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Private Jet purchasing process: Steps and recommendations to avoid expensive mistakes

If you have already decided to buy a private jet there is still a long way to go until you can begin to fly it. How do you follow this path will determine the success or failure of the project. Let’s review the recommended steps since a company or particular has taken the decision, until the aircraft can begin to fly with the new owner.


1.- BUILD YOUR TEAM. THIS IS THE KEY TO SUCCESS

An aircraft is a very expensive asset. There are many factors involved that must be supervised by expert people. Don’t trust in anybody that tells you that can deal with all aspects of a jet acquisition with just one person. 

There are companies and individuals with a long experience in law, taxes, financing, importation, engineering, certification, maintenance, operations, etc. You will need advise from all of them so try to find the right people and gather a good team to support your decisions. This is the key to success.

If you have a good team of advisors you will buy a good product adapted to your requirements saving time and money. Otherwise you will risk hundreds of thousands or even millions of dollars in the operation.

To summarise, these are the main areas of expertise you will need to cover:

  • Finnacial, Law, Taxes & Importation. As any high value asset, you will need to consider how to finance it. And not only the purchase but the future operation. Usually you will have to import the aircraft into your country and pay taxes like Registration Tax, VAT, importation, etc. If you don’t know how to do it, you can suffer investigations and penalties from your Government. For the future operation, consider how are you structuring the charges in your organisation. Are you using the aircraft for your corporation, for your private flights, for charter? There are different tax implications for each model. It will be also important to choose the registration country. You also need to supervise several critical contracts. Your lawyers must review each one to be sure your rights are reflected as well as seller’s compromises.

  • Engineering, Maintenance & Certification. Each aircraft is completely different from a technical point of view. You need technical advice to know what type of aircraft will be the best for your flights profile and how should be equipped.  Another key event is to define and supervise the technical delivery and the PPI (Pre-Purchase inspection). Especially in the case you decide to buy a pre-owned unit you need somebody to investigate the full history of the aircraft. We are not talking about checking one maintenance logbook but to fully review the whole records, that can be dozens of boxes as well as check the physical status, compliance with special requirements of the future country of operations, etc. They will help you to determine the real value of the asset you are purchasing as well as to guarantee you receive it in perfect conditions and that will be accepted by the country of registration. They will also recommend how to keep the value in the future.

  • Registration & Operations. A crew must be chosen and begin their preparation to be able to fly the aircraft. Your preferred routes must be evaluated to know if the aircraft will be able to use them in terms of avionics, fuel capacity, etc. 


You will also need support to choose who will manage for you all the aspects of the future operation: Flight Ops / Crew, Handling, Dispatch, Maintenance, Airworthiness, Trainning, etc.

Make sure that all the people involved have the experience and background in the areas they are supervising. And, again, don’t trust if one person says that is expert in all areas. Probably will have a general knowledge of everything but will not be expert in anything.


2.- DEFINITION. CHOOSE WHAT YOU REALLY NEED.

First of all is to choose the aircraft model will be better to fulfil your expectations. Resist to make just an emotional decision. Perhaps the aircraft you like is not the aircraft you need. 


Think about your needs:


MISSIONS

Where do you want to fly and how often? If you use to fly less than 2.000 miles then you don’t need a long range aircraft. More over, you don’t want this kind of aircraft as the operation will be much more expensive and, perhaps, will suffer restrictions to land in some small airports that maybe you want to use.

Perhaps, for the same price, you will be able to choose between a pre-owned bigger aircraft with many flight hours or an almost new smaller model. The decision should be taken based on the use you want for it. If you don’t need the big one, a smaller new aircraft will be more satisfactory in terms of interior and exterior state, future maintenance cost, operational flexibility, etc. Of course, if you use to fly long range don’t choose an aircraft that has to make stops in many of the usual routes or you will loose the main advantages to have a private jet.

How many people use to fly with you? If you don’t fly long routes but you use to fly with 12 people, a small aircraft will not be enough. Or if you fly further, but alone, perhaps you need to find a medium range aircraft with an interior configuration with less seats and perhaps a couple of divans to convert into a bed.

Define the airports you want to use more often, as well as analyse the routes in terms of fuel consumption, speed, navigation capabilities, etc. You will need experts in operations / dispatch to help you with this issue. 


MODEL AND AIRCRAFT AVAILABLE: NEW OR PRE-OWNED

Once you have defined the mission profile, and your budget, you will have different aircraft from different manufacturers to choose. You have also to decide if you want a new aircraft or you don’t mind to buy a pre-owned one with a lower price.

Of course, a pre-owned aircraft will be cheaper and can be available immediately while for a brand new aircraft perhaps you will have to wait months or years to get yours.



Let’s summarise the characteristics of each choice:


Price: Of course, the price will be lower for a pre-owned unit except some “almost new” units with especial equipment that could be immediately available. This is not common nowadays but it was in the past when delivery slots for some long range aircraft were reserved for years and pre-owned units, were sold at the same price or even higher.


Availability: Usually pre-owned units are available in a short term, just after finishing the sale process. Be careful, some pre-owned units will need to be grounded for a long time if they are not certified to fly in your region. For example, we have seen US registered aircraft purchased by European customers that required modifications that took more than one year to be done or approved. If you want to repaint or refurbish the interior before begin the operation, count with one or two extra months after closing the deal.

For new aircraft it will depend on the brand and model. Some models are available almost immediately, especially in case of small jets, but others have a delivery time of one to three years.


Warranty & Pay Per Hour Programs: Some pre-owned units are still under manufacturer’s warranty and enrolled in engine, APU or airframe programs. The price will be very different if they are in this situation or not. To enrol an old pre-owned aircraft in an engine or airframe program can cost several millions so the price will be obviously very different. Evaluate each option and don’t take risks.

New aircraft will have the manufacturer’s warranty but you will have to choose if enrolling it in a pay per hour program. Study the numbers. Not all the programs are the same and not all of them are good for everybody. If you don’t want any risk and pay a monthly fee, the best option is to choose one of these programs. If you prefer to assume the risk and pay for the maintenance only when it is required, probably will be cheaper but the risk of a big failure will be always there. Consider also where the aircraft will be based and who will perform the maintenance tasks. These kind of programs can reject the coverage if the works are not performed in an approved center and perhaps you don’t have any one near you.


Re-Sale Value: Consider how long do you plan to keep the aircraft with you. There are models whose depreciation is very fast or aircraft with interiors or special modifications that will not be easy except by another client. 

If you plan to sell the aircraft in a short term, try to choose a jet with a standard configuration, neutral interior and paint and enrol it in airframe, APU & engines programs.

During the period that the aircraft is covered by the manufacturer’s guarantee these programs will be cheaper and you will be able to sell the aircraft with better conditions. If the aircraft is new, you can even negotiate with the manufacturer a purchase option after a period of time if you are planning to buy a new one after.

Other option is to negotiate a leasing with a financial entity that can recover the aircraft after a period of time. Be careful with delivery conditions in the leasing contract that can be tough, as usually you will have to comply with some conditions like fresh paint or minimum life percentage for notable parts.


Customisation: If you buy a new aircraft you will be able to choose between the options that the manufacturer offer, as well as to chose some customer installations, materials, colours, etc. Be aware that you cannot install in an aircraft anything you want. Safety, weight, structural and other requirements and regulations will prevent or restrict some especial demands. Also be careful as some options can require a certification that can take a lot of time (and money) or may be not approved for your area of operation.

For a Pre-owned aircraft you will be limited to the current configuration unless you want to paint, refurbish or install extra equipment. In this case the advice is the same. Be careful with the time (and money) required to do it as well as with the certification of any modification.



Try to choose available and certified options. Unless you really need them, avoid high cost non-standard options. 

3.- PURCHASING THE AIRCRAFT. TRUST YOUR TEAM

Our recommendation after you have decided what models comply with your requirements is to make a market analysis.

Study what units are in the pre-owned market, compare with the new units and determine which are the most interesting for you, evaluating your budget and requirements.

We have now two different ways if you decide for a new or a pre-owned aircraft:


New Aircraft. The process is easier. You will have to deal with the brand representative in your area and reserve your unit. You will have to sign a contract and pay a deposit. Depending on the aircraft the manufacturer will determine a payment program until final delivery. Be careful with the terms of the contract as they will determine manufacturer’s compromises in case of delays, failures in quality, delivery conditions, certifications, guarantees, etc. Your technical and law team must supervise this contract. 

When delivery is ready you will have to sign the bill of sale and transfer the rest of the aircraft price.


Pre-owned Aircraft. The process from delivery to the beginning of operations, is the same, but there is an important complication before delivery that supposes the main difference. You need to go trough a PPI process that will determine if the asset you are purchasing has the value you are paying for.

This process will begin with a LOI (Letter of Intent) that you will sign with the seller when your team has determined which aircraft is the best for you. The seller will probably delegate in a broker that will represent him in the operation as the person in charge of the selling and, perhaps, a team with financial and technical people, because a selling can be as complicated as a purchase. We will dedicate another article to this.

Once you have signed the LOI and deposited an agreed amount in an escrow, the seller will provide you with access to the whole records and will begin a PPI. Be careful with the LOI as you have to agree in this document the scope of the PPI, where and when will take place, responsibilities of each part, delivery conditions, etc. If you make a mistake here, you can loose the deposit, at least. For example, if you sign in the LOI that the aircraft will be delivered in compliance with FAA requirements and you pretend to operate the aircraft in Europe, you can get an aircraft with a modification that is not EASA certified and all the time and money required to re-certify it will have to be paid by you. Make sure that the LOI is supervised by your legal and technical team.

After signing the LOI will begin the PPI process that we will detail in the next chapter.



4.- AIRCRAFT DELIVERY. COORDINATION & TEAMWORK

New Aircraft.

Your team must supervise the process since you sign the purchase agreement with the manufacturer, to avoid delays or last minute surprises. Your technical advisors must supervise with you the options of equipment, interior, painting, certification, etc. Then, they will have to supervise that the manufacturer complies with the compromises of time and quality for the delivery.

In the meantime, prepare your financial structure and future operational organisation.

The most important event will be the aircraft final delivery.

Final delivery must be prepared carefully. The technical team will have to be at manufacturers’s facilities in advance to prepare all technical aspects and supervise the final quality of the product.

They will have to prepare a lot of paperwork for the Aviation Authorities that will have to accept the aircraft as well as make sure that any last minute discrepancy is rectified. They will participate in the delivery flight and reception of documents, subscriptions, enrolment in programs, etc.

At the same time, law and tax advisors will prepare the final contracts for signature: Bill of Sale, new registration and ownership documents, etc. as well as prepare the importation process.

New operator, or NCC/CAMO organisation if private, must be also involved to be able to begin the normal operation as soon as the aircraft is sold and imported.


Pre-owned Aircraft

When the PPI begins, your technical team must be always there, supervising that the Service Center performs all agreed inspections and that any discrepancy is rectified in accordance with regulations and LOI conditions. Once the Acceptance Document is signed there is no way back and no guarantee for any undiscovered issue so, make sure you include in the PPI scope everything that your technical team can recommend: borescope inspections, flight test, records survey, operational & functional checks, etc.

A list of discrepancies must be created after the PPI is completed determining who has to pay each one. Usually, in the LOI is established that the seller will pay for any discrepancy that affects the airworthiness and the buyer any item that is considered cosmetic. This is the reason why it’s so important a good definition in the LOI. If you have written, for example, that the aircraft must be delivered with “all original equipment in working conditions” and the microwave is not working, the seller must pay for it. If you have just written that the “aircraft will be delivered in airworthiness conditions” he will not pay for it, as microwave is not considered an “airworthiness” item.

After the PPI is finished, all discrepancies have been rectified and paid by each part. With the Release to Service issued and the technical acceptance of the aircraft by the buyer, the Bill of Sale can be signed. At this moment, the financial & tax team should have the import process prepared and the technical team should have coordinated with the Aviation Authorities and the new Operator (if it is going to be operated in an AOC) the acceptance of the aircraft and the issue of a new Airworthiness Certificate (if required). The process will be different depending the country of origin and destination, as well as the kind of operation chosen.



5.- CONCLUSIONS

To have success in a business jet purchase we need to assume that the process is really complex. A private jet is not a car or an apartment. It is a really expensive and complicate asset to buy and to maintain. 

This is the reason why the key to success is to have a team involved since the very beginning of the project to the final delivery and also during the future operation.

Be sure that the money invested in the team will be worth it. We have seen many buyers loose hundreds of thousands because they just accepted the aircraft after an standard PPI without supervision or because they chose an aircraft that was not certified for the area where they wanted to operate the aircraft.

A real example. A Global Express with US registration was purchased to operate in Europe. It was found that aircraft interior was not certified in EASA. Certification and refurbishment cost 1.5 M USD and one year with the aircraft grounded. Moreover, it was a low s/n with a former especial equipment that caused extra corrosion and interference with other equipment so, when it was sold a few years later the aircraft value had fallen to less than the half of purchasing price.

Don’t risk. You need a private jet to improve your business not to complicate it.

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