Aircraft resale prices remain low, while companies and individuals have more cash on hand. For many, it makes sense to consider purchasing an aircraft for business or personal use. But the process of buying an aircraft is quite different than the process of purchasing a commercial property or a business.
According to aircraft acquisition consultant Brian Chase of Chase Aviation, there are three key items that surprise most first-time buyers. In a recent article, he outlines his concerns for new buyers.
1) Aircraft Brokers Aren’t Licensed.
It’s quite surprising to many first-time buyers that aircraft brokers are not required to be licensed. There is no state in the US or any governmental body that offers or requires licensure. While the FAA and international aviation organizations like ICAO heavily regulate the use of aircraft, there is no internationally recognized set of standards concerning buying or selling aircraft.
“Some of the ‘best’ (defined here as highest grossing) aircraft salesman have little aeronautical knowledge, no formal training and many have no college degree. What they are good at is “getting deals done,” said Chase. “This means that their interests and financial motive might be different than yours as the aircraft buyer, and the means they use to get that done is pretty much unencumbered by laws or ethical rules of any organization,” Chase indicated.
2) Use of Personal Aircraft is Highly Regulated.
While the FAA doesn’t get into the buying and selling or aircraft, they can be very restrictive about how specific aircraft are used under specific circumstances.
“As an example: You may like the Pilatus PC-12 (we do too) but did you know that the *Legacy* version of it cannot currently be enrolled on a charter certificate? It’s information like that that you’ll most likely never get from a Broker that has one for sale. Chances are, they didn’t even know that but if they did, they’d have no obligation to tell you,” said Chase.
Another example – if an aircraft flies in and out of remote airports in Colorado, altitude, short runways and the surrounding terrain make many common business jets impractical in winter weather. Of course, the winter weather is usually what makes these destinations the most attractive in the first place, Chase says.
Pilots that fly here frequently know why a Falcon 7x is preferable to the otherwise more popular Beechcraft 400 for getting in and out of this airport reliably. A broker may or may not know this, and may or may not choose to tell the client, unless he’s trying to sell a Falcon.
3) There Is No Standard Contract for an Aircraft Acquisition.
“There are a hundred different ways to buy an aircraft and there is no such thing as a “standard” or generic contract,” says Chase.
“Every aircraft sale must be appropriately tailored for the category and class of the aircraft, needs of both the buyer and requirements of the seller, and most importantly the conditions of the sale. Questions to consider - Who pays for the movement of the aircraft to Pre-Buy Inspection? What does the Pre-Buy Inspection consist of? What discrepancies subsequently discovered are the Seller obligated to fix (or not!)? What are the timeframes to accomplish all this in?
All of these questions, and much, much more have to be answered in this contract and the time to discuss them isn’t after the client has agreed to a purchase price, but before accepting the price.”
The Bottom Line – Buyers Should Find Someone They Trust That Will Represent Their Interests.
Aircraft buyers often find themselves surrounded by people whose interests in purchasing an aircraft are not compatible with their own.
The broker wants the buyer to make the decision that results in the biggest commission. The seller wants to unload an airplane as quickly as possible. Aircraft manufacturers want the order. If an owner already has an aviation department, he may find that his chief pilot wants the plane that will be the next step up on his resume.
His Director of Maintenance wants a plane he’s already familiar with maintaining and fixing. His CPA may want the plane is that is simplest to account for, or that looks best on the balance sheet this quarter. Buyers may find their publicist wants the plane that he’ll look the best stepping out of.
“And everybody has a brother-in-law, who knows a guy,” jokes Chase. “Which is why we’re in this business.”
“We started Chase Aviation Company 11 years ago and found ourselves constantly being put in position of choosing between our own self-interest and the well-being of our clients. We have walked away from hundreds of thousands of dollars of revenue that we could have earned had we just done what most every aircraft broker would do; shut up and 'get the deal done.' I’m not sure I should be proud of this but we have literally talked people out of buying an aircraft! Imagine that… Whether they weren’t going to use it enough to justify the real costs, couldn’t make a business case for it or just had downright unrealistic expectations, an aircraft sales company gave advice not to buy an aircraft. About six years ago we totally walked away from the 'Aircraft Broker' label and set out to do something which much more closely matched the service we provide; advice to aircraft buyers with only their interests in mind. For the most part, the difference in those two titles comes down to priorities. That’s not to say that an aircraft broker doesn't do the things that an aviation consultant does, it's just about where their priorities and their financial motivations are.“
For the full text of Chase’s article, see the website.
About Chase Aviation
Chase Aviation Company, LLC was founded by Brian T. Chase in May of 2006. Located at the Charleston International Airport (CHS,) Chase Aviation provides clients with aircraft sales related consulting services, primarily focused on turbine aircraft acquisitions. They can be contacted at http://chaseaviation.com or 843-628-7406.
###
Contact Aviation Business Consultants Intl. (ABCI) :
Paula Williams
702-987-1679
paula@aviationbusinessconsultants.com
1288 East 850 North Tooele UT 84074
