Top Things to Know Before Buying Your Jet (Part 1)

There are several basic things to know before buying an aircraft, and some other less obvious areas too. Over a two-part article, a selection of leading brokers reveal to Chris Kjelgaard what those areas are...

Chris Kjelgaard  |  22nd March 2024
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    Chris Kjelgaard
    Chris Kjelgaard

    Chris Kjelgaard has been an aviation journalist for more than 40 years and has written on multiple topics...

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    Things to do before buying a private jet


    Those planning to buy a business aircraft usually believe they know what kind of plane they want, how much they are prepared to pay for it, and the types of mission they mostly expect to be using the aircraft for.

    Inexperienced buyers, particularly those who have never purchased a business jet before, often do not realize there are several other very important factors they must weigh up carefully before making a final decision.

    Buyers should fully account for these when deciding which aircraft to buy – or indeed, if they might be better served chartering an aircraft or buying a fractional share, reputable brokers agree.

    Following are some key areas to consider ahead of your acquisition that will help ensure you don’t make a purchase you later regret...

    1. Pick the Right Jet Management/Brokerage Partner

    Will you have your own Flight Department operate the aircraft, or will you place it with an aircraft management company who may be able to help offset some of the operating costs through charter revenue when you are not using it?

    If you are planning to have an aircraft management company operate the aircraft for you, it’s important to do some due diligence as to which management company you’ll use, says Dustin Cordier, Head of Global Sales for Atlanta- based OGARAJETS.

    “Research your management company – there is such a difference between top-level companies and some local management companies, who will tell you anything” to get a transaction closed, he suggests.

    Some management companies – at the very least optimistic, if not unscrupulous – are known to have advised customers that if they charter their aircraft out for parts of the assets’ flying time, they can make their ownership of the aircraft cash-positive.

    “It is very, very difficult to get a 25% cash offset if you charter the aircraft,” Cordier asserts.

    In particular, he adds, when looking for experienced brokers or management companies to help, buyers shouldn’t trust what they read on social media. Cordier has noticed a distinct and growing social media trend for people who have just one or two years in the aviation industry to describe themselves as experts and advertise their services accordingly.

    Tim Barber and Leah Alexander, UK-based Aircraft Sales & Acquisition specialists for Duncan Aviation, say much the same thing. “There are many intermediaries, ranging from top companies to [the likes of] someone based in a two-bedroom house in Hemel Hempstead,” says Barber. “Make sure you know who you’re getting into bed with.”

    Accordingly, would-be business aircraft buyers must research the range of aircraft brokers and aircraft management companies thoroughly and very carefully before choosing a partner to advise them, represent them and assist them in making the purchase.

    2. You’ll Need Other Experts Too... Choose Carefully

    “Picking the right partner extends to tax advisors and your legal team, and accountant,” Alexander adds.

    Even if a prospective aircraft buyer has top-class legal and accounting representation for their business, those experts are likely to have little, if any, experience of the highly specialized areas of aviation law, aircraft customs and taxation, airworthiness regulation and aircraft registry and de-registry needed to close the transaction successfully, Cordier notes.

    So it behoves the buyer to find a specialist team of experts to advise and represent them throughout the transaction and deal with any unexpected issues that may arise in the process. Picking the right team, Alexander says, starts with selecting an aircraft broker with an easily verifiable record of closing lots of aircraft purchases and sales.

    Importantly, a good broker will first find out from the buyer the typical aircraft mission profile which best suits their needs. 

    Then the broker will be happy to advise the customer on choosing exactly the right aircraft – type, model and individual example – to best suit that mission profile, and the aircraft appearance, accommodation and cabin interior features that meet the customer’s wishes.

    Additionally, Alexander says, “the right broker has the right network of experts” who it can contact to ensure that the buyer is represented during the aircraft selection and purchase negotiation process by a top-class, highly experienced team of aviation industry experts.

    Ultimately, adds Barber, in a well-managed business jet acquisition, “the buyer doesn’t need to know about any of [the details] except the high-level stuff. They should be able to rely on the broker” for learning about and dealing successfully and quickly with the minutiae involved in the transaction.

    3. Buying an Aircraft is Not Like Buying a Car

    In almost every important respect, buying an aircraft is not like buying a car. While cars and aircraft carry people and goods, and in most cases run on fossil fuels, that is where the similarities stop. And that includes when it comes to comparing, buying, and selling aircraft and cars, says Cordier.

    “Aircraft are not commodities, like cars,” he explains. “They are all individual, and buying an aircraft is more akin to buying a business than it is to a car.”

    This is why it is vital for any would-be buyer to engage the best, most experienced team of specialists they can when planning to buy a business jet. “Just as you don’t shop for the cheapest cardiologist [when you have a heart condition], you don’t shop for the cheapest tax attorney or accountant” when buying an aircraft, Cordier illustrates.

    “It is worth the investment to get a good aviation CPA and aviation tax attorney for your purchase. The severity of risk [of buying a poor-quality aircraft which will need a massive amount of further investment post-purchase] is much greater than the cost of a good attorney, broker, accountant, pilot, and maintenance specialist.”

    4. Set, Monitor and Maintain an Adequate Transaction Timeline

    There are several reasons why it is important for buyers to establish, monitor and maintain a timeline for completing a business aircraft purchase, according to Barber.

    It is important for buyers to begin the process far enough in advance to ensure they have adequate time to allow all the required consultation with their brokers to find the right aircraft, put together an effective team of experts to assist in negotiating and closing the transaction, and obtain any financing that might be needed to buy the aircraft.

    Leading brokers recommend would-be buyers should begin their research and preparations as much as six months before they hope to complete their acquisition since a multitude of factors can combine to cause periods of delay (some of which could prove to be extended delays).

    One such factor that buyers must account for is the scarcity of slots at MRO facilities in which an aircraft can be inducted for a pre-purchase inspection. Many MRO facilities still have backlogs of six months – and in some cases longer – for work that requires significant downtime.

    So, buyers and sellers must book a slot well in advance at the chosen MRO center that will undertake the inspection.

    Another reason it could make compelling sense for the buyer to allow plenty of time ahead of the desired closing date is if the transaction is international, meaning the team would have to deal with more than one aircraft registry to conclude the acquisition.

    “Some registries are easier to work with than others,” says Barber. “Some take 24 hours to deregister an aircraft, but others take a couple of weeks.” This also provides an important reason why “the broker needs to stay on top of the closing timeliness process.”

    5. Meeting the Financier’s Documentation Needs & Timeline

    One of the most important reasons why buyers need to provide ample time for a business jet purchase to be completed is that they may have to find one or more suitable financing sources (assuming they aren’t cash-buyers).

    Even though a buyer may have had a long and very successful relationship with a particular bank which supports and handles their business and personal financial affairs, oftentimes that bank might not be experienced in funding aircraft financing deals, whether loans, leases or interim forms of financing, notes Alexander.

    In such cases, the would-be buyer will need to find another bank or source of funding which will be suitable for financing the acquisition of the aircraft they want to buy. That could take weeks, and even when the right financier is found the buyer must then be able to provide that bank or leasing company with the detailed personal and business financial data which it requires.

    The institution needs data firstly to establish that the buyer is creditworthy enough to be buying or leasing the aircraft, and secondly to ensure the buyer can provide it with enough collateral to secure its up-front financing of the deal.

    When preparing the aircraft financing and budgeting for it, “six weeks would not be too much time” for the buyer to allocate to gathering all the required personal and business financial data the funding institution needs, and for the institution to arrange the necessary financing, Alexander reckons. “Three months in advance might be even better.”

    An important role the buyer’s broker can often play is assisting the buyer in finding the right financing partner.

    “There are aircraft financing options, and brokers who can find those options for those aircraft that are less attractive” says Alexander. Overall, she adds, “The more time you give yourself in advance, the better your options will be and the quicker you can close” on the purchase.

    Don't miss Part 2 of this articleFind it here on AvBuyer.com 

    More information from:
    Duncan Aviation: www.duncanaviation.aero
    OGARAJETS: https://ogarajets.com

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