Define the numerator

Policy should state whether LTV uses:

• Principal outstanding.
• Principal plus accrued interest.
• Funded exposure plus a commitment.
• Net exposure after controlled cash collateral.
• Facility exposure allocated across multiple aircraft.
• Cross-collateralized exposure.
• Protective advances or fees.

Reconcile the numerator to the bank’s authoritative loan system. Aircraft software should not become a competing loan-accounting ledger.

Define the denominator

For each value, store:

• Aircraft and manufacturer serial number.
• Value amount and currency.
• Effective date.
• Value premise: market, orderly liquidation, forced liquidation, or other.
• Method: appraisal, evaluation, desktop, index, model, or internal analysis.
• Provider and reviewer.
• Aircraft specification and utilization used.
• Maintenance and records assumptions.
• Adjustments.
• Approval and next-review date.

Avoid retaining only “$5.2 million.” The context determines whether that number is usable.

Serial-specific aircraft value

Two aircraft of the same model and year can differ materially because of:

• Engine and APU time and cycles.
• Heavy-check and landing-gear status.
• Program enrollment and account standing.
• Cabin, avionics, and connectivity.
• Damage and repair history.
• Modifications and configuration.
• Records completeness.
• Location and import or export status.
• Marketability and expected remarketing time.

Use the aircraft valuation framework to connect market evidence with the exact collateral, then run current and stressed assumptions through the aircraft valuation projection model.

Maintenance-adjusted value

A maintenance adjustment may reflect:

• Cost or benefit relative to market-normal engine status.
• Inspection or overhaul exposure.
• Life-limited-part remaining life.
• Program coverage or shortfall.
• Deferred maintenance.
• Known damage or repair.
• Configuration discrepancy.
• Missing or conflicting records.

Document the method and avoid double counting. A comparable sale price may already incorporate typical maintenance status; subtracting the full event again can understate value.

Scheduled and event-driven updates

Calendar triggers may be based on:

• Risk rating.
• Exposure.
• LTV.
• Aircraft type and market volatility.
• Value method.
• Policy or loan document.

Event triggers can include:

• Damage or incident.
• Major inspection or engine event.
• Program termination or arrears.
• Material utilization change.
• Aircraft modification.
• Registration, ownership, or jurisdiction change.
• Missing records discovered.
• Default, modification, or workout.
• Market disruption or model-specific concern.

An event alert should not automatically overwrite value. It should initiate review under policy.

Current, stressed, and recovery LTV

Maintain separate views:

Label each ratio clearly. Mixing premises makes portfolio aggregation misleading.

Stress scenarios

Test:

• Broad market decline.
• Model-specific value decline.
• Engine or APU event.
• Loss of program coverage.
• Damage with repair and downtime.
• Missing-record discovery.
• Forced-sale discount.
• Extended recovery timeline.
• Foreign jurisdiction and repositioning cost.

The stress is useful when assumptions are transparent and consistent. It is not a forecast of a guaranteed loss.

LTV thresholds and workflow

For each threshold:

• Define warning and breach level.
• Identify source policy or covenant.
• Specify review frequency.
• Assign owner.
• Define required evidence.
• Identify escalation and approval.
• Track cure, waiver, added collateral, paydown, or monitoring.
• Preserve closure evidence.

Do not let a new appraisal silently erase a prior LTV breach and its management response.

Portfolio reporting

Report:

• LTV distribution.
• Stressed LTV distribution.
• Exposure above policy thresholds.
• Value age and method.
• Missing or stale value.
• Value changes by period.
• Maintenance-adjusted exposure.
• Concentration by aircraft model and value provider.
• Exceptions and waivers.
• Loans relying on weak records or uncertain configuration.

Give users the ability to open the valuation, specification, and aircraft evidence behind the ratio.

Valuation governance

Controls should address:

• Independence from loan production where required by policy or law.
• Provider qualifications.
• Method selection.
• Review and challenge.
• Value-shopping prevention.
• Model validation where models are used.
• Data quality.
• Conflicts of interest.
• Documentation and retention.

The Federal Reserve’s appraisal guidance is specific to real-estate-related transactions, not aircraft. Its general control principles—credible methodology, independence, documentation, review, and timely information—are useful analogies but must not be misrepresented as the aircraft rule.

Sources and further reading

• OCC Lending and Loan Portfolio Risk Management
• Federal Reserve Interagency Appraisal and Evaluation Guidelines
• Radar aircraft valuation
• Radar aircraft collateral monitoring
• Radar aircraft records audit