Measuring ‘Cost’ versus ‘Value’ of a Flight Panel Retrofit

Value is a way of expressing the worth of something, and although traditionally associated with monetary affairs, can be expressed in many other ways. This includes when value is applied to avionics upgrades in the cockpit of your business aircraft.

The measure of value for the same item or experience can be low for one person and yet high for another, because value is subjective, and associated with context.

We all assume that we can make the best value decisions, and sometimes, to avoid losing face, we will argue against our better judgment.

To gravitate toward effective value decisions, we should do our due diligence looking at value across the full spectrum of any project we wish to start, including cockpit retrofits. This implies measuring value in several different areas. For aircraft, and options for cockpit upgrades, there are the following value associations to consider:

• Safety
• Flight Operation
• Cockpit Ergonomics
• Budget
• Return on Investment (ROI)
• Bundling
• Resale
• Extended life
• Obsolescence & Futureproofing
• Level of Integration

The cockpit is the engine house of the aircraft where, over the cabin, ergonomics replaces comfort and flight operations replace office/home experience. Safety, on the other hand, will always rate as the priority for any part of the aircraft.

When you first consider an upgrade, cost naturally comes to mind. While many flight departments will place cost on one side of a scale and everything else on the other, it is never that simple. As many a sales manager would say “it depends”.

For this article, we’re going to avoid the murky maze of budget numbers themselves, instead focusing on the factors that determine them. Cost is a relative business, and facilities that upgrade aircraft have their own way of determining them, based on margin expectations, available options, labor hours and bundling projects. Bundling can tip the value scale very quickly if the impact of bundling a cockpit upgrade with an engine or airframe event leads to an overall reduction in cost.

Different Upgrade Methods

Cockpit changes are designed, integrated, and certified in different ways which can dramatically affect the ‘cost versus value’ measurement. For example, if the upgrade is provided from the aircraft or avionics Original Equipment Manufacturer (OEM), as a Service Bulletin (or Aircraft Service Change) it’s likely – but not guaranteed – that it will be ‘as represented’, and the quoted price will be the billed amount.

It is important to check that the ‘package’ (material and paperwork) includes your aircraft serial number, and that a previous owner (or you) has not modified your aircraft via a third-party since delivery.

If the upgrade is based on a Supplemental Type Certificate (STC), it’s possible there will be several caveats and variables to consider – any one of which could lead to a costly STC Amendment, over and above the cost to use the existing STC.

If the STC is based on an Approved Model List (AML), it is designed and approved to cover different models of aircraft and should include your aircraft make/model.

For some models of aircraft there may be several STCs available for a similar avionics upgrade. Each will have a different applicant owner, and some may be available for a fee, for use by companies who are not the applicant.

As you shop around for the best value STC, make sure the discussion includes how well each STC version fits your serial number, based on current equipage and the hardware/software status of that equipage. You may find a lower-cost STC, but Amendments could take the delivery price way beyond expectation.

Some Core Upgrade Value Measures

Some of the upgrade values themselves, include:

• Safer operations
• The ability to undertake new flight procedures
• A positive return on investment
• An increase in the Aircraft Bluebook/VREF value
• Improved aircraft and equipment reliability
• Reduction in operating costs
• Reduced downtime for continued airworthiness
• Improved odds of an aircraft resale
• How the upgrade fits with the market mood

Timing is everything and advice given this month, or this year, may be out of sync with the reality later. For example, understanding the market mood for your aircraft sector is relevant to decision making.

In 2022, the demand for pre-flown aircraft is high and the availability low. However, at any point in time, there may be more light jets and turboprops available than large cabin aircraft. 

Proportionately, spending a significant slice of your budget on an upgrade could have a very different ROI and resale value for different aircraft sectors, based on the demand in the marketplace.

Spending some time studying aircraft OEM deliveries and available pre-flown aircraft of similar size and performance to your own, along with price escalation or decline, could reveal useful data to assist in your overall decision process.

Some upgrade values are obvious and others not so. Common sales themes such as increased safety, ability to fly new procedures and improved reliability are assumed in an upgrade. Others, centered on aircraft value, operating costs and reduction in downtime, are subjective.

A quick guide to filter through those subtle upgrade values is to obtain data on similar aircraft valuations, equipage and pricing, through AMSTAT, VREF or JETNET. These are subscription aircraft intelligence services and are used frequently by brokers. Engaging your preferred or a new broker to tease out the subtle information may be very helpful, even if you are not currently trading your aircraft.

Brokers are very smart on the market mood and their consultant aircraft specialists, with expertise on the technical aspects of each aircraft model, can steer you in a sensible direction. By reviewing comparison statistics, it is possible to figure out how a retrofit impacts aircraft valuation, resale potential and even savings in continued airworthiness (maintenance) & downtime.

If the price of your aircraft model is declining in the marketplace, and an upgrade of your cockpit is going to increase the percentage against the total aircraft resale value, then your decision should factor in how you are likely to recover your investment (ROI).

Sometimes an upgrade is a necessity, tipping the value scale with ‘required’ as a non-variable. When this occurs, there will be a tendency to rush toward the most economical upgrade option, perhaps motivated by a limited budget, a time crunch or simply cash flow at the corporate level.

While understandable, rushing is the worst way to proceed. This is a time to reflect on the right decision by seeking advice, shop around for choices and always keeping the aircraft resale potential in the back of your mind, even if you intend to own the aircraft forever.

Examples of meeting necessity are obsolescence of existing avionics, mandates such as ADS-B Out, significant recurring repair costs and changes to where and how you operate the aircraft.

While being forced to upgrade a singular product may be straightforward, upgrading a cockpit is not. Here is what you should avoid:

• Turning your aircraft into a ‘project’ because you were in a hurry and due diligence was not completed.
• Third party integration products, providing analog to digital conversion in older aircraft platforms, that could be seen as a risk by a future buyer and particularly when it comes to international support. Examples of these can be found when upgrading to a glass cockpit but retaining analog controls or legacy remote ‘radios’.
• A cluttered cockpit appearance with kludged components. The current market mood, due to supply limitations, is “if I cannot get a new or a recent pre-flown aircraft, I at least want the aircraft I buy to look and feel like it is new or recent”. While mostly an exterior and cabin experience, the desire and expectation extend to an uncluttered cockpit.

These are value related considerations to weigh against the downward pressure of saving on costs. The result of hurried decisions may be favorable in the short term and disastrous later, when least expected.

In Part 2, we’ll continue our discussion with a look at the cost and value of specific equipment in a flight panel retrofit. Read it here.

Read more articles on Avionics for Business Aviation