They should form an integral part of due diligence in any aircraft transaction, but who pays for the findings that emerge from a Pre-Purchase Inspection, and what benefits do they offer both seller and buyer? Gerrard Cowan, with AvBuyer, learns more.
Pre-buy or pre-purchase inspections (PPIs) are critical to the aircraft acquisition process, ensuring the aircraft meets the required technical and airworthiness standards. It can be a complex area, with varying financial implications. But what are some of the common issues that arise from the process that buyers and sellers should be aware of?
The need for a PPI is clear. It isn’t possible to obtain a full understanding of the asset from a due diligence perspective based on technical specifications or remote records and photos alone, says Rob Watts, Director of Consulting at ACC Aviation.
“Performing a thorough inspection of the aircraft/engine and its records will ensure that the buyer knows what they’re buying, [the aircraft’s] technical condition and airworthiness status, and make the buyer aware of any potential maintenance expenditure liabilities they may be acquiring,” he says.
“The inspection also serves as the basis for further price (or other conditions) negotiations, should it be required.”
George Kleros, Senior Vice President of Advisory Services at JSSI, says a PPI should always be considered a mandatory step in the transaction process, adding that the complexity of the process is often impacted by such factors as the aircraft’s age and operating region. However, the PPI “may have been overlooked during the pandemic as one of the seller’s conditions to expedite the sale.”
Who Pays for any Issues the PPI Identifies?
Typically, the issue of who pays for what following a Pre-Purchase Inspection will be clearly identified in the aircraft purchase agreement, says Kleros.
“Airworthiness squawks - which require corrective action immediately to allow the aircraft to fly - usually default back to the seller. Non-airworthy discrepancies such as exterior/interior cosmetic issues or wear-and-tear could be deferred and deflected back to the buyer,” he explains.
There may be concessions on either side, but “it all depends on the willingness of the seller and buyer to compromise and come to an agreement.”
This article was written by Gerrard Cowan of AvBuyer and originally published on July 25, 2024.