By Vincent Wigmans
Buying an aircraft is a major commitment that should be carefully considered. A lot of people think they can easily perform a purchase by them self without overseeing all the aspects. One of the most common mistakes in the purchase of an aircraft is to buy it to quickly without considering all the effects of that decision.
They need to consider upfront details like the passenger quantity it needs to carry, if they fly with these passengers all the time or just once a year and if the aircraft will be used for private or for business purposes. But they also need to consider the range of the aircraft, the airports they like to reach and the region they will fly in. They should also ask themselves how many times on a yearly basis they will use the aircraft and how ownership compares to the cost of renting/chartering an aircraft. These are just a few considerations but there are many, many more.
With the necessary understanding and the right broker at their side, the process of buying an aircraft and operating can be simplified. The broker has the ability to streamline the entire process for a buyer but can also assist with the selection, budgeting and cost expectations, but most important to negotiate and close the best deal.
As an example, the Fly Aeolus Acquisitions Process consist out of:
- Analyzing the current transportation needs to advise which aircraft would fits best.
- Conduct an in-depth market research of all available aircraft that would fit these needs.
- Create a short list of 3 aircraft to consider incl. a review of the initial aircraft logs, maintenance tracking sheet, and other documents to prepare a projected analysis for upcoming maintenance.
- Discuss a strategy based on preferred aircraft.
- Negotiate with seller on behalf of the client.
- Prepare Letter of Intent (LOI) and open an Escrow account.
- Organize a thorough pre-purchase inspection on both the aircraft documents, as well as a physical inspection of the aircraft.
- Work out logistics of Pre-Buy inspection including estimated cost for all inspections/repairs needed before delivery.
- Prepare a formal Aircraft Purchase Agreement and present Aircraft Purchase Agreement to seller after approval from buyer.
- Oversee closing incl. acceptance flight and delivery.
Costs
Calculating with the asking price is the easy part but have you also considered all the other additional cost involved for an aircraft sale/transaction? There are many costs that you need to be aware of before purchasing your aircraft, think about cost for:
- Pre-purchase inspection
- Aircraft registration transfer
- VAT ruling request
- Customs
- Trust set-up (if needed)
- Escrow (recommended)
- VAT (if applicable)
- Maintenance
- Registration change (if applicable)
- Refurbishment to get the aircraft in the condition you prefer
- Insurance
- Ferry
- Crew
- Monthly loan
- Broker
- Fuel
- Parking, landing, hangarage
- Software update cost
- Maintenance reserve
- Depreciation
These costs are just a short summary of the many cost involved and should be taken into account when purchasing an aircraft.
Financing
Many potential aircraft owners do need finance for their favorite aircraft. A lot of them are waiting till they find the perfect aircraft and then start the financing request. During our last aircraft sale, we had two buyers who could not get any finance in the end. They spend a lot of money on a pre-purchase inspection and in the end, this was a waste of money.
A financing request will take weeks and we even had cases that took months, Best is to request a pre-approval finance request, for the expected amount of money you like to spend, before you even find the perfect aircraft. If you find the perfect aircraft first and then decide to ask for a loan, then it can happen that your preferred aircraft is already sold to somebody else.
Pre-purchase inspection
The pre-purchase inspection is an essential part of any used aircraft transaction. When you consider buying an aircraft it makes sense to include some of the Pre-purchase inspection (PPI) (initial aircraft logs, maintenance tracking sheet) during the preparation of a short list. Before you perform the in-depth inspections, you would like to get a rough status about the aircraft you like to add to your shortlist.
If the choice for an aircraft is made a Letter of Intent will be set-up and the scope of the PPI will be clearly defined. Also, the selection of a neutral maintenance facility will be made. The maintenance facility selected must not have a pre-existing relationship with the seller. This to avoid a conflict of interest. It is very important that the independent facility is able to demonstrate experience with the aircraft type being inspected.
The aircraft and its records are then delivered to the facility and the inspection begins. Ideally, both buyer and seller will have representatives on site throughout the inspection process. The PPI will be completed before any discrepancies are rectified.
A final report will be generated and delivered to the buyer, providing a summary of the aircraft condition and status of airworthiness related items. In this report a PPI will identify two categories of discrepancy: airworthiness limiting and non-airworthiness limiting. An unwritten rule is that the seller will pay for the airworthiness limiting items as they’re obliged to deliver a fully airworthy aircraft to the buyer. On the other, non-airworthiness items, the buyer and seller have to agree regarding cost of corrective actions. If the two parties approve the individual items, the transaction can move towards completion.
The above items are just a few of the items that need to be considered when purchasing your first aircraft. Do also check if the market value of an aircraft is correct, for tips on the pricing of an aircraft check our blog: Pricing an Aircraft right, here you can find factors that will influence the price of an aircraft.
On our Youtube channel we also answer the most common questions we received from first time buyers!
As Fly Aeolus has a large understanding of the market, we for sure can save you money when you purchase your first aircraft!
Please contact us today at sales@faaircraftsales.com or give us a call: +31 (0)15 820 0999