When Obstacles Become Opportunities
There are many factors to consider when purchasing an aircraft. Some are personal, such as the interior style, and others are tangible, such as avionics compliance. But jets are complex machines and when something appears to be a hurdle, it could possibly be solved with creativity and an open mind.
LOCATION
In today’s world of COVID-19 travel restrictions, the physical location of the aircraft and where the inspection or closing will occur can cause serious logistical issues for a buyer.
For example, most buyers want to view an aircraft before they buy it, and if the aircraft is located in a country with travel restrictions, this adds a heavy layer of difficulty. But it does not mean the aircraft should no longer be considered.
As an option, the buyer could offer to pay to move the aircraft to their location, and if the transaction moves forward, the cost can be credited towards the sale price. Or if they decide not to purchase it, they can pay to move the aircraft back. We are advising clients at this time to resort to this option after they have eliminated other possibilities as it could require extra costs.
Another factor is where the Pre-Purchase Inspection will be conducted. Can the buyer send his representative to oversee the inspection or are travel restrictions limiting who can enter the country or airport where the inspection is to occur? If a broker or manager is unable to enter the maintenance facility’s country, it is often possible to hire a local, trustworthy representative who can report back on activity and work being performed.
This also applies to where closing will take place. We have closed a few transactions in the last few months in the Channel Islands. Only essential crew members are allowed onboard the aircraft to land, and even then they cannot leave the area right around the aircraft nor enter the FBO. Closing in such a location can be accomplished, but you must know the details and rules of the place you are going.
Location issues can be overcome with forward planning. Buyers and sellers must cooperate with each other and find mutual solutions to work towards a successful transaction.
REGISTRATION AUTHORITY & AVIONICS
A potential aircraft to purchase may be on a registry that complicates the transition to the buyer’s chosen registry.
Each country register is different, but the main two standards they follow are the FAA (from the USA) and EASA (from Europe). As the two standards have significant differences in requirements regarding certain specifications, aircraft cannot always go from one registry to the other. This is more prevalent in the light and mid-size jets where avionics can differ from model to model. EASA requires a flight data recorder and TCAS II to be installed which the FAA does not. Both of these avionics are very expensive and time consuming to install. You must know what specific requirements can be overcome and which are too complicated or too costly to be worth your while. Most buyers understandably want to fly their new jet as soon as possible after closing, and installing expensive avionics is not a desirable prospect. Knowing your requirements in advance allows a buyer to refine their search and eliminate unsuitable aircraft.
There can also be certain modifications done to a European aircraft that are not and will not be approved by the FAA and vice versa. This is frequently the case when it comes to installing WIFI systems, satellite phones, or other avionics where a modification approval is used that was approved for the current owner’s registry but not for the buyers registry. It is very costly and time consuming to get a modification re-certified by an opposing register.
Your broker should assist you in the details of what is acceptable for each registration. Narrowing your search down to those aircraft that can most easily be transferred to your register of choice will save you time and money.
INTERIOR
An aspect that should not cause a buyer to immediately turn away is the interior. Often with pre-owned jets, the interior is in less than pristine condition or not in the style you would desire. Interiors are subjective and one person’s style is not necessarily shared by all. But changing out an interior is really just a function of time and money. It is a fairly quantifiable problem to overcome and comes down to the question: “Do you want to buy the aircraft and undertake a refurbishment in the first weeks of ownership?”
Costs can be quoted for seat recovering and new carpet and anything else you want to change. A full interior refurb with woodwork and new leather can take 6-8 weeks, and smaller changes such as carpet and seat re-dyes can be done in a matter of days.
A tip of advice is to refurb the interior the moment you purchase the aircraft, so you love it the moment you first fly it. We have seen that when buyers wait a few months to do the interior work, there are often too many reasons to not put the aircraft out of commission for the time required, and they end up being less happy over the long run flying an aircraft that is not exactly as they want it.
Do not let a bad interior stop you from considering a good aircraft, but do make sure the price and other parameters of the aircraft make the investment of money and time worth undertaking for you as the buyer.
INSPECTIONS
A looming inspection schedule can often be a turn-off to buyers especially on heavy jets. These inspections can cost a lot of money and require serious down time. Generally, sellers are amenable to performing major inspections that are due within the next 12 months in the Pre-Purchase Inspection. The seller would have to do that inspection at any rate if the aircraft does not sell and as a buyer, you are buying at an optimal time in the aircraft’s life cycle to reduce your future cost of ownership.
Performing a major inspection as part of a pre-buy also allows the new owner to get a thorough look at the inside of the aircraft that a normal PPI would not provide.
Trepidation can arise when a major inspection is due in and around 24 months. It is a bit too far out to include in the PPI and would throw off the inspection schedule for the buyer. But if an inspection is around two years out, mentally budget that money and time into your consideration. Are you willing to go through the cost and downtime in the near future? The aircraft may be a great fit for you in all other areas, and it makes sense to move forward with it. Or if not, you can look at older aircraft that already have those major inspections completed or a newer aircraft with the inspection further in the future. There are many options that your broker can assist you with walking through inspection schedules and estimates on what they cost.
The key with purchasing an aircraft is to feel confident about your choice.
Arm yourself with knowledge on what potential hurdles could be used to your advantage. There may be times when walking away from an aircraft is the best decision for you. You may want a more simple turn-key opportunity. But there may be other times when an aircraft meets many of your criteria but has one obstacle to it that you want to try and overcome. Speak with your broker on your priorities and how to set up your aircraft search to best suit your needs.
This article was first published in our Fly-By Newsletter Issue 16. For market updates and more articles like this, subscribe to our newsletter and receive it directly to your inbox. Subscribe through the contact box below or at this link: Subscribe here
