- 07 Jun 2023
- René Armas Maes
- Aircraft Ownership
Every aircraft buyer should ensure a Pre-Buy Inspection takes place before they conclude the acquisition of an aircraft. But how should they prioritize, rank and negotiate discrepancies that arise? René Armas Maes explores...Back to Articles
To safeguard against unwanted surprises after the conclusion of an aircraft sale, buyers of pre-owned aircraft need to insist on a Pre-Buy Inspection.
This essentially requires the aircraft they’re purchasing to visit a pre-agreed maintenance facility to ascertain whether there are any issues that could impact the aircraft sale or its final sale price. The process requires a certified appraiser to give a thorough review of the aircraft’s logbooks, maintenance records, and other key documentation. Meanwhile, the aircraft will undergo ground and flight test inspections.
Ideally, the inspection will confirm all systems are working properly, everything installed on the airplane is as entered in the maintenance records, and that the logbooks represent a complete, accurate history of the aircraft from the day it rolled off the factory production line.
Ultimately, the buyer and seller should expect for some discrepancies to emerge. The question is whether those discrepancies are serious enough to derail the deal, require renegotiation, and who is obliged to pay to correct them.
As a buyer the objective of a Pre-Purchase Inspection is to examine the aircraft in detail. The inspection will provide answers to the following questions (among others):
The agreement set out between buyer and seller should be clear about who pays for different issues arising from the inspection. While all Pre-Purchase Inspections will uncover smaller items that need addressing, sometimes bigger issues that impact airworthiness (essentially grounding the aircraft) could arise.
Correcting an issue that makes an aircraft unairworthy may be a costly fix, and the sale agreement should be clear that this is the responsibility of the seller. Therefore, buyers who fail to insist on a Pre-Purchase Inspection taking place prior to closing leave themselves open to a nasty surprise.
Depth of Inspection: The depth of the Pre-Buy Inspection will depend on many factors. Depending on aircraft type, age and the number of engines, system complexity, cabin size and amenities vary from one aircraft to another.
Moreover, an aircraft that the buyer plans to make available for Part 135 charter some of the time will need to comply with specific airworthiness regulations that Part 91 operators do not. Be clear on these.
Place of Inspection: While most of the time the seller will be keen to drive the inspection process, including suggesting where an aircraft should be inspected, it is in the best interests of the buyer that an independent maintenance facility executes the inspection to provide an impartial overview of the maintenance condition and standard of maintenance work undertaken on the aircraft.
Content of Inspection: While the buyer may allow the seller to come up with a list of items to be reviewed during the inspection, a savvy buyer should thoroughly review the seller’s list, revising it to include other items that should be included. For example, whether the seller has included a borescopic inspection of the engines (the costliest component of an aircraft).
Ideally, buyers will push for a comprehensive pre-purchase inspection, including a review of annual inspection findings; the type, date, and maintenance shop that executed any repair or scheduled maintenance (including engine and APU overhauls where applicable); and a review of whether the seller has complied with all Airworthiness Directives (AD) relating to the aircraft.
In addition to the aircraft’s cosmetics (paint, carpet and overall interior condition), major aircraft components such as the landing gears, avionics, engine mounts, control surfaces and seals should be considered. Make sure they are included in the Pre-Buy Inspection checklist to avoid any surprise downtime. Don’t forget to be thorough in reviewing corrosion.
Beyond the obvious places, corrosion can occur in harder to access areas, and buyers should ensure the inspection checks the aircraft structure, engines, lavatory and fuel tanks for signs of corrosion.
Once the results of the Pre-Buy Inspection are back, what should buyers do with any discrepancies that are found? In short, it’s important to be strategic. In order of importance:
1. Focus on any item(s) that impact the aircraft’s airworthiness.
2. Identify any other issues found, categorizing them in terms of major or minor discrepancies.
3. Rank all issues based on relevance (for example, a lack of regulatory compliance making the aircraft unairworthy), cost allocation (who pays) and expected aircraft downtime associated with fixing the discrepancy.
Beyond issues impacting the aircraft’s airworthiness, most other items will not be a deal-breaker, but having the above three-step approach will allow buyers to talk to the seller and find remedies leading towards the close of a successful transaction.
If there are any disputes about paying to correct discrepancies, the Letter of Intent (LOI) should be structured in a way that establishes who is responsible in specific instances. For those areas not detailed in the LOI a little give-and-take on both sides of the transaction table may be needed to bring about a successful conclusion.
When conducting an assessment on the equipment of the aircraft, don’t just focus on the aircraft’s past – look to its future too. Consider any future regulatory requirements and how the aircraft complies (or not). Equipage to comply may be costly, giving reason to further negotiate the sale price.
Once the inspection is done, assuming the inspection didn’t reveal any deal-breakers, the buyer will be several steps further on towards the conclusion of the deal. Careful management of the findings and a little goodwill on both sides of the table will bring it to fruition. A win-win for all!
Read about aircraft maintenance on AvBuyer's MRO for Business Aviation Hub