Latest / VREF | The Truth About the Aviation Market / The $110,000 Upgrade That Could Tank Your Aircraft’s Value | EP 46
Transcript
- Addison: For the first time in about 60 years, you can buy a genuinely brand new aircraft engine, new design, not a rebuild, it's not something that's been refreshed, it's not a version or a derivative of something from the Eisenhower administration. It's new, it's clean sheet, it even burns jet fuel, it has no spark plugs to fall, it has no magnetos to fail, it has no mixture to lean, it doesn't even have a carburetor to ice up. By almost every measure. An engineer would put on a whiteboard. It is better than whatever is bolted on to the front of your airplane right now. And I'm going to spend the next half hour telling you why that newer, better engine might make your airplane worth less. At least for a while, not more. Less. If that sounds backwards to you, good. That means you're going to learn something today that almost nobody bothers to tell owners until it's already cost them. Once you see it, you will never again confuse a better aircraft with a bigger number. Welcome back to the Truth About the Market. I am your host, Jason Zilberbrand. I'm president of VREF. I've appraised nearly every type of aircraft out there. My clients range from private owners to lenders, banks, insurance companies, operators you've heard of, major Fortune 500 companies, law firms, government agencies, including the FAA. And I've owned aircraft, operated aircraft, I bought them, I've sold them, I financed them, and I have spent decades watching how this market behaves when conditions change. So when I talk about the aircraft market, it's not theory, it's definitely not social media commentary, and it's not some scraped internet data wrapped in a chart. But it is real-world transactional experience. And this podcast also has no sponsors, there's no advertisers, there's no outflow outside influence. Because nobody pays for the opinions here, nobody dictates my conclusions, because aviation is a capital-intensive market, and the market punishes misinformation every single time. So here's the news that makes today possible. Company called Delta Hawk out of Racine, Wisconsin, earned an FAA type certificate for a brand new jet-fueled diesel engine. The first clean sheet piston aircraft engine to get certified in over 60 years. And as of this recording, They're actually delivering them. And there's a two-year wait list. So this isn't a thought experiment anymore. This is a new engine. It's got a new price tag and it's going into airplanes you recognize. But this episode is not really an engine review because I'm not a mechanic. And you don't need me to read you a spec sheet. This episode is about confusion, a specific, expensive confusion between two things that look identical and are not. How a good piece of hardware like an engine and what it's worth to the market. And those two things are different. The Delta Hawk just happens to be the cleanest example to come along in decades. So I'm going to use it. Real numbers, no fluff. So let's get into it. So let me give it to you accurately because most of what gets repeated about this engine is half-right. It's got four cylinders, it's a two-stroke, it's a diesel, it's an inverted V and it runs on Jet A. It can also run on JP8 and diesel fuel. It's turbocharged and it's supercharged, both of them. And it's liquid cooled and it's direct drive and it's got a single power lever. It means no plugs, no mags, no mixture, no carb heat. You push it up and you fly. The certified model is called the DHK 180. The 180 stands for 180 horsepower. There are two bigger versions coming. A 200 horsepower and a 235 horsepower model. And here's a clever bit. All three are the same physical size and the same weight. You buy the same package and you can dial up the power to where you want it. Now let's talk about the four numbers that actually matter for what we're talking about today. The first one, weight. At about 357 pounds dry, that's heavy for its class. But we gotta be fair here. That number already includes accessories like the turbocharger, the supercharger, and a cooling system. And if you look at 180 horsepower like homing, yes, it's roughly 270 to 300 pounds, but you haven't added any of that stuff yet. Two, altitude. Critical altitude is north of 17,000 feet. That's the real party trick here, folks. It keeps making rated power up where a normally aspirated engine is starving. Three, it's life. Delta Hawk points to roughly 3,000 hours of design life. Listen to that. It's a design life. There is no official FAA blessed time between overhauls yet. Primarily because it's a replacement, and we'll get into that later. But what you do is you fly it away and it comes back. 4. Price. As of this taping, the complete DHK-180 package starts at about $110,000. Of course, that's subject to change. But that's the number on the table right now. And there's no numbers yet for the 200 and 235 horsepower variants yet. But let's compare that to the V ref value of a complete Lycoming IO360 package. That's going to set you back roughly $45,000 to $55,000, depending on the build and the aircraft you're putting it on. And you start to see the picture. But it's real, it's not vaporware. They do have a type certificate in hand. Companies chasing approvals for the 172, the 182. They've got a Cirrus SR20 flying as a testbed, and they're building experimental packages for the RV-10, the R V14, and the Bearhawk. And these are airplanes you know. I want to be fair to this engine before I get to the part that costs you, because the appeal is very real. I get a lot of calls. I've been asked by a bunch of folks to do this episode. So let's start with fuel because it's the whole ball game, people. It burns Jet A. It's cheaper than 100 low lead in a lot of places. And it's available almost everywhere on Earth. And and I think this is really important. I've talked about it in prior podcasts. It's not sitting under a regulatory death sentence. Because let's be honest, the leaded fuel in your engine that it drinks today, the FAA put out a plan to get it out of Avgas by January of twenty six. And that's the industry's Eagle program. And their aim is to end 100 low lead by the end of 2030. Say what you want, aggressive, it's never gonna happen. It doesn't matter. An engine that never touched leaded fuel, it just walks past this entire problem. And then you got the high altitude and the efficiency. See, diesel diesel for fuel burns turbo class performance way up high. So there's no hand jungling of a mixture and a turbo at the same time. And for all of you people that are flying in the mountain regions. And hot and high fields for anybody whose mission lives where the air is thin, it punishes a normal engine. That's a real capability. It stands out. And the simplicity. One lever. A whole shelf of ways for a pilot to mishandle an engine completely gone. For the right owner, flying the right mission, a lot of hours a year. This is a seriously attractive package, and I mean that sincerely. Now, let me tell you why none of that is the same thing as value. Well, three of them, and I'm gonna be honest about all three. First, the weight. Diesels are heavy. High compression demands a stout engine. That's just physics. Yes, the 357 pounds bundles the turbo and its cooling systems. It's still real mass people, and it's out on your nose. And that's a useful load issue and the center of gravity conversation. It's not just a footnote to a lot of people. Second, the spread. The financial spread between $110,000 compared to $45,000 to $55,000. You're roughly doubling your engine cost up front, and betting that cheap fuel and efficiency clawed back over many hundreds of hours. For a high time operator, that bet can pay for itself. For the owner flying 50 hours a year, it's a long, long road back to break even, guys. Third, And this is the one that hits value the hardest. It's unproven. Okay, it's certified, yes, and that is a genuine milestone. My hat's off to him. I like these guys, but deliveries are just starting. There is no deep field history. We've got no TBO. In fact, what they're calling it now is a TBR. It's a time between replacement. Because what you have to do with the end of its useful life is basically get rid of it and replace it. And there's thin data on what it's really going to cost to keep these things running across a full life. What are the parts pipelines? How many mechanics in the country have ever laid hands on one? You have limitations as to who can work on it. And, and I think this is the most important part, because aviators have really good long-term memory. The market remembers what came before. And I have to say it out loud. Aviation diesels have been a graveyard in our industry. Thalart, the diesel that powered a chunk of the Diamond Fleet went bankrupt and left owners completely stranded. Continental and Austro eventually steadied that line. Textron actually certified a diesel, if you remember, called the Skyhawk, the JTA, and then what did they do? They canceled it a year later. So none of that has me rooting against the Delta Hawk, but I'm telling you the exact memory the market brings to the table when it sees a new diesel engine. And here's the heart of it. The mistake almost every Everybody makes, and it's really not a dumb person mistake. I see smart owners make it constantly. It's assuming that a better engine is automatically more valuable. That the quality of the machine and the worth of the asset move together. Well, I got news for you, they don't, and they are two different measurements, and only one of them shows up in your bank account. See, quality is what the engine can do, value is what the next buyer will trust it to do and pay for. Those are very different numbers and the gap between them is where owners get hurt. Watch what actually happens when a buyer looks at a fresh, healthy engine on a normal airplane. He does not think wonderful I'll pay more. He thinks good, I don't have an engine bill hanging over me. That's the whole transaction in his head. So here's the line I want you to keep in your head. A fresh engine? Well, it depends. Does it add value? It removes a lot of excuses, and does it? I do think a run out engine wrecks an offer and kills the deal. That's where the real dollars move. On the downside, and then if you have a fresh one, right, it really brings the aircraft back to a no excuses, no discount type of a situation. It erases the penalty. But does it stack a bonus on top? Maybe, maybe not. It really comes down to the market. It comes down to the aircraft you're dealing with. It comes down to How long it takes to get these engines worked on and overhauled and returned to service, the distance between what owners spend on engines and what they get back at a sale is one of the most dependable letdowns in this entire business because there is no rule. I will tell you, according to my data and what I see every day, at the time of resale, people do tend to recover their full cost of an overhaul if it just occurred. Because the amount of time it takes, you could be looking at six months waiting for a new engine to come back today. There's real value, but it starts to decay. And as time goes by, that fresh overhaul becomes expected maintenance. And I think that's what you need to take out of this. Take all of it. Add the words new and unproven. You've just handed the buyer a second or he stacked on the first. Not only is this engine healthy, but do I understand it? Can my shop service it? Will my mechanic be able to repair it? Will anyone insure it? Who am I going to sell it to? Every one of those is a friction point. And friction does not show up as excitement at the closing table. It shows up as money off the asking price, which produces the thing that sounds insane and is true. In the near term, on the used market, the better, more advanced engine can make an airplane much harder to sell, not easier. A smaller pool of buyers who understand it means weaker pricing, not stronger. Being first in line, it can actually cost you. An airplane engine may be the only thing I know of where the early adopter pays a premium and then takes a discount for the privilege. You'll notice I'm not talking about getting an overhaul in a 320 or an IO550. We're talking about a brand new motor. So to be fair to the other side, if Delta Hawk proves out, and I do think they're going to, reliability, parts on the shelf, a published TBR, insurers who get comfortable, the whole equation is going to flip. And then it burns cheap Jedi, it's immune to 2030 lead phase out, it is certified, it is supported, it becomes a genuine premium. Maybe. It's built in the United States, I'll say that's a big deal. But that's a bet on the ecosystem growing up. It's not a check. The market writes you the day the engine gets installed. And this is the exact moment the obvious thing needs saying because it's the entire reason V ref exists. If you are thinking about a major piece of hardware, like getting a new engine, Or maybe a new avionics panel. Anything where you're about to spend big money and quietly assume you'll get it back, find out what your specific aircraft is actually worth first. Not a broker's estimate with respect to the good ones. Not a number pulled off a listing site and dressed up as analysis. An actual defensible, independent appraisal on your airplane, with your logs reviewed, with your specific equipment. From people who do nothing else but value airplanes. That's the whole job I do. That's what VREF does. Get the value before you spend the money. It literally is the cheapest insurance you will ever buy on the most dis expensive decision you will ever make. So none of this is new behavior. We've watched engine and power plant upgrades for decades in this industry. We've seen fuel STCs come and go, we've seen conversions, re-engine programs, and the pattern. barely changes. The modification helps the airplane do its job, and the resale recovery comes back partially, sometimes healthy, sometimes it doesn't, but it's almost never full sticker. The diesel chapter just makes the lesson louder. When thalar when under owners learn something permanent, that the value under an airplane evaporates the moment the company behind the engine does as well, which gives us the real takeaway. And it's not that diesels are bad. It's this. Resale doesn't follow the better engine. It follows the bigger part shelf. So the value story for the Delta Hawk or any new engine gets written less by the machine and more by the company building the world around it. They gotta build parts and stock. They gotta get shops trained. They have to actually have hours getting accumulated in the field. Build that. And the value will follow. Skip it, and you're Thal Hard. As the person who has to put a defensible number on these airframes, that network is a thing I watch, not the horsepower. So let's pull it together. A better engine is not automatically a more valuable aircraft. New is not automatically worth more. The quality of the hardware and the worth of the asset are two separate measurements. And the market only ever pays you on the second one. And here's the deeper cut, the part that should change how you read every upgrade pitch from right now. Going forward, there are two completely different questions hiding inside any big spend on an airplane. One, will this make the plane better for me? To fly, to own? Two, will the next buyer pay me back for it? Those are not the same question. And the owners who get burned are the ones who think they're answering the first while quietly betting their wallet on the second. So decide on purpose. Re engine, upgrade, modernize because it makes the airplane better for your mission and the years that you're going to own the aircraft. Do that, and the resale is irrelevant. You already won. But spend it expecting the market to reimburse you a closing. And you've made a bet that the market never agreed to. Which is the one thing I'll ask of you, and then I'll let you go. If you're anywhere near one of those moves, well, re engine. A big upgrade, buying an airplane, carrying new or unusual equipment, or selling one you poured money into, have the conversation before you commit, not after. Almost everyone reaches me after. They call me after the wire went out, after the installation, after the airplane sat. There's a ceiling on what anyone can do after the fact. The entire value is on the front end, while the decision is in front of you. That's what V ref is for. Not to sell you anything. You heard the intro. Nobody pays for the opinions on this show, but if you want a clear, independent, defensible read on what your airplane is actually worth and what that shiny new engine will and won't do to the number, that is literally my job. Reach out while it can still change the outcome. So let me bring it home. There is finally a new engine after 60 some odd years, a real one certified. It's clever. It's drinking the fuel of the next 20 years instead of the last 60. For the right airplane, the right owner. It may genuinely be the better choice. And I hope it succeeds because this industry needs new ideas that actually reach the field and it's made in the USA. But better is an engineering word and worth is a market word. And they do not mean the same thing. The market doesn't pay for what a machine can do. It pays for what it trusts, what it can fix, what it can sell again. So upgrade for the flying. Let the resale be a surprise you didn't need. Never plan you leaned on. See, this is the truth about the market. And that's the truth here. The market does not care how advanced your motor is. It settles up on its own terms and what the next buyer will actually trust and actually pay you back for. And it has no patience for the difference between being impressive and valuable. So, one quick thing before the close, and I'll tell you exactly why I'm asking. There are no ads on this show. We have no sponsors, you know that. Nobody's paying to push it in front of new listeners, and that's on purpose. It's the whole reason you can trust what you just heard. The trade-off is that this podcast only spreads one way by people like you handing it to other people. So if any of this was useful, any of it at all, do the three things that actually move it. Follow or subscribe where you're listening so the next one finds you. Leave me a quick rating. Send this episode to the one owner you know who's circling a big upgrade and assuming that they'll get it back. They won't. Thank you for the spec sheet, though thank you for this. That's the ask. And here's the close. This podcast exists for one reason. To analyze aircraft as capital assets without brokerage spin, without the manufacturer narrative. And remember, when you need accurate, defensible, and data-driven aircraft values, there's only one name in the industry to trust, that's v ref. Visit vref dot com to get started today. The market is moving, folks. It's just not moving where you're looking. I'm Jason Zilberbrand, and this is the truth about the market. Until next time, fly safe and stay smart.