Lufthansa Bombardier Aviation Services’ Robert Drover outlines how to navigate the complex buying and selling process successfully...Back to Articles
The pre-purchase inspection: It’s an essential part of any used aircraft transaction, meaning it’s vital to understand both from the perspective of the buyer and the seller.
When considering the Pre-Purchase Inspection (PPI) it makes sense to begin early, preferably at the Aircraft Purchase Agreement (APA) stage of the transaction. After all, it is the APA that will specify the scope of the PPI, as well as the conditions under which the buyer can cancel the transaction if discrepancies are revealed as a result of the PPI.
There are various matters to resolve between buyer and seller before a successful PPI can take place. For example, they must agree on a facility to conduct the inspection.
To avoid a conflict of interest, the aircraft buyer should always select a neutral facility that has not undertaken the regular, scheduled maintenance for the aircraft previously or had any other pre-existing relationship with the seller.
The reason for this is simple - an ‘independent’ facility is best-placed to provide an independent, non-biased inspection report.
It is also important that the independent facility is able to demonstrate experience with the aircraft type being inspected.
The buyer should be able to obtain previous customer references to confirm the experience, and offer insight on the quality of the work previously undertaken.
Furthermore, beware the price that seems too good to be true! Never choose a less experienced facility because its price is lower. Remember, you are dealing with a multi-million dollar transaction in most cases, and you can be sure you will ultimately get what you pay for! The PPI is not something that should be shortchanged.
Other Bones of Contention
An additional area that occasionally arises, and needs resolving at the APA stage of the transaction is the scope of the inspection. Perhaps the aircraft buyer wants more inspection tasks to be undertaken than the seller is happy to include in the PPI.
For example, a buyer might require a highly comprehensive inspection on an older aircraft (common practice), or one that has been exposed to more adverse climates (salt air or dusty environment). Perhaps the aircraft in question has damage history that the buyer wants checked carefully, or was operated in a part of the world whose infrastructure does not support the same standard of maintenance as is common in the buyer’s region.
While the seller may be concerned that any corrective action required as a result of the more comprehensive inspection would eat into the value of the transaction to them, the buyer naturally does not want to pay for an unseen airworthiness issue that could have been identified by a more thorough inspection.
A good inspection shop will help clarify the scope of inspection available to both buyer and seller.
For example, LBAS offers its inspections at Levels 1-3 - Level 3 being the most detailed inspection - but with each level being clearly defined and based on the MRO’s experience with the specific aircraft type.
The buyer and seller, together with their representatives, must work together to iron out their differences and mutually agree on the scope that the chosen shop will perform. Once an agreement is reached, the APA can then define the delivery conditions between the aircraft buyer and seller, and the PPI can proceed.
What Happens in a PPI?
PPIs are a complex business with the various interests involved. An experienced facility will help manage the complexities, and LBAS aims to be a pivotal point in the transaction, seeking to help manage the process and ensure that both buyer and seller are happy with the outcome. But what, typically, can each party expect from the PPI process?
Typically at LBAS, once the aircraft buyer has initiated the process and requested a PPI, they will receive a proposal from the facility with the options available (Level 1-3 in LBAS’ case), with each level being clearly defined.
Alternatively, the buyer may choose to define their own inspection scope in addition to the facility’s recommendations.
Once selected, the scope of the PPI will be clearly defined, leaving no room for misunderstanding from any of the parties, and when the seller agrees to the scope and nature of the PPI, the buyer will pay for the inspection up-front.
The buyer, seller and facility should then seek to execute a three-party agreement that governs individual responsibilities, and establishes the lines of communication for the duration of the PPI – all of which are essential to prevent the process from becoming more complicated than it needs to be.
The aircraft and its records are then delivered to the facility and the inspection can begin. Ideally, both buyer and seller will have representatives on site throughout the inspection process.
In most instances, the PPI will be completed before any discrepancies are rectified. In any case all discrepancies found are communicated to both buyer and seller for them to agree and approve before any action is taken. Furthermore, at LBAS, no action to rectify a discrepancy will ensue without individual snag approval.
A final report will be generated, providing a summary of the aircraft condition and status of airworthiness related items – this is provided initially to the buyer and (if the buyer agrees) also to the seller upon request.
PPI Over, What Next?
Typically a PPI will identify two categories of discrepancy: airworthiness limiting and non-airworthiness-limiting.
Once one of the two parties approves the individual items, the facility will proceed with rectification. If neither party agrees to take responsibility for an item, that item remains ‘open’. Once all approved items are corrected, the work order is closed, the respective invoices are billed, and the transaction can move towards completion.
Thus you can see that close lines of communication are required for an aircraft transaction before, during and after the pre-purchase inspection. This is no time to try and cut costs, and both parties will need a full complement of aviation professionals and a knowledgeable, experienced PPI facility to help them navigate the process and come away from the transaction feeling as though they each got a great deal!