- 08 Apr 2020
- Dave Higdon
Getting ahead of the curve is essential when you decide to buy an aircraft — there's a lot still to do! Dave Higdon highlights seven mistakes to avoid.Back to Articles
Companies should prepare for taking ownership of a business aircraft by performing all the necessary steps. Too often, first-time buyers find themselves thrust into the role of managing an aircraft with little background preparation.
If that process only starts when the papers are signed and ownership formally changes hands, the new owner will already be far behind the curve.
With the necessary understanding, though, and the right professionals at your side, the process of acquiring and operating a business aircraft can be greatly simplified. Following is a list of seven common mistakes that are easily made, and even more easily avoided during the acquisition process with appropriate planning.
1. Don’t Wait to Arrange Financing for the Purchase
Buyers should not wait until they’ve found their ideal aircraft before arranging financing for the acquisition. Doing so is likely to set you up for a lengthy wait for
processing, heightening the chance of missing out on the ideal aircraft.
Aircraft financing companies require detailed documentation from buyers in order to conduct credit and risk assessment, and the process of completing a loan can run into weeks or even months, depending on the details underlying the transaction (including aircraft age and equipment) and the buyers’ details.
The smart move would be to start a pre-approval finance process as soon as you decide there is a need for the company to own and operate a business aircraft.
Bonus Tip:Aircraft enrolled on hourly maintenance cost programs often get better finance terms, faster. Enrollment helps assure lenders that the airplane is well-tended.
2. Don’t Overlook Your Staffing & Acquisition
Team Needs The flight crew is a must for the new acquisition. It’s wise to hire your crew in advance. Ideally they will be qualified to fly the business aircraft you plan on purchasing, ensuring the aircraft is operational as soon as you have taken ownership.
By hiring them in advance you can also use their knowledge and talent to inform and assist in the shopping process. However, the flight crew will form just one component of your transaction team…
The whole team should incorporate professionals from the legal, financial, taxation, maintenance and brokerage fields who will help ensure the aircraft's operation complies with the applicable regulations of the jurisdiction(s) it will fly in and the Internal Revenue Service (IRS) or other tax agency.
3. Don’t Misunderstand the Total Acquisition and Operating Costs
The acquisition and operating cost of a business aircraft can seem deep, wide and complex. You’ll need to consider all of the following points in advance of entering the marketplace:
The above list should highlight the need to have done the sums (with the help of an expert) long before heading down the acquisition road.
Bonus Tip: Many operators enroll their aircraft on hourly maintenance cost programs covering airframe, avionics and engines to help bring predictability to the maintenance costs.
4. Don’t Ignore the Other Options
People and companies in need of regular, reliable air transportation enjoy more alternatives to access business aircraft than ever before, including ad hoc charter, jet cards, shared ownership, fractional ownership, and membership groups.
Prospective buyers should have shopped all of the potential solutions before moving ahead with an acquisition.
Bonus Tip: Assuming whole aircraft ownership is still the best fit for your mission need, consider chartering different aircraft types that might fit your need to confirm or eliminate models from your shopping list. Doing so will enable you to assess range and payload capabilities as well as comfort levels of a typical trip you anticipate making.
5. Don’t Value Aesthetics Over Function
Arguably, the toughest aspect of selecting a company aircraft involves defining operational needs, and understanding how to separate what you need from what you want.
“Lots of operators would love to be able to justify a larger, longer range Gulfstream G650ER,” one veteran business aircraft consultant told AvBuyer. “The reality for some is that a Cirrus SJ50 singleengine jet would provide all the capability they need.”
As part of that ‘want versus need’ equation are operational considerations. For example, if the aircraft will often visit non-towered airports with 3,500ft runways, those needing a 6,000ft runway to land would be a foolish choice.
6. Don’t Skip the Pre-Purchase Inspection
Commonly, buyers will look for ways to shave off some of the costs of purchasing and owning an aircraft. To the uninitiated, the pre-purchase inspection may seem ripe for cost-cutting. Those who are most tempted to skip this step are those buying from a familiar party.
The complete pre-purchase inspection should open a window on the aircraft's history, back to when it originally left the factory.
The inspecting mechanic typically reviews the logbooks for the engine and airframe, maintenance records, ADs and SBs.
Records should be complete and comprehensive, covering any damage history, time remaining on lifelimited components, conformity with the manufacturer’s maintenance programs and powerplant inspections.
Neglect in any of these areas will increase the risk to an inattentive buyer.
7. Don’t Cut Costs on Insurance
Insurance is another item that should never be treated as a cost-cutting exercise. Your chosen insurance agent or broker should discuss with you early in the process the arrangements made for the incoming aircraft.
Your insurance broker or agent will also be the expert to warn you about operations or service contracts which could void your insurance. And the same person can help you make certain your coverage is adequate for your business (protecting the owners, cabin occupants and their families, and the aircraft investment itself).
Liability insurance is a must in most US states. Hull insurance is a must in the eyes of the financing entities (protecting their investment). And hull insurance also protects owners who paid cash, helping ensure an accident doesn't wipe out their investment.
There’s plenty else for buyers of business aircraft to be thinking about beyond simply signing the paperwork needed to get an aircraft transaction across the line.
Those with the right team to advise and direct them each step of the way will discern where costs can be cut safely, and where additional expenditure would be prudent. Better still, they’ll be less exposed to unnecessary risk throughout the tenure of aircraft ownership.