The attorneys at Aero Law Group have handled a wide variety of aircraft transactions and have dealt with just about every issue that can occur in the process of acquiring and owning an aircraft. We understand that an aircraft can be an invaluable business tool, but buyers must make careful plans prior to signing a purchase agreement to avoid unnecessary surprises that could derail the transaction.
We often have potential clients come to us saying that “I have decided to buy that aircraft,” and when we ask why “that aircraft,” it is because a friend has one or a salesman has offered them one, but there is no analysis to back up the decision. That often doesn’t end well.
To do it right, the first step in buyer an aircraft is to build a team of experts to support you through the purchase process. You should consider the following experts for your team: an acquisition agent (broker); an aviation attorney; a technical expert who can advise on the aircraft’s physical condition; a finance expert such as your CFO or CPA; and tax professionals that can deal with both federal and state tax issues. A good team of experts can not only solve issues that can occur in a transaction; they can also avoid creating them in the first place.
Work with your team to determine which aircraft is right for your needs. While it may be tempting to choose the latest and greatest to roll out off the assembly line, that shiny new aircraft may not be the best option to meet your needs. And just because your friend bought a certain aircraft type and raves about it, doesn’t mean that that aircraft type is the right one for you. Start by identifying your mission requirements: the routes you want to fly; the number of passengers you will normally carry; and the number of hours you are likely to fly in a year. Your broker can use this information to help you determine the potential aircraft types that meet those requirements and then narrow down the list by analyzing qualifying aircraft types for availability, condition, and costs. This information allows you to build a negotiating strategy to acquire the best-suited aircraft for you.
Use your aviation attorney to draft and negotiate all the transaction documents and manage the delivery process and tax planning. Getting the details right at the start keeps a good transaction moving forward to successful conclusion and gives you the right off ramps if the aircraft turns out to be not as advertised.
Are you going to finance the aircraft purchase? The time to plan for financing is before signing a letter of intent on the desired aircraft. Engage with potential financiers early in the purchase process to understand what your true ownership cost will be, and what type of financing makes the most sense for you. Your choices range from your existing bank, that may want to finance the aircraft to keep your business, to banks and leasing companies that specialize in aircraft financing. You should understand your available financing options before making an offer.
Finally, don’t forget to plan on how to operate the aircraft before being locked into the purchase. Are you going to try to manage the aircraft yourself or are you planning to delegate that responsibility to your pilot? Are you instead planning to hire a professional aircraft management company to handle that responsibility? There are lots of choices here and a good choice can lead to a successful aircraft ownership experience. A bad choice can lead to other outcomes. Options to consider range from self-management to a local management company or to a large national management company.
We want you to have a positive experience with your aircraft purchase, and strongly believe that the right preparation prior to purchasing will help you reach that goal. The information in this article is an introduction to the measures you need to take prior to deciding to buy an aircraft and is therefore general in nature. Please feel free to contact one of our experienced aviation attorneys directly to discuss your specific business/personal needs.