- 25 Apr 2023
- Gerrard Cowan
- Aircraft Ownership
What should be on the checklist of every buyer of a pre-owned business aircraft? David Wyndham shares a seven-step roadmap to help clarify the process and keep an aircraft acquisition on course for completion without needless hassle...Back to Articles
Unless you are an aircraft sales professional, buying a business jet is usually done very infrequently. An aircraft transaction is no place for the uneducated or unprepared. It’s important to know the different stages of the transaction thoroughly and keep close tabs on everything. Following are seven steps to put you on a path to completion.
If you are to ensure a smooth transaction, it’s best to follow three basic tips:
This article will provide a seven-step roadmap to completion with a focus on tips one and two.
Step 1: Build Your Aircraft Acquisition Team
Before you even get to the transaction process, you should have identified your needs and desires, developed a budget to acquire and operate the aircraft, and done your due diligence in identifying your preferred aircraft acquisition professional.
If you don’t have a qualified aviation attorney, this is the time to get one. There are many technical and legal terms that can play significant parts in the transaction, and having good legal advice will protect you as the buyer.
Once the jet for sale you wish to purchase has been identified, you should plan on about six to eight weeks for the process to unfold.
If you plan on placing your aircraft with a management company, get the agreements in place and the management team involved early. Aircraft insurance, crew training, support equipment, and possibly a different hangar will all need to be coordinated.
Step 2: Letter of Intent
The initial steps in an aircraft transaction will involve the Letter of Intent (LOI) and scheduling the Pre-Purchase Inspection (PPI).
The LOI is a non-binding document that sets up the buyer’s intent to purchase, the price, and conditions of purchase. Depending on the transaction and your aviation legal advice, it may be short and general, or it could be lengthy and detailed.
Try to cover the general terms of the purchase to include what sort of PPI you will accept, and where and when you desire to close. The delivery location should involve tax planning as well as any operational considerations. The LOI will ultimately set the tone and pace of the process.
Step 3: Placing Funds into Escrow
The LOI, assuming it’s accepted, precedes the placement of funds into Escrow. The terms of the release of funds need to be clearly specified and understood by both parties and the Escrow Agent.
Upon placing funds into escrow, a title search and International Registry Application will be started. The title should be clear of any liens or encumbrances.
Step 4: Purchase of Sale Agreement
Next, the Purchase and Sale Agreement (PSA) will be due. This is typically prepared by the buyer’s legal team. Financing (if needed) is addressed here, as well as the final acceptance terms for the aircraft.
The PSA will determine who of the buyer and seller will pay which costs, where the closing will take place, and what terms are needed in the upcoming PPI for a successful sale. The PSA should also address payment for any discrepancies arising from the PPI.
To continue reading, click on the button below to view the article in the AvBuyer May 2023 digital edition.