PART 1: AVIATION SECTOR SERIES
The purchase of an aircraft is a major commitment, and one that should be carefully considered; particularly when buying a used aircraft.
Likewise, when selling an aircraft there is a huge amount of information and documentation that needs to be drafted, reviewed, collated and processed, before any money or an aircraft itself can change hands.
The type of aircraft that is most suited to an owner’s needs vs. the type of aircraft an owner would love to own, are often two different things entirely. One of the most common mistakes made in purchasing an aircraft, is that prospective owners do not spend enough time analysing their requirements and being realistic.
As a prospective owner you should be considering matters such as the typical flight load, the distances you will want to travel and the possible flight conditions and topography; now look and compare aircraft options!
If possible and in the first instance, consider chartering the type of aircraft, in which you are interested, to determine how well it meets your requirements. Keep in mind that the biggest expense of owning an aircraft is not necessarily the initial purchase price but the running costs once you own it.
This is a crucial step!
Now is your chance to investigate and learn everything there is to know about the history of your proposed new purchase. Does the aircraft meet the required safety standards and does it have all its paperwork in place? Are any Supplemental Type Certificates (‘STC’) duly approved? What about the maintenance programme, paint, interior, flight hours, equipment on-board etc.?…All of this needs to be checked out.
Choosing the right person to carry out your pre-purchase inspection is also important. Make sure you arrange for someone with the correct qualifications and experience to undertake such work; once that aircraft ownership changes hands, it will be very difficult, if not impossible, to go back to the seller to complain or ask for compensation.
The ownership or title of an aircraft from when it was first manufactured can go through many localities or jurisdictions before it reaches the seller that currently has possession of the aircraft. It may even be the case that the aircraft was part financed or has been used as collateral, so it’s not unusual to find liens or encumbrances attached to the aircraft or engines.
This is why it is really important to thoroughly research and check whether your potential purchase is clear of all of these things, before you hand over any funds or sign any documents.
Once you have made the decision to purchase an aircraft, a Letter of Intent (“LOI”) is drawn up between the buyer and the seller, which clearly sets out the details of the intended sale – price, deposit amount, terms of sale, etc.
It should also include an expiration date for the proposed deal, giving you the chance to withdraw if things go wrong or take longer than expected. The details in the LOI will then be carried forward and used as the basis for the final purchase agreement.
You should expect to see an Airworthiness Certificate, which is usually transferred with an aircraft when it is sold. As a buyer, it is your job to make sure the airworthiness certificate is, as the regulations specify, current.
You will need to make sure that all the aircraft manuals are available and ready to be transferred with the aircraft, including the Logbooks for Engine and Airframe, Weight and Balance data, Aircraft Equipment List, Pilot’s Operating Handbook and Aircraft Flight Manual.
Maintenance records should be checked to ensure they are complete, no missing pages, fully signed and all inspections are current.
A Bill of Sale (proof of purchase or sales contract) will need to be drawn up and signed by the buyer and seller. This document will also be required by third parties such as the chosen aircraft registry and customs authorities so it is important that the correct information is shown in the right format.
The final steps to purchasing an aircraft take a lot of co-ordination. There are usually a number of parties involved, including the buyer, seller, lawyers, brokers, bank(s), insurance providers, escrow service provider etc. Title has to be transferred and the aircraft registered to the new owner, money has to move into and out of escrow, the aircraft has to be insured by the new owner, and the aircraft has to be physically handed over.
Purchasing an aircraft is a complicated business with many pitfalls along the way making it all the more important to choose an experienced and knowledgeable service provider.
With a comprehensive understanding of the industry, Sentient has vast experience in structuring the ownership of a range of aircraft including business jets and helicopters. Together with its professional team we are well placed to assist owners and their representatives in understanding the diverse requirements associated with not just ownership, but the registration and operation of private and commercial aircraft, and can work with you through all the necessary steps and procedures to manage the transaction effectively and efficiently.
For more information on our full range of aviation services contact: firstname.lastname@example.org.