Buying a jet sounds simple. You find one you like, go to the owner, pay them money and then you fly out on your new jet. That would be nice. But a jet is usually owned by someone in another country. Often, you choose to get finance for it. There could be a tax implication when you purchase it. You may decide to put it on a foreign registration. There are many facets to the process of buying that jet that makes it much more complicated than the act of money changing hands.
Because we are a company who is intimately involved in jet transactions daily, we have learned that if we can prepare our clients upfront to the possible complications and unexpected time delays, then the entire transaction process will be smoother and more enjoyable.
Below is the first part of our list of things you may not have expected to occur during your aircraft transaction:
- There can be a lot of people involved in your transaction. A transaction can involve the Principle, their internal lawyers, tax advisers, contract lawyers, accountants, the operator, financiers, a broker, an escrow agent, government entities and the inspection facility. And that’s just on the Seller’s side – you can have the same amount of people involved on the Buyer’s side. These parties are a very necessary part of the transaction that you want to be involved, but it often surprises clients when they realize the amount of people needed to complete the transaction in the most optimal way for both the buyer and seller.
- Drafting and agreeing to the Purchase Agreement takes more time than you think it will. The Buyer will often have to organize the structure/SPV that will hold the asset, how funds will flow through that SPV, and get their tax and VAT advice before the purchase agreement can be signed. There will be less to organize for the Seller, but they still have to get their tax advice before they can sign the PA. When the times comes to finally sign off on it, each party can do so with confidence that it is structured to best suit their legal, financial and personal goals.
- Arranging financing for your jet can take up to a month or longer in certain cases. This usually has less to do with the due diligence into the credit worthiness of the person wanting the loan, but more to do with the bank structuring their paperwork to perfect their security interests in the jurisdiction the plane will be registered, as well as properly implementing their guarantees across the SPV’s of the borrower’s corporate structure. If the borrower is a long-time client of the bank, this process can be shorter but new clients should expect a good deal of time for their financing to be finalized. The Financier will also want to be involved in the transaction process and usually require a visual inspection of the asset before funding is approved.
There are so many moving parts and aspects to an aircraft transaction. Your aircraft broker will and should manage and coordinate this process to make it as smooth as possible, but managing expectations of possible delays and complications can make the entire transaction more enjoyable.
Articles are written from real world experience by Colibri Aircraft’s individuals. If you have any questions or comments about the topic of this blog, please feel free to contact us at enquiries@colibriaircraft.com
