Aircraft improvement levels are preserved for conversion that doesn't require max-starred plane. Consider improving your planes before doing conversion quests, as post-conversion planes either have higher improvement cost or currently cannot be improved.
Aircraft Conversion refers to a series of (usually) one-time quests that allows the admiral to upgrade the planes of the famed air groups. In general, these quests requires the player to scrap certain planes, usually the aircraft that the air group are transferred to.
The Skilled Crew Members are fairies that are awarded as an inventory item which is required for quests that converts certain plane into Skilled versions. The conversion is permanent and one of the crew members will be deducted from the inventory for each conversion.
All Aircraft Conversion Quests requires the converting aircraft to be unlocked. Additionally, all the required planes should be scrapped one at a time.
The Aircraft Conversion Quests for Egusa and Tomonaga Squadron, as well as 601st Air Group would have reset their scrap count when the plane is removed from the flagship, or if the wrong plane is scrapped. Thus it is important to double-check for the absence of equipment lock on the converting plane.
The Aircraft Conversion Quests quests for Iwai and Iwamoto Flights, as well as Skilled Pilots requires the converting planes to be at Rank 7 and would have to start over from Rank 2, necessitating repeated training after every conversion.