This first post is quick guide to PNG files manipulation using GIMP.
Feel free to post any other guides to different file formats or techniques.
I didnt check other sims but XP uses (also) PNG file format for texture files. I am not an expert, so this is how I did it for one particular aircraft.
Before
After
To locate texture file navigate to aircraft folder
…\XP11\Aircraft\Extra Aircraft\DF AS350B3 Plus XP10\liveries\Transport.1\objects
It is always wise to make a copy of this folder or the particular texture file just in case.
In my case it is texture file called MainStage.png
Open particular texture with GIMP eg Right Mouse click -> Open With -> GIMP (if you are asked to Convert/Keep something I use Keep).
Then go to MS forums, banner, Right Mouse click -> Save image as
and save it somewhere where you can later locate it 
It is again PNG file.
Locate saved MS banner PNG file, Right Mouse click -> Open With -> GIMP
Now you have two GIMP windows opened or one window with two tabs.
On the texture file tab go to menu Tools -> Selection Tools -> Rectangle Select
Select part of the picture which is close to the section which you want to mask and select it, then Ctrl+C and Ctrl+V.
Then drag and drop it over the reg no. Do it again and again (if needed) until the whole reg no is masked.
If there are rough edges after the paste use e.g. Tools -> Paint Tools -> Smudge
Change the ‘Size’ of the tool (in my case tool menu on left hand side, Size 20) and do the smudging. Green rectangle shows already smudged area. Proceed with all the edges.
In case there are more tones of red colour (lighter and darker), as is the case for the left side of the engine cowling, just use smaller area of the same tone, copy-paste to mask, and do the smudging as appropriate.
Smudge size - bigger means you will finish it quicker, smaller means you can smudge in tighter spaces not blurring other parts.
Then go to the other tab with MS logo. From menu again Tools -> Selection Tools -> Rectangle Select
and select MS text. Or use it as is, the whole text and logo. It is already PNG file with transparent background what is great I selected just the MS text. Select, Ctrl+C to copy, open the other tab with texture and Ctrl+V to Paste. Choose again selection tool to drag and drop pasted layer. Drag it over to where you want to place it on the texture.
With the pasted MS text still selected go to menu Layer -> Scale Layer…
Change Size of this pasted layer (MS text), select Interpolation (NoHalo worked best for me) and then click Scale. Reposition it again after scaling if needed using selection tool.
To apply any effects I use menu Tools -> Transform Tools -> Unified Transform
Click on any of the rectangles and drag them to see what they do. I dragged the one in yellow.
Do similar steps for other side of the engine cowling, etc.
To rotate pasted layer use Tools -> Transform Tools -> Rotate
and so on.
Be sure that you have the pasted layer always selected when you want to use any tool on it. If you lost selection, use Ctrl+Z or Ctrl+Y to go back and forth in the steps you have already performed. GIMP remembers many steps.
Once you are satisfied with the manipulations go to menu File -> Export As… and Export. Confirm the default settings for PNG export.
Save or Save As in this case doesnt work as GIMP can Save only in GIMP picture formats. But can Export to many common formats.
Once Exported successfully, you dont need to save at closing.
Run XPlane and check your creation in game.
In case of any questions feel free to ask.
