Pre-Buy Inspections: What Do You Need to Achieve?

In most purchases of pre-owned business aircraft, Pre-Purchase Inspections (PPIs) are necessary and highly important initial tasks.

Performed at the buyer’s request, the PPI is carried out to assess the physical condition of the aircraft – allowing the buyer and seller to then negotiate what (if any) repair or refurbishment work is needed to satisfy the buyer’s condition expectations – and ensure the documentation of the aircraft’s maintenance and operating history is complete.

An obvious basic first step for would-be buyers is to determine what they expect the PPI to accomplish. Clearly, it should either satisfy the buyer that the aircraft is in a condition which allows them to complete the purchase, or produce findings or repair/alteration actions which the buyer can then ask the seller to undertake before the transaction is completed.

Ultimately, however, the buyer’s expectations of the PPI’s scope should be reasonable enough to prevent the seller balking completely, creating an unresolvable hurdle causing the deal to founder.

Setting Realistic Aircraft Pre-Purchase Inspection Expectations

While for inspection-cost and other reasons the seller and buyer may not agree on what each wants the scope of the PPI to include, their differences should be resolvable by means of agreeing to adopt the recommendations made by an independent third-party.

For example, in their pre-buy negotiations, the most common way for both seller and buyer to achieve consensus is to have the OEM or third-party MRO service center hosting (and often conducting) the PPI first to provide a recommended PPI report.

Lee Rohde, President & CEO of Essex Aviation, says the MRO facility should have a specific recommended PPI report for every different aircraft model it handles, based on the manufacturer’s own inspection and maintenance recommendations and accounting for every unique aspect of that model.

The report will also take account of the service center’s own findings on the individual aircraft’s condition, having performed its own preliminary inspection of the aircraft in question.

In any given pre-owned aircraft transaction, both buyer and seller are well-advised to adopt the inspection-task recommendations included in the service center’s recommended PPI report, Rohde says.

For any used-aircraft sale/purchase transaction in which Essex Aviation is involved as an advisor, broker or principal, he says, “I always want as an exhibit [in the contract documentation] the actual PPI proposal that both parties have agreed to, so there is no question of who was supposed to be doing what, and that something is not inspected.”

Beyond that proposal from the MRO service center, “some items may be separated” during the buyer-seller negotiations, perhaps specifying that the seller pays for some specific PPI tasks requested by the purchaser, and that the buyer pays for others.

What the Aircraft Pre-Purchase Inspection is Meant to Do

Any sensible aircraft buyer should hire a small set of independent technical, legal and business advisors to act as their representatives when negotiating to buy a used business aircraft. They will know the tasks required, and the reasonable limits of the Pre-Purchase Inspection on the specific aircraft which is the subject of the planned purchase.

Nevertheless, it behooves any buyer to know and keep in mind what the objectives of any PPI are, in order for them to keep their requirements and requests reasonable. The buyer’s main objectives for the PPI should be twofold, according to Rohde.

First is to evaluate the aircraft’s physical condition to ensure there’s no undisclosed damage, or that it has other undisclosed issues which the seller should either remedy before transaction completion or should be subject to further negotiation on the aircraft’s purchase price.

Second is to perform a complete review of the aircraft’s maintenance and operating records, including all those documenting the remaining lives of all of the aircraft’s Life-Limited Parts (LLPs).

If any of those records are missing, are not in consecutive order, or are not in English (which is the standard language of the aviation industry), it is the seller’s responsibility to restore them to full and proper condition before the purchase is completed.

If records concerning any LLPs are incomplete, then the seller should replace those parts with parts with remaining lives which the buyer and seller mutually agree.

According to Rohde, records restoration and/or parts replacement is the seller’s responsibility before the transaction closes.

But if the buyer allows the purchase to go ahead without those conditions being met, then after the deal is completed the buyer becomes responsible for restoring those missing or incomplete records, or replacing those LLPs, to keep the aircraft airworthy and make it fit for future resale.

Restoration of records and LLP replacement are very expensive tasks to perform and can alter the financial economics of a pre-owned aircraft sale considerably. 

Additionally, as part of the PPI the buyer should make a complete review of any scheduled maintenance the aircraft and/or its engines are due to undergo within, say, the next 12 months, says Rohde. The reason the buyer should do that is that they can then seek to negotiate with the seller to have that scheduled maintenance rolled into the overall PPI of the aircraft, at the buyer’s cost.

If the seller permits the scheduled maintenance to be done within the PPI process, the buyer will then be purchasing an aircraft with “a nice long run” of operational availability before its next round of scheduled maintenance, Rohde explains.

In general, the seller will seek to limit the scope of the PPI, he says. Sellers will naturally seek to minimize the risk that the PPI will find an unexpected serious condition issue that might prevent the sale being completed, or one or more less serious issues which the seller would nevertheless need to pay to have repaired for the transaction to complete.

However, adds Rohde, depending on the aircraft’s previous maintenance and damage history, the seller should regard some of buyer-generated inspection requests as being reasonable.

For instance, if the aircraft’s records show it has a previous history of corrosion damage and repair, it would be reasonable for the buyer to ask to have non-destructive testing of the repaired area performed to ensure that the corrosion damage was repaired properly.

The Different Aircraft Pre-Purchase Inspection Levels

In terms of the technical resources involved and the physical invasiveness of the investigations made, there are up to four different levels of PPI and a further fifth, pre-PPI, type of inspection, according to Mark Thibault, Co-Founder and Chief Technical Officer of aircraft inspection firm Crew Chiefs Corporation.

Aircraft Condition Survey: Starting with the pre-PPI level, Crew Chiefs and various other aircraft technical inspectors offer a service known as an aircraft condition survey.

While this service involves no invasive inspection of the aircraft, with Crew Chiefs it does involve making a thorough visual inspection of the aircraft’s exterior and interior, and an inspection of its maintenance records and operational history documents.

According to Thibault, a thoroughly performed aircraft condition survey can be very telling in revealing a potential need for further inspection work that is much deeper in scope, and a likely need for repair work.

The condition of the aircraft’s fittings and overall condition of the interior are often indicative of the level of maintenance care which the aircraft has received throughout its operating life, Thibault suggests.

Additionally, he says, by indicating the attention to detail the seller has previously paid to the overall condition of the aircraft, its interior condition also serves as “a prelude to the buyer, which they can then leverage to do a cheaper PPI or get price concessions” from the seller.

Learn what each level inspection entails – continue reading in AvBuyer’s February digital edition by clicking the button below…