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Buying a Jet? The Costs you may not Have Considered…

Are there hidden costs when buying used jets? What do buyers need to be careful about when purchasing an aircraft? Dave Higdon asks Johnny Foster for his tips.

Dave Higdon   |   6th September 2019
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Dave Higdon Dave Higdon

Dave Higdon writes about aviation from his base in Wichita Kansas. During three decades in...
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What are some of the hidden costs that could impact the unwary business aircraft buyer? What are the best things to do to minimize the risks? Dave Higdon asks OGARAJETS’ Johnny Foster for his best advice…
 
 
In aviation, the best surprise is no surprise. The line applies to weather, flight plans, instrument clearances, flights...and even to buying private jets. Yet the purchase of a used business aircraft, done properly and wisely, should present no surprises.
 
Professionally performed title search and escrow services generally assure the buyer that any hidden liens or other potentially costly surprises come to the attention of the would-be buyer ahead of the transaction closing.
 
Similarly, the very raison d'être for the Pre-Purchase Inspection – examining the logbooks, maintenance records, airworthiness directives and the ownership history of an aircraft – is to avoid such surprises as unresolved Airworthiness Directives (ADs), tardy or deferred maintenance and expensive, encumbering liens. Still, however, the occasional surprise happens...
 
Sometimes they happen when something is not properly logged. Occasionally they happen with no warning. And sometimes the surprise occurs because time ran out on an inspection or Airworthiness Directive (AD).
 
Every now and again, the surprise arises because a guarded seller hopes they won't draw notice in the standard processes.
 
And as complex as modern business turbine aircraft are, there are literally thousands of ways something can fail, time out or reach a wear limit before becoming an obvious issue. But as OGARAJETS' Johnny Foster observes, the highest probability of surprise costs come not from mechanical or hardware aspects of the aircraft, but instead are hidden in the complex and voluminous paperwork accompanying a transaction.
 
“Interestingly, all of these are almost completely avoidable with proper due diligence,” Foster explains. “Engaging a professional team to protect your interest will pay for itself multiple times over the investment in their services.”
 
 
Beware Undecipherable Paperwork

Foster observed that more risks hide in the contracts and documents than in the physical state and logs of an aircraft subjected to the detailed, albeit invasive, pre-purchase inspection process. “The ‘Number One’ hidden and most significant cost could be the one buried in a back-to-back transaction,” he explains.
 
“When a buyer doesn’t deal directly with the owner (or through their engaged broker), at least one – and oftentimes – multiple other parties are making spreads while adding little or no value to the transaction process, and often increasing risks,” Foster warns.
 
This sometimes occurs when an inexperienced buyer relies on multiple go-betweens, or when the people handling the transaction conveniently forget to mention or document an issue which is something Foster emphasizes continues to happen with unwelcome frequency. “The lack of transparency in our industry remains shocking to me.”
 
It's here that the value of services by ethical, experienced professionals often far outweighs their costs, he noted. “Buyers and sellers need to employ trusted teams to protect their interests. Otherwise, they leave themselves exposed to significant costs and risks.” Before engaging a broker to represent your interests, you should expect to see references from previous clients.
 
 Buying a Jet? What are the hidden costs for the unwary?
 
 
Avoid the Bargain Basement Pre-Purchase Inspection

Everybody wants to save money wherever they can. But saving money on the process of buying a business jet may be the worst place to try to trim costs, as Foster – and many other brokers and dealers – attest.
 
“A cursory or light pre-purchase inspection adds very little value to the buyer – other than shortening the time to close,” he explains. A cut-rate pre-purchase may hold appeal for the buyer in a rush – or the seller with an aircraft plagued by some unwelcome hidden issues. But shortcuts in aviation seldom pass without heightened risk.
 
“Under such a scenario, the buyer assumes significant risks related to incomplete logs and records, inoperative systems, etc.,” Foster elaborates. “Typically, the relatively little saved in purchase price is eclipsed by costs related to future failures and loss of use.”
 
Bite the bullet – hire the best, ask for the best, take the time and never live with the uncomfortable question, ‘What could that bargain pre-purchase inspection have missed?’
 
 
Uncover the Hidden Dangers

Foster cited a prime example of how a bargain pre-purchase inspection may be no bargain at all: Undiscovered corrosion. “Corrosion, especially prevalent in aging aircraft and many based or operated in saline environments, is a significant concern,” he warned. “Remediation is usually a significant undertaking of time and dollars.”
 
Some corrosion manifests itself on surfaces easily seen and accessed. The presence of visible surface corrosion, however, may be a harbinger of deeper laying problems. Hence the need for a deep, invasive inspection to root out corrosion in places seldom seen.
 
Ribs, spars and stiffeners inside wings and empennage surfaces may be difficult to access, requiring a visual visit – whether with a mirror and flashlight or a remotely controlled scope threaded into the wings, tail surfaces, ailerons, flaps and elevator.
 
While remediation is possible, Foster stresses such work should be considered a temporary cure. “Once present, corrosion is rarely cured,” he said. “It’s always then present, and it’s not a matter of if, but rather when it will return.”
 
If corrosion is discovered, it becomes a matter for discussion between the would-be buyer and the professional performing the inspection:
 
  • How bad is the corrosion now?
  • How difficult (expensive) is remediation and repair?
  • Is the condition severe enough to warrant making a new decision?
 
Better Disappointment Than Disintegration

Ultimately, you should never be afraid to walk away from a deal. As one Wichita-based aircraft inspector observed, “it’s better to be disappointed than to be let down by a structural failure brought on by an unaddressed problem.”
 
Whether structural damage from corrosion, a powerplant past its hot-section inspection date or incomplete paperwork, the industry agrees: It’s better to walk away than be let down later because of issues masked by a shallow pre-purchase inspection, or paperwork hiding a financially expensive secret.
 
“There's always another airplane,” one aircraft broker observed. “There's only one of you, your colleagues, your family or friends. Thirty-five thousand feet is no place for buyer's remorse – or worse.”
 
And as Johnny Foster noted, “Caveat Emptor...control your destiny or someone else will!”
 
More information from www.ogarajets.com
 
 
 
 
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Read more about: Buying a Jet | Used Jet Dealers and Brokers | Buying Jets | Johnny Foster | OGARAJETS

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