Why is it important to develop a thorough aircraft acquisition plan for your next business jet purchase? David Wyndham highlights not only why, but also how you should formulate a failsafe blueprint…
With a sense of urgency and a large sum of cash, an aircraft acquisition can be completed rather quickly. However, without a plan or the right team in place, these types of scrambles typically result in the wrong aircraft for the job, or just simply picking the wrong aircraft. To avoid the headache from an impulse purchase, you need to build a business aircraft acquisition plan.
To begin, there are two fundamental reasons for acquiring new or different aircraft:
- The current aircraft can no longer perform the mission, or
- The current aircraft is no longer the most cost-effective solution.
Changes in mission need to be quantified. As an example, one client in the Eastern US started flying shorter trips with fewer people. Their eight-passenger jet, with a 1,800nm range, was more than they needed.
Instead, they found that a five-passenger airplane that’s more efficient on short trips might be the next aircraft for them.
But how can you quantify what it is that you need and want? Economics are critical. The cost of an aircraft is more than the acquisition price alone. It encompasses the total costs needed to operate the aircraft and allow for a future residual value.
As an example, a single aircraft that meets 98% of usage requirements may cost far more than an aircraft that meets 85% of your needs with a supplemental jet card, charter or fractional solution in place for the remaining 15%.
What Should Your Acquisition Plan Include?
It is important for you to understand what it costs to own and operate the aircraft – and this will all come into your acquisition plan. So, what should your acquisition plan include?
An aircraft acquisition plan must (at a minimum):
- Identify, quantify and differentiate your needs and wants;
- Identify and rank the possible aircraft types by mission capability; and
- Analyze all the costs involved with the aircraft.
Your plan should be void of emotional issues and stay as far from subjective criteria as possible. To help in this respect, you will need someone who can ask the tough questions and assist with an unbiased analysis of the candidate aircraft.
Consultants may offer the unbiased review that you initially need, and their feedback will need to cover both technical and financial aspects of the aircraft acquisition.
Who Should be on Your Acquisition Team?
As you proceed with the acquisition you need to add expertise across several fields to your team. Tax planning should begin well before the purchase, not after the closing, meaning that you will need to hire someone familiar with taxes as they apply to aviation.
You will also need to consult a qualified aviation attorney to ensure that the contracts are appropriate and that the various regulatory issues are addressed. A document that looks good from a basic business perspective may not be legal in the eyes of the FAA or other aviation authority.
Don't overlook the insurance broker, who will need to be kept informed as to when and how the aircraft is to be used. (For example, if the aircraft is to be placed on a management agreement, who and how are each of the parties to that agreement going to be covered?)
You will also need an aircraft sales professional, who will ideally have an excellent understanding of the aircraft sales market — what the availability is; lead times for various models; who to contact about pre-buy inspections and appraisals; and how long it could take to dispose of your current aircraft.
Moreover, the aircraft sales professional you hire will need all the qualities required to be an excellent facilitator, since their job will also be to make sure the deal closes and that all parties are happy.
Additional Planning When Buying New…
Moreover, if you are buying a new aircraft, specifying all the options, picking out paint, and choosing an interior may take a minimum of six months and may well require the services of additional advisors.
Think of your business aircraft acquisition as a “time-is-money” deal. That is, if you don’t have much time, you’ll probably spend even more money! If you are looking to close a deal by the end of this year, you need to be looking seriously right now, and investing in all of the right areas to ensure your acquisition plan results in the right aircraft, at the right cost, at the right time.
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