- 16 Mar 2022
- Andre Fodor
- Aircraft Ownership
Are you buying a private jet for the first time? What should you know about the transaction to ensure it runs as smoothly as possible? Seasoned Aviation Director Andre Fodor shares some rules…
The current appetite for new and preowned business aircraft has seen prices rise to premiums. The marketplace sees not only a shortage of aircraft, but of flight crew, and the people who support operations and provide ground services. In view of this, let’s discuss the acquisition process for buyers looking to purchase a business jet in today’s market…
A potential client called me once wanting to purchase a Light Jet. As I tried to explain the process of buying jets – the dos and don’ts of getting the right one – it was clear he was far more interested in schooling me. “As a successful entrepreneur”, he began, “and having purchased expensive cars and boats, buying a jet is a similar purchase”.
He genuinely believed he could simply find a great buy over the internet and put in an offer. Politely, I replied that while he seemed to believe in what he was saying, I have a money- and hassle-saving process that’s worked well for me, and to let me know if I could be of assistance in the future.
Of course, not everybody is like that entrepreneur. For those genuinely keen to understand the perils of unsophisticated buying in the Business Aviation arena, and how to avoid them, the following should serve to help you stay out of trouble:
Rule 1: Know Your Need
Before starting the acquisition process, you should identify what your medium- and long-term needs for the aircraft are. What will the typical flight distances be, the frequent destinations, the performance requirements, and the usual payloads carried? There’s a good reason for getting a clear idea of exactly what you need...
I was once retained by the owner of a recently purchased Large Jet. They were having problems with the newly hired lead pilot who told them that they couldn’t operate from their home airport.
The company’s principal was ready to terminate the pilot’s contract for refusing to fly there, but the head-hunter who had procured the pilot insisted on a second opinion. After performing an assessment of the airport, I understood the pilot’s reasoning.
The airport’s runway weight limitation was too low, excluding the aircraft by its weight from operating there, even with minimum fuel. Essentially, having failed to undertake a pre-assessment of the aircraft and airport, the buyer purchased too much airplane for their preferred airport to handle.
In another instance, consulting for a potential buyer who had his heart set on buying a specific model of aircraft, I learned that his daughter, recently married, and was expecting twin children. The purpose of the airplane was for family vacations, and a basic headcount proved that the number of seats offered in the cabin of this airplane would not accommodate this growing family.
A willingness to stand back from the aircraft of his heart’s desire, and look at the facts in the light of his actual need, enabled that buyer to upgrade his choice. A serious case of buyer’s remorse was averted that day.
Rule 2: Know Your Broker
It is important not to inadvertently sway the market. Buyers who randomly call multiple brokers may end up inquiring about the same aircraft many times over. This causes a ripple effect in pricing as a false sense is created that multiple prospects are interested in the same asset.
When this happens, a price will be artificially hiked-up, and the transaction could become confused, with several brokers trying to sell the same airplane to the same buyer.
Choose a broker and work with them. Resist the urge to use an inexperienced one. Words (and business cards) can be cheap. Most deals happen between experienced brokers, and this can include deals for airplanes that never reach the open market – especially now that demand is so high, and pre-owned inventory so low.
Rule 3: Never Forego a Pre-Purchase Inspection
I once received a call from a pilot from South America asking if I would be available to consult on a post-purchase issue. His operation had bought a jet from Europe. With low hours on the engines, it had not been flown for several years – but had an irresistibly low ask price!
Upon landing in the US for an inspection and re-registration, it was found that the aircraft’s landing gear was overdue an overhaul. Corrosion on that landing gear was subsequently found to be beyond limits, while the left wing near the winglet also had a severe bend on it. So much for smart buying!
Unless you engage, and listen to, expert advice on an aircraft prior to buying it, the “great deal” that a newcomer thinks they’ve found will rarely prove to be the case. There is all manner of hidden secrets it could be hiding.
NEVER attempt to buy a jet without a proper Pre-Purchase Inspection, performed by a reputable service center (and not the same service center that normally maintains the jet). The service center should have extensive experience in that specific type of aircraft, and you should hire an expert to be present, in-person, representing your interests at the inspection.
Expertise is Core
Having expertise on your side will be essential to your aircraft purchase. For example, experienced legal representatives will be able to navigate a chain of custody search which could reveal legal issues that prevent title transfer and registration.
Moreover, money must be placed in escrow until closing (never in the hands of the seller or broker). The services of an Escrow agent will be needed. And no matter what you do, retain a reputable and experienced closing agent to conclude the transaction.
There’s a specific set of steps that are required to exchange an airplane for money, and perfect timing is essential for the asset to become yours at the same time as money is exchanged. Like any complex transaction, purchasing an airplane requires knowledge and expertise.
So, resist the temptation to take shortcuts, or cut costs at such a crucial time. There are proven processes to bring about the successful outcome to a business jet transaction. Don’t be shy to reach out to experienced buyers, brokers, mechanics, and others, arming yourself with all the vital knowledge and experience required to buy the best airplane available for your money.