide enough information, so the owner of the asset or the purchase of an asset:

obtains a professional opinion of the present fair market value on an FSTD.
obtains a professional opinion of the value on an FSTD to be refurbished or modified.
obtains a professional opinion of the value of an FSTD as a prudent safeguard against excessive tax assessments, capital gains and other taxes.
verifies damage claims resulting from fire, accidents and other disasters.
provides the basis for decision-making in the commitment of funds for FSTD acquisition (pre-buy inspection).
provides persuasive, independent evidence of the condition of an FSTD and its qualifiability in the regulatory rule targeted.
or the prospective purchaser in obtaining financing or insurance.
may assist a financial institution in substantiating the nature and value of the FSTD as it relates to collateral.
may assist a financial institution by supporting the loan portfolio for examination by the loan committee and/or bank examiner.
may distinguish a Flight Simulator from others that may be available or operated in the market.
has all information to reduce the time required to sell/ purchase a Flight Simulator.

What results should you expect from an appraiser ?

A determination of an exact or range of value based on experience, purchasing of new Full Flight Simulators, purchasing of refurbished Simulators, based on linear depreciation, average annual utilization, average life cycle of FFS and on Upgrades necessary.
He should obtain the following values for you:
- Residual Value
- Fair market value and future fair market value
- Liquidation value
- Diminished value
- Replacement value
- Reasonable purchase price
He should give you general considerations for or before purchase, whether there are costs to be expected with certain updates or the qualification in another regulatory rule.
He should provide you with a detailed report including photos, maintenance reports, etc.