An introduction to the valuation of aircraft Hangars-Part 2.

ABSTRACT

This article provides an overview of the general considerations for the valuation and analysis of aircraft hangars. Hangars are a special-use type of property with specific and unique considerations. The article is presented in two parts. This, part two, discusses the market analysis of airport characteristics; highest and best use; the impact of ground leases on value; and the cost, sales comparison, and income approaches to value. Aviation industry trends and characteristics are briefly summarized and a valuation case study illustrates the concepts. Part one, published in the Winter 2008 issue of The Appraisal Journal, discussed hangar characteristics, valuation considerations and property rights, the impact of fuel sales, and site considerations.

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This article is the second in a two-part series addressing the valuation of aircraft hangars. It focuses on the market analysis of airport characteristics, highest and best use, the impact of ground leases on value, and the three approaches to value. Part one of this article, which was published in the Winter 2008 issue of The Appraisal Journal, discusses hangar characteristics, valuation considerations and property rights, the impact of fuel sales, and site considerations.

Market Analysis of the Aviation Industry

Nationwide, the aviation industry is mature, with growth in various segments but decline in other segments. Since 9/11, prices, gross domestic product, and traffic volume have restabilized and grown. (1) The impact of 9/11 on the aviation industry, although pertinent, is beyond the purview of this article.

Short-term aviation industry trends are difficult to gauge, as industry statistics may be several years old before published. However, we do know that in 2000, air transportation generated $53.4 billion, or 0.5% of the U.S. gross domestic product. (2) In 2005, there were 609,325 pilots, a decrease from 733,000 pilots in 1970. (3) Over the years, the stock of aircraft and airports has consistently grown.