- 08 Jul 2020
- Jessica Pownell
Rebecca Applegarth discusses some of the popular urban legends surrounding buying and selling business aircraft with Par Avion’s Janine Iannarelli, and Eagle Aviation’s Lee Thomas…Back to Articles
Buying or selling a business aircraft is a complex process. The last thing anybody needs are added complications that are created by misunderstandings and unnecessary mistakes. These could prove costly in terms of time and money, and even lead to the unraveling of a deal. So you'll need to know some of the common myths and truths surrounding the process...
It is important for buyers and sellers to weed out the myths from the truths in the aircraft acquisition process. But what are some of the prevailing urban legends attaching themselves to the used aircraft sales process, and what are the realities? Following are some insights from the experts.
Urban Legend #1: You can sit back and let the transaction take its natural course
Highlighting how it’s easy for an aircraft buyer to be lured into a false sense of security, Janine Iannarelli warns buyers against taking a more passive role in the aircraft transaction.
“When looking to buy your aircraft, you may have been told you do not need a salesperson to represent you because you get everything you need from the seller,” she says.
“However, this suggests that only one person controls the narrative, which should not be the case in any transaction.
“The same applies to buyers who do not feel they need to be on-site for a pre-buy inspection ‘because it is in the hands of an independent third party to evaluate the aircraft’. In this instance, it’s possible that you risk missing something that is said or casually commented on that might prove important later in the negotiations, or (maintenance-wise) missing something you otherwise would have wanted to address now.”
Then there is the related false belief that there’s no need for a pre-buy inspection at all if the aircraft is fresh out of another inspection. “As most contracts call for a buyer to rely on their own inspection, you had better do so,” Iannarelli warns, “even if it is a limited pre-buy inspection.”
Urban Legend #2: You can sell the aircraft yourself
Lee Thomas explains that leveraging the services of a professional will enable you to market your aircraft globally, maximizing the opportunity to obtain the best price. “In today’s market, exposure is everything,” he says. “If you are not able to show your aircraft to potential buyers, a sale will be very difficult.”
While some sellers might be tempted to look to their flight department to co-ordinate their marketing efforts, this is not a feasible solution, says Thomas. “In most flight departments, pilots have tremendous responsibility and simply do not have the time available to give their attention to the extensive work required to properly sell your aircraft.”
It’s far better to invest in the services of a dealer or broker to do the legwork here, Thomas says. “With a sizable annual advertising budget, Eagle Aviation’s listed aircraft can receive the maximum exposure necessary to ensure an equitable sale in as short a time frame as possible.”
Moreover, timing is critical in aircraft sales transactions, he continues. “A pilot tasked with marketing the aircraft may not be able to return phone calls, follow-up with prospects, disseminate information, or negotiate agreements,” he adds.
“Timely dissemination of information is one of the most critical factors in securing a buyer for a corporate aircraft. By investing in the services of an experienced dealer or broker, you’ll benefit from the services of sales professionals who can handle all aspects of the sale.”
Urban Legend #3: The commission to sell your aircraft is too much
In nine out of ten used aircraft transactions, a dealer or broker is involved in representing either the seller or the buyer, Thomas shares. “If you are going to end up paying a commission on the sale, we recommend you invest in the experienced professionals who are looking out for your interest.
“By doing so, you are not only paying for the dealer or broker’s highly capable sales services, but you’re investing in your own peace of mind,” he suggests, adding that the services rendered can help with assisting buyers obtain financing, assembling a team for tax and legal advice, coordinating and monitoring the pre-purchase inspection, filing the FAA documentation necessary to complete the sale, and more.
“You get what you pay for - cheap commissions usually mean less investment of at least one of the key resources a buyer or seller depends upon: manpower," Iannarelli adds.
"If a broker takes a listing that promises not to be among the more profitable, it runs the risk of not receiving the same amount of attention as their better opportunities.”
“There is in fact plenty of value to the commission you will pay for the services rendered, particularly when you consider the value of your own time that you will save,” Thomas continues.
Urban Legend #4: A brief LOI is better than a more detailed one
The Letter of Intent outlines the understanding between two or more parties that will be further developed in a legally binding contract, says Iannarelli.
“The details can be addressed in the purchase and sale agreement,” she explains, “but failing to detail in the Letter of Intent the points that contribute to the overall monetary value of the deal could lead to collapsed negotiations over the aircraft purchase and sale agreement.” Therefore, more detail is better than less when it comes to the Letter of Intent.
Urban Legend #5: Advanced websites must mean experience… right?
Despite a move towards digital platforms over the last few years, the meaning behind the phrase “don’t judge a book by its cover” still stands, and it applies to the selection of which dealer or broker will assist you with buying or selling your next business aircraft.
“It is possible for anyone to create an advanced, professional-looking website to sell and buy aircraft on,” says Iannarelli. “The look and feel of a broker’s website doesn’t automatically mean they have the necessary expertise to successfully promote your aircraft or manage the sale.
“Ultimately, there is no substitute for an expert’s reliability and knowledge,” she concludes, adding that prospective buyers and sellers should get to know a dealer/broker, not just make assumptions, based on their visible online presence.
The above urban legends really do prevail within the used aircraft sales world, and should highlight that it is crucial to have all the information available to you, from the right source, in a timely fashion.
Having the right expertise at your side will prove invaluable to a good experience in the used aircraft marketplace.
More information from www.eagle-aviation.com or www.paravionltd.com
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