For years I've preached about the right way and the wrong way to buy (or sell) an aircraft. It's a step by step, linear process that, every once in a while, I let someone try to convince me we can go slightly out of order and when I do, it ends up with a dead deal or at best, a miserable one. After 13 years of experience and well over 150+ transactions, here it is, my key to a successful aircraft transaction.

PLEASE NOTE: These are the major steps put into simplified form. Do not try this at home!

1. Make an Offer - Whether informally through email or with a written Letter of Intent.
2. Your offer gets countered, or accepted. Buyer and Seller work towards drafting a mutually agreeable Aircraft Purchase Agreement designed specifically to outline everything going forward. During this time but preferably after:
3. Buyer may go for a visual-only, inspection. No wrenches, no tools, hands behind the back! Review logbooks for continuity, not content. This should take an hour or two at most.
4. Demo / Test Flight- Many Sellers will not allow a test flight at this phase. We do not like to unless an APA is executed.
5. Buyer decides to move forward with the purchase or backs away.
6. Buyer and Seller execute an agreeable Aircraft Purchase Agreement which outlines the following remaining steps:
7. Deposit- Buyer sends the Deposit amount to Escrow.
8. Relocation Flight / Test Flight - Seller delivers the plane to the Pre-Buy facility. (This is a GREAT time for the Buyer to perform Test Flight if they haven’t already.) Buyer pays for the plane at a set, hourly rate. Like an all-inclusive lease. Plus pilot airfare, hotel, per diem, if applicable.
9. Pre-Buy Inspection - Buyer works with Pre-buy Facility to develop a workscope and Buyer pays (or commits to pay) for the work as defined in their Work Order. That Work Order or a list of the specific tasks to be taken becomes a part of the APA.
10. Pre-Buy Inspection begins, and lasts the amount of days allowed per APA; usually 3-4 business days.
11. Once the Pre-Buy Inspection finishes, a Discrepancy List is provided to both Buyer and Seller. The Discrepancies are categorized as Airworthy (aka Mandatory), Recommended, or simply cosmetic.
12. Seller agrees to fix ONLY Airworthy (aka Mandatory) discrepancies identified. There will be several items of contention here. There always is. The general rule of thumb we use though is that if the Discrepancy would prevent the Pre-Buy facility from signing off the plane for Annual Inspection (or equivalent), it must be completed by the Seller. Believe it or not, the FAA does not strictly define the term “Airworthy” other than that the plane “meets its type design requirements and is in a condition for safe flight.”
13. Acceptance or Rejection - Prior to the Seller paying to fix discrepancies, the Buyer must either Accept the Aircraft and make the Deposit non-refundable AND agree to purchase the airplane pending only the rectification of the discrepancies. If you don’t close within the allotted timeframe, the Escrow agent will release your Deposit to the Seller. OR, the Buyer may choose to reject the Aircraft and have its Deposit refunded in full.
14. Once the discrepancies are rectified, there is usually 3 business days allowance to close. During this time, Buyer and Seller should work with Escrow to get their FAA Bill of Sale and Application for Registration signed. Also, Buyer gets closing documents signed, and seller coordinates with its lien holders to get lien releases ready to be filed.
15. Buyer and / or Buyer’s Bank sends remaining balance of funds to Escrow.
16. The plane is relocated to the Closing Location, mutually agreed upon at APA execution. The preference is to close on-site at the maintenance facility to limit risk of loss and having to deal with the logistics, weather and other variables.
17. When all closing conditions have been met, Buyer and Seller both instruct the Escrow Agent to close.
18. The Escrow agent wires the Lien payoff amount to any Seller lien holders; remaining balance wired to Seller.
19. Escrow files FAA Bill of Sale (signed by Seller) and FAA Application for Registration (signed by Buyer) at FAA in-person.
20. Ownership has transferred, the deal is CLOSED. Make sure your insurance policy is bound!

Footnote: At some point, you may have realized that buying an aircraft is a complex and complicated process and that you should probably hire a professional. Whether it’s our company or someone else, find someone you can trust to help you navigate the process.

For more information about our Aircraft Acquisition Services, please visit:
www.chaseaviation.com/aircraftacquisitions.html

(C) 2019 Chase Aviation Company

Chase Aviation is pleased to announce that our last blog post had an article written about it which got syndicated in over 100 different publications!  

Here's a few of the links:

http://www.live5news.com/story/36845414/news
http://investor.wallstreetselect.com/wss/news/read/35294053
http://markets.financialcontent.com/streetinsider/news/read/35294053
http://markets.buffalonews.com/buffnews/news/read/35294053/Three_Things_Buyers_Should_Know_Before_Purchasing_an_Aircraft

By Brian T. Chase

For the most part, the difference between an Aircraft Broker and an Aircraft Acquisition Consultant comes down to priorities. That’s not to say that an aircraft broker doesn't do the things that an aircraft acquisition consultant does, it's just about where their priorities are and their financial motivations.

To dispel any preconceived notions, it should be known that there is ZERO regulation of the aircraft sales industry. There are no Federal Aviation Regulations which apply to it, no internationally recognized set of standards to be adhered to and almost no barriers to entry into this industry. 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 though is “getting deals done.”

Not unlike a real estate broker, an aircraft broker only gets paid when they “get their deal done.” This is by design and it is how it has always been. And sometimes what you need when you encounter adversity during an aircraft purchase, is somebody that can just "get the deal done.”  

However, there will also be a time when what you need to do is to walk away from that airplane or that seller. After all, is the person who only makes money if the airplane sells motivated to give you that advice?

We started Chase Aviation Company eleven 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.

So 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. Not the pilot who wants to fly the next best aircraft in his career, not the seller’s broker who knows how to “get a deal done,” not the “buddy” who has a Learjet; the best aircraft for the mission, needs and budget.

We work with many first time aircraft buyers that currently charter, have a jet card, or fractional share but have a business need and as they fly more, see how insanely expensive those options will get. So for a clean slate aircraft acquisition, the first thing we do is assess the mission; what are the current and future requirements, typical passenger loads, frequent airport requirements, range profiles.

We are constrained in this analysis by a budget range that the customer sets and we then present a list of options that fit the criteria. It sounds pretty simple and something that a Google search can provide but all airplanes have “dirty little secrets” that don’t advertise themselves.

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.

Another area to watch out for is the contract used to purchase the aircraft. There’s a hundred different ways to buy an aircraft and there is no such thing as a “standard” or generic contract.

Every one 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.

• Who pays for the movement of the aircraft to Pre-Buy Inspection?
• What does the Pre-Buy Inspection consist of?
• What discrepancies found is the Seller obligated to fix (or not!)?
• Heck, what IS a “discrepancy” even defined as?
• 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 you’ve agreed to a purchase price, but before accepting the price. We call this “deal structuring.” Everyone thinks the purchase price is the most important part and I’d argue it’s one of the least. The first time aircraft owners we see have the worst problems are the ones who were simply motivated by that purchase price. But that’s just the cost of ownership on day one

So, what is the difference between an aircraft broker and an aircraft acquisition consultant?  In my mind, it boils down to the priority of who we represent.  We represent you, the buyer. That’s our number one priority. Not the broker, who wants the biggest commission; not the seller who wants to unload an airplane as quickly as possible; not the manufacturer, who wants the order; not your chief pilot, who wants the next step up on his resume; not your CPA, who wants what looks best on the balance sheet this quarter; not your publicist, who wants the plane that he’ll look the best stepping out of. And most definitely not your brother-in-law, who knows a guy. 

So, if you're in the market for a business aircraft or are considering it, put time and experience on your side.