NAFA member, David Wyndham, President of Conklin & de Decker, details a buyer’s dilemma: Two used business jets of the same make and model are listed ‘For Sale’ and offer remarkably similar specifications. How can you tell which would provide the better purchase?
The summary within the table below depicts the approximate aircraft specifications and shows that each aircraft offers updated avionics, a recent paint and interior refurbishment, and engines fully covered by an hourly cost maintenance program (HCMP).
At first glance, these two jets look nearly identical. But are they really? What are some things a potential buyer can do to differentiate between them?
Question 1: Time on Market?
First, it’s important to establish how long each aircraft has been listed ‘For Sale’. A little research by a broker might reveal that one of these aircraft has been on the market considerably longer than average.
If the average time on the market for this model is typically 180 days, but one of these particular jets has remained unsold for a year, you’ll need to ask why.
Question 2: Aircraft’s Home Base?
Next, a buyer should look at where the two aircraft are based. In our scenario, one is based in the Southeast US and the other in the Western US; one sits in a humid climate near the ocean while the other sits in a dry, potentially dusty, desert environment.
Corrosion may be an issue, and ought to be investigated with a thorough Pre-Purchase Inspection (PPI).
Where the aircraft is based may also impact the cost and time to close the deal, however. If your prospective aircraft is thousands of miles away in another country, it becomes harder to arrange demonstration flights and PPIs.
There may be additional tax considerations with respect to the import and export of the aircraft. The reregistration of the aircraft from one country to another can also be more complicated.
Bottom line: International acquisitions take more time and likely will cost more money. You can mitigate these concerns by using a broker and lawyers who are familiar with cross-border acquisitions.
Question 3: Cabin Connectivity?
The cabin connectivity is another potential differentiator. For example, Aircraft 1, represented in our comparison table states it has Wi-Fi – but is it a land-based Air-to-Ground system? If you’re flying long distances over water and need to remain connected, a satellite-based system will be required.
Satellite-based Wi-Fi costs more to install and much more for the data usage versus a land-based system. Thus, if Aircraft 1 has a land-based system and you require global access, when Aircraft 2 as a blank canvas may be preferable to avoid the added cost of updating and installing satellite-based Wi-Fi from ground-based.
Question 4: Paint and Refurbishment?
Both aircraft in this example claim to have recent paint and interior refurbishments. The sales photographs will reveal to you the colors and patterns used, but they may not reveal the quality of the materials used, and any possible wear-and-tear.
Moreover, the galley may be configured in different ways. Do you need a convection oven, or is the microwave sufficient? These details will help differentiate which model works best for you.
Question 5: Maintenance Status?
The biggest differentiator is not ultimately total time, paint color, or the latest avionics suite being installed. (All these things can add value, or cost money to change.) The biggest differentiator lies in the maintenance status and quality of the records.
If you’re seriously evaluating an aircraft, ask for a maintenance status report. Most business jets are on a computerized maintenance tracking system now, and a report can be easily generated showing the status of major scheduled maintenance items, completion dates, and what is coming due soon. At a minimum, the seller should provide the status of the major maintenance items.
As an example, if Aircraft 1 requires a major maintenance inspection in 2019 costing $300,000, while Aircraft 2 just completed the same inspection, then Aircraft 2 may be a better purchase at the asking price.
Another request to make, if it’s not already stated in the listed specification, is for the compliance status with various regulatory items (Reduced Vertical Separation Minimum (RVSM), Required Navigation Performance (RNP) and Future Air Navigation System (FANS 1/A)).
If the maintenance records do not provide a complete and accurate description of the aircraft and its airworthiness status, then the aircraft is not legal for flight. An inspection of the records is typically done during an on-site appraisal or a PPI. Both are for serious buyers and are preceded by a letter of intent to purchase, or other documentation with a legitimate offer.
Question 6: Charter Approved?
Is the aircraft Part 91 or Part 135 approved by the FAA? In Europe, there are similar specifications to follow. If you plan to charter your aircraft, purchasing one that is already in compliance with the local regulatory requirements for commercial operations is a plus.
PPIs and Appraisals are Vital
An old friend once told me, “Buying a used aircraft without doing a thorough Pre-Purchase Inspection is like playing Russian roulette with a fully-loaded pistol.”
There is no substitute for a PPI performed by a qualified facility. Preferably this will not be the same facility that conducts routine maintenance on the candidate aircraft. PPIs can be expensive, but significantly reduce the risk of unexpected out-of-pocket costs in those first couple of years of jet ownership.
An appraisal by a qualified appraiser is another recommended part of the pre-purchase process and will shed light on the current market for the model being considered, identify trends in sales prices, and ensure you are being quoted a fair price. If you are leasing or financing the aircraft, these are commonly mandated by the financial institution.
What to Conclude?
In summary, we leave you with the following important takeaways:
- Work with a broker who knows the type of aircraft you are looking to buy. They can steer you clear of the less-desirable aircraft and ask the initial questions to have you arrive at a suitable candidate.
- Find a broker familiar with international transactions if you are looking outside your home country for an aircraft. The added work can pay-off with a great aircraft.
- Always perform a PPI and an appraisal, once you are serious about the purchase.
- Never make the final decision to buy based on your emotions.
- If you have two options that appear equal, do a little research or get a professional opinion. Subtle differences can have a serious impact!
Buying the right aircraft takes a skilled and knowledgeable team to guide and advise you. It’s smart money and a wise investment.
This article was originally published in AvBuyer on October 10, 2018.
