At one time, the term “Artificial Intelligence” (AI) concerned me, as visions of Terminator and other movies showing how AI gone wrong can wreak havoc on human civilization played in my head. And make no mistake, it can—just like any other technology, such as nuclear energy. There’s always a yin and yang component to any science, as it can be used for good and bad purposes. So, let’s focus on what AI is and what it is not, specifically concerning aircraft evaluations.
Understanding AI in Aircraft Appraising
AI is an umbrella term encompassing a variety of strategies involving learning algorithms. For example, we’ve seen robots learning to walk on various surfaces, failing until they succeed. That set of learning algorithms is extremely complex, requiring decisions (meaning lines of code) to be executed in nanoseconds for the robot to navigate a given surface successfully.
This differs from a prosthetic arm that picks up brain waves to move like a regular arm and hand, or algorithms designed to develop new pharmaceuticals to combat viruses. These technologies are all considered AI because they analyze large volumes of information to identify patterns or solutions. This is the real benefit of AI tools. Used properly, learning algorithms can “see” patterns in large amounts of data that would take the typical human much longer, if ever, to visualize. So the question now becomes, how might this technology be used for aircraft evaluations, and why would we want to?
The Current State of Aircraft Value Information
To understand how AI would be useful in aircraft evaluations, it’s important to understand how public information regarding aircraft values is currently gathered and analyzed.
First, there is no public repository of aircraft selling prices, which is a fundamental limitation. The absence of this information makes factual data difficult, if not impossible, to come by. If someone does find an actual selling price, it raises a few more questions:
- Who provided this information?
- How accurate is it?
- What details about the aircraft are known or can be verified?
If all these details were publicly available, the analysis would be more straightforward, but generally, they are not. In most cases, these details are treated as confidential and gatekept by the people who have them.
Reliance on Secondary Resources
Because of the issue mentioned above, everyone must use secondary resources to value aircraft. For decades, this secondary resource came from subscribers of a given publication. At one time, that may have been adequate. Subscribers might have provided reasonably accurate information, and those using that information were attempting to provide useful data for public use. Over time, as avionics became more complex and sales data became scarce, some subscribers learned they could manipulate the published information by providing less-than-honest data.
The financial collapse in 2007/2008 is a good example of this manipulation. For those putting out information quarterly and taking information from subscribers, the aircraft market seemed very healthy and high.
For evaluators using other methods, the downturn had already started showing declining values. However, sellers and those financing aircraft didn’t want to see that, so they cherry-picked the information that gave them the results they wanted. In the end, that approach was a disaster for those who overpaid for the aircraft and defaulted on their loans, and for the banks that owned that paper. Even today, this data-gathering process continues to be flawed.
So, what is the alternative?
Leveraging AI for Better Analysis
There is a relationship between asking prices and selling prices. This is not a direct relationship like the actual selling price, but a relationship nonetheless. Every day, a number of aircraft come on and off the market, identifying specific pieces of equipment installed along with asking prices and time on the market. In other words, there is a massive amount of information that, if analyzed properly, could reveal key details useful to an evaluator.
Why is this important?
Current methods generally represent most aircraft as they were delivered. For aircraft less than 5-7 years old, that may be adequate. However, the typical General Aviation aircraft (including bizjets, turboprops, and pistons) is about 50 years old on average. The “Average Retail” figure typically used is tied to that specific configuration.
This relationship can provide misleading results.
For example, the Average Retail configuration usually presumes that every year/make/model of a given aircraft has the same number of “hours per year” usage. One observation I’ve made is that different year models generally have different levels of usage. As a result, aircraft equipped as standard with GPS equipment compared with those preceding it flew more and were upgraded as technology changed. The inability to understand an aircraft’s typical usage can impact its overall valuation. In a different example, avionics that are decades old are considered “the standard” for valuation purposes. The reality for that make and model may actually include WAAS GPS, ADS-B out, and other equipment not available when the aircraft was manufactured but are typical today—or even mandated by Federal law.
Therefore, the Average Retail number may be tied to a configuration that no longer exists. So, what does the Average Retail number really mean or what does it reference? Today, it is a number anchored to an incorrect configuration. Even though evaluators deal with the Average Retail number routinely, how do they make logical sense of a number that is anchored in this manner? Or, did this situation ever cross their minds?
The short answer is that most aircraft evaluators never make this logical connection nor do they leave their office to inspect the airframe or minimally review and research the aircraft’s logbooks. They tend to input a few unverified parameters into a web-based software tool that spits out a number they believe is accurate and credible, never realizing they double-counted equipment, ignored damage history, or misrepresented the subject aircraft.
The Need for Modern Evaluation Tools
The current system for evaluating aircraft is antiquated. It’s been showing its age for some time and isn’t getting any better. There is a massive amount of data that could be used and analyzed if only someone would capture it for analysis and develop the tools to do so.
This would be a massive undertaking in terms of software development and data collection compared to the current methodology. There would need to be a business justification for this effort as well. In other words, how quickly would this investment be returned, and how many more paid subscribers could be captured? For evaluators who have developed their expertise around using this antiquated information or who may be a non-profit entity, modernizing evaluation tools becomes cost-prohibitive and there is no incentive to do anything different.
The PAAO Has the Answer
The Professional Aircraft Appraisal Organization (PAAO) is a for-profit, data-driven Trade Organization with access to thousands of aircraft data points dating back to 2020. The PAAO teaches individuals to appraise aircraft using the latest tools and technologies. Action that others are unable or unwilling to take. This provides better, more accurate, and more realistic reporting of results for aircraft valuations, and the ability to discuss details where other methodologies cannot.
Recently, the PAAO integrated advanced AI tools into its data analysis process, enhancing the integrity of appraisals and refining the Average Expected Selling Price by factoring in the “typical” configuration for each specific year, make, and model.
This cutting-edge approach allows Plane Data, Inc., an associate of the PAAO, to deliver aircraft appraisal reports that are more realistic in their valuation methodologies. Unlike other organizations that may rely on outdated methods, Plane Data, Inc. leverages AI-driven insights to offer unparalleled clarity and depth in aircraft appraisals.
While the next blog post will explore these advancements in greater detail, rest assured that with these innovative tools, there’s no need to rely on obsolete information and analysis.
