NAFA member David G. Mayer, Partner with Shackelford, McKinley & Norton LLP, discusses what it takes and who it takes to successfully complete an aircraft purchase.
No one should buy a used aircraft on the fly. But that does not mean the parties cannot, or should not, move quickly and efficiently to close a purchase. Some prospective purchasers treat buying an aircraft as if it is just like acquiring real estate, a car, or a boat. However, those purchases do not trigger similar complex and intersecting regulatory, liability, tax, risk management, financing/leasing, and technical equipment issues.
Sometimes trying to pace or schedule an aircraft purchase from any point in the deal continuum to closing seems more aspirational than practical. After more than four decades of practicing law, it seems no deal is the same; no deal is “simple;” and few purchases occur without external factors complicating decisions such as the U.S. presidential election, turbulent geopolitics, and economic conditions. How, then, does a purchaser start this buying journey, and what should the purchaser expect to happen?
Transaction Teams
First and foremost, a potential purchaser should hire an aircraft broker with aircraft market knowledge, strong business aviation industry relationships, team-oriented negotiating skills, and economic analysis capability. Some technical consultants also function well as brokers. Such brokers know and, in real-time, can apply to purchase decisions such factors as increasing aircraft inventories, constraints on pilot availability and high compensation, declining interest rates, and fluctuating prices in different aircraft makes and models.
Second—or first to help assess team members—a purchaser should select an aviation lawyer with deep aviation legal knowledge and deal experience, wide industry contacts, and a sense of urgency aligned with the client’s objectives.
Third, the lawyer and broker can and should recommend other appropriate aviation resources, including aviation insurance brokers, tax accountants, technical consultants, FAA counsel, and escrow and trust companies. These people, acting concurrently with the lawyer and broker, can help pick up the pace, facilitate a smooth closing, and enhance the quality of services to the parties.
Aviation professionals understand how to work rapidly, interactively, and responsively in tight coordination with their seller and purchaser clients while avoiding mistakes like those I previously identified (see “AINsight: 7 Avoidable Mistakes in Acquiring a Bizjet”).
Unfortunately, in my experience, some purchasers seem reluctant or decline to incur the expense for these resources, even in large aircraft purchases. They believe their inside counsel or other non-aviation lawyer alone can manage the process and aviation issues. Through no fault of those lawyers, the choice may result in significant mistakes such as operating the aircraft in violation of the Federal Aviation Regulations (FARs), incurring sales tax, structuring to limit personal liability, and reducing federal income tax benefits.
This article was originally published by AIN on September 13, 2024.
