Are you considering the purchase of a used jet from abroad in 2017? Jet Tolbert offers a few tips on international etiquette that could tilt a ‘go’ or a ‘no go’ buying decision in your favour…
With demand for used jets mostly coming from the United States at present, buyers continue to include within their aircraft searches jets for sale that are based outside the US. The following paragraphs are designed to help US buyers increase their bargaining power and international sellers harness the current US-based demand.
A successful international transaction requires the buyer to have a clear understanding of the technicalities of importing an aircraft. Unfamiliar costs should be considered and calculated prior to contract negotiation, and the appropriate contractual mechanism should be built into the closing/import process. Correctly managed, such homework can be accomplished easily.
In reality, though, owing to cultural differences and/or a lack of familiarity with regulations, an unwitting buyer can be sucked into a black hole of convoluted negotiation ambiguity—a fate that can burn time and money (and the opportunity to purchase another aircraft).
From the selling perspective, it is vital for international sellers to send the right message by understanding the market demand coming from the US and showing a willingness to adjust their pricing expectation. As an example, the time and expense of international travel as well as the process of switching an aircraft from EASA to FAA jurisdiction can be considerable for the buyer.
Therefore, a savvy seller will appreciate the buyer’s perspective and integrate planned ‘concessions’ into the negotiation to help sell the aircraft more quickly.
Obviously achieving the right price needs a balanced approach by buyer and seller. But sellers have to be keenly aware of the cost of owning the aircraft for a longer period as a delay to the sale occurs, and truly understand the impact of depreciation.
It is not uncommon to find an international seller holding out for ‘just a little longer’, passing on an offer deemed too low only to sell their jet for dramatically less further down the line. We are aware of an aircraft that was not sold a year ago because the seller rejected a solid offer that was 13% higher than today’s ask price.
When combined with the other costs of ownership during that period, the seller’s loss is probably closer to 20%. This example is a clear case of a seller suffering as a result of eschewing trusted guidance to make the right decision at the right time.
Most obstacles to international aircraft sales are surmountable. Often, however, the respective parties to a transaction fail to consider the cultural differences, misreading the signals being sent from the other side of the negotiating table before and during closing.
The US buyer needs a clear signal regarding when they have a partner who is serious in their commitment to sell the aircraft and close the deal. Detecting that sign can be very difficult if the buyer is unfamiliar with local business practices. Misreading of cultural cues and etiquette, one party can easily gain a false expectation or understanding of the other side.
Whether in client consultation meetings or cross-border negotiations between buyer and seller, such miscommunication can lead to unnecessary waste of time and money at best, and a missed opportunity at worst.
While it is ideal for all parties within the transaction to adopt a direct manner, culturally some sellers will be perceived as ‘hiding’ information and motives. This may be expected practice within the seller’s culture, and US buyers need to be clear on these customs to avoid misunderstandings and loss of trust during the transaction.
That said, there are extreme cases in which an aircraft and its equipment may be deliberately misrepresented, or a company is hiding its involvement in pending litigation. A buyer must be discerning to tell the difference. Ultimately, the seller as well as the broker will likely have advisors within their own region. Between them they will be able to read into the motives of the seller early in negotiations.
The best way to move forward with an international transaction is to partner with a broker representative who can demonstrate deep industry knowledge in multiple regions and has a long history of success in transactions around the world.
Familiarity with technical aspects of trans-border transactions is required, along with strong industry connections that will reinforce a deal structure and offer insight into understanding ‘cultural norms’.
In today’s used jet sales market, the best value may come from an aircraft under international ownership. This is an exciting time in our industry, and we expect international sellers to continue to drive the market on the supply side for the time being. As demand and aircraft values strengthen in the domestic US market, those international opportunities will become increasingly alluring – and all participants could benefit.
An understanding of international business etiquette becomes crucial to make sure you’re proceeding down the right path, with the right seller, and not wasting time and missing a good jet for sale elsewhere.