Base Value vs. Market Value: Understanding the Distinction That Matters in Aircraft Appraisal
Why these two valuation concepts are not interchangeable, and how confusing them can lead to costly miscalculations.
In aircraft appraisal, two values come up more than any other: Base Value and Market Value. They are often used interchangeably in conversation, but they mean very different things. Getting them confused can lead to mispriced transactions and unrealistic return assumptions.
Here is what each one means, and why the difference matters.
What Is Market Value?
Market Value reflects what a willing buyer would pay a willing seller for an aircraft in the current market, right now, under current conditions. It accounts for everything happening in the real world at the time of the appraisal: surplus inventory, fuel prices, geopolitical disruptions, airline profitability, and financing availability.
Market Value is, by nature, a snapshot. It moves. An aircraft valued at $20 million today may be valued differently in 18 months if demand shifts or a new variant enters the market.
What Is Base Value?
Base Value is a longer-term, equilibrium concept. It represents what an aircraft would be worth in a stable, balanced market, where supply and demand are in reasonable equilibrium and no unusual external forces are distorting the market.
Base Value does not chase market cycles. It is designed to be more stable and is typically used as a reference point in debt underwriting and portfolio valuation where a conservative, cycle-neutral number is required.
Why Does This Distinction Matter in Practice?
Consider a lessor placing an aircraft during a period of very high demand, post-pandemic recovery for example. Market Value may be significantly above Base Value because demand is outpacing supply. A lender or lessor relying purely on Market Value in that environment may be overexposing themselves to downside risk when the cycle normalises.
“An owner who understands this distinction will not panic-sell an aircraft at cyclically depressed Market Value when the Base Value, and the long-term asset fundamentals, remain sound.
Conversely, in a distressed market, Market Value may fall well below Base Value. An owner who understands this distinction will not panic-sell an aircraft at cyclically depressed Market Value when the Base Value, and the long-term asset fundamentals, remain sound.
Which One Should You Use?
It depends on the purpose. Market Value is appropriate for active transactions: buying, selling, or re-leasing in the current market. Base Value is more appropriate for long-term financing decisions, insurance, and portfolio stress-testing.
In practice, a well-prepared appraisal report will state both, and a well-informed client will know which number to anchor on for which decision.
At Voler Haut Aviation, our appraisal work is conducted in line with IVS standards, with both values clearly defined and contextualised for the specific transaction or oversight requirement.
