Aircraft For Sale Aviation Articles

Yearend Aircraft Purchases - A Good Deal?

There is less than a month left in 2013. For many businesses, this is a time to look at yearend capital purchases. Buying in December can get a business a nice tax deduction for the year while spending the money as late as December 31. With new business aircraft, you commonly see strong sales and deliveries in the last quarter, December especially. To see if this makes sense from a tax perspective, consult an aviation tax authority, not me. Here are three tips if you find yourself in an airplane-buying mood.

Tip #1. Take the time to plan on what aircraft to acquire. If this article is your first inkling that you want to buy, wait until next year. Buying on impulse often leaves you disappointed. What looked or sounded great in the moment can turn out not to be what you thought you were getting.

When looking at what aircraft to acquire, be objective. Objective means choosing criteria that can be measured. Objective criteria should also be specific to the mission assigned to the aircraft. That way you can avoid over-buying - getting far too much aircraft than you really need. If you are clear about what you need, it is easier to set up your criteria. “Go anywhere, anytime” might set you up for a supersonic tilt-rotor amphibian, but can you afford that? Make sure that whatever aircraft you acquire, that it meets objective criteria for meeting your business’s air transportation needs.

Tip #2. Get your acquisition team together. To get the tax deduction for a business aircraft for 2013, you will generally need to take delivery and place the aircraft into service by year’s end. Ownership involves the title, insurance, sales tax planning, and possibly financing. The bigger the aircraft, the more complexity these deals seem to have. Make sure that your team: legal, tax, insurance, finance, etc. are informed and prepared in advance. Note: in advance is not the day prior to delivery. These professionals are quite busy in December.

Tip #3. Evaluate all of the costs involved in the owning, and operating, of the proposed aircraft. You may be getting a sizeable discount on the aircraft you are looking to purchase, but if it is going to eat up a lot of money in operating expenses, then the deal may not be the best one financially. Look at the total Life Cycle Costs: acquisition, operating costs, finance or lease costs, and potential resale value after a period of use.

Being able to get another tax deduction in 2013 with the acquisition of an aircraft may be great in 2013, but may not be as helpful to your company in 2014 and beyond. As part of the aircraft life cycle costing, you may want to look at your company’s projected profits over the next few years. 2013 may be a profitable year (congratulations), but having a larger write-off next year may be better.

Bonus tip #4. Good things come to those who will wait. When the new aircraft manufacturer makes a lot of year-end deliveries, many of them will come with a trade-in. So Early 2014 should see these same folks with some good deals on pre-owned aircraft. Maybe, just maybe, the deal on the older aircraft might exceed to deal on the new model.

I did not see any “Black Friday” deals on new aircraft. But, depending on the manufacturer and model, there may be some great deals to be had prior to yearend. If you have planned for this in advance, you should be able to make things happen. P.S. - cash is king here as the deal would be guaranteed to close.

Jurassic Jets

Are older business aircraft even sellable? And how old is OLD?

At the recent NBAA convention in Las Vegas, I sat in on several briefings about the state of aircraft sales and residual values. It was unanimous that older aircraft are not selling. No news there. It's been that way since 2008. What was interesting is the speakers' definition of "old."

I've been going with older than 15 years as "old" in terms of the ability to sell at a reasonable price within a reasonable amount of time. Age 15 also works with getting financing: The Aircraft Age + Length of Lease/Loan should not exceed 20 years. Age 15 allows for a five year financial deal. It seems like the new "old" is younger than that. And no, we can blame it on the Millennials. Blame it on the economic booms of the late 1990s and again in the mid-2000s.

An "old" business airplane is now older than age 10 in terms of maintaining a residual value and being sellable.

Glancing through the GAMA shipment database by year, business aviation saw significant increases in sales and deliveries during the past 15 years. Many manufacturers saw their sales double, peaking in delivery backlog in about 2008. Thus, there are a large number of relatively recent vintage airplanes available that are in the 5 to 15 year group, and especially aged 5 to 10.

The future air navigation systems that have been developing are in place or will be in the next decade. New or nearly new aircraft are either capable of using the full airspace, or can be easily upgraded. Older aircraft may not be so easily updated, especially older business jets that need the upper altitudes for efficient flight.

Older business aircraft, especially jets, have operating costs significantly higher than their new equivalents. A second or third overhaul on most turbine engines will be very costly due to retirement components within the engine. Unscheduled maintenance is also much higher for these older aircraft.

Lastly, emerging markets outside the US can, and do, purchase mostly new or newer aircraft. Developing nations are adopting the EASA regulations as it relates to aircraft aging issues. Some even place an age limit on imported aircraft.

So we have a large number of recently produced aircraft, many with updated avionic systems, that can be purchased for quite reasonable prices. Financial institutions have the money to lend, provided the credit is excellent. The 20 or 30-year old airplane costly to maintain, and sending them to a developing nation to sell isn't viable. These aircraft are just not selling. Let’s take a look at an example.

Jet Years produced Percent Fleet For Sale Average Days Listed For Sale
Gulfstream GIII 1979-1987 18% 828
Gulfstream GIVSP 1992-2002 13.56% 375
Gulfstream G450 2005-current 7% 239

You can buy a used GIII for under $1 million. But almost no one wants one even at that price. Newer GIVSPs and especially the G450 have a market.

One of the speakers referred to the oldest business aircraft as "Jurassic Jets." They are from a bygone era of cheap gas. They are not selling and the financial institutions do not want them on their books. From what the speakers say, and I agree, this is not going to change. Many of these aircraft are with their last owner.

Why go the Extra Mile?

Sometimes it pays!

Jim Odenwaldt
Elliott Aviation Aircraft Sales Manager

www.elliottaviation.com

In our previous articles we talked about the technical side of our deals; now it is time for a discussion about the power of relationships. Dealer/Brokers thrive on repeat business from our core customer base. We all need new customers to keep our database alive but we must nurture relations with customers who have already used our services. As our client’s needs change, we need to be willing to adjust, stay intelligent and supportive.

I spent my first 16 years in the Aircraft Sales business with a full-service dealership. Our sales team represented a full line of new piston through turboprop products and enjoyed a large protected territory. We had the backing of an MRO division that grew to several OEM Authorized Service Centers. We were stocking dealer and did our own demos, deliveries and often customer training . This offering was ideal for many owners as they had local and complete support as they moved up the product line.

In the late 90’s I met an owner of a cabin-class single who was ready to move up and purchased a new twin turboprop. He would base with us and be a perfect customer… buying airplanes, hangar, fuel and maintenance. My company was happy with the deal and also happy to tell me that I would personally be doing the 200 hrs of transition training that the insurance company had decided to require. It was immediately obvious he was excellent pilot, fun to fly with and the mission was complete in four months.

The next two years went smoothly with his ownership experience and he was ready for the next logical transition to a light jet. He was a new airplane buyer and the OEM we were representing did not have a single pilot jet to offer. I painfully sat on the sideline while he bought a new airplane from the competition. We still had a fuel customer but had lost the sales and MRO business.

Interestingly, it became evident that the new jet service center being 200 miles away was very inconvenient, especially compared to the on-field service that he had become accustomed to with our product. My company was supportive of my idea to provide shuttle service to and from the competition’s facility, as needed. Yes, it was usually a piston airplane but it was a ride and he was very appreciative. This offer of support proved key, since after two years, our OEM had a single-pilot jet to offer and the customer was ready for an upgrade. We participated in the new delivery, got our local facility MRO Factory Authorization for the new jet and sold the trade!

The decision to think outside the box and offer the extra support with this client proved to be very worthwhile. He has provided countless referrals and has personally owned eight airplanes, bought two for his company and had us involved in 13 transactions. Without the decision to offer the support when he went with the completion it would have most likely ended with just the one sale. We have remained loyal to each other and that’s a win-win.

Jim Odenwaldt has extensive flying and technical experience with all Beechcraft products and sales expertise with all models of Hawker/Beech, Citation and Gulfstream. After graduating from Embry-Riddle in 1989, Jim worked as a CFI and maintenance technician. While with American Beechcraft Company, he was responsible for aircraft sales in the mid-Atlantic region. In addition to his ATP, Jim is an A&P and type rated in the Beechcraft Premier.

Elliott Aviation is a second-generation, family-owned business aviation company offering a complete menu of high quality products and services including aircraft sales, avionics service & installations, aircraft maintenance, accessory repair & overhaul, paint and interior, charter and aircraft management. Serving the business aviation industry nationally and internationally, they have facilities in Moline, IL, Des Moines, IA, and Minneapolis, MN. The company is a member of the Pinnacle Air Network, National Business Aviation Association (NBAA), National Air Transportation Association (NATA), and National Aircraft Resale Association (NARA).

A Wrench in your Deal

Or a Screw in your wing?

Jim Odenwaldt -Elliott Aviation Aircraft Sales Manager www.elliottaviation.com

Last month we touched on technical expertise and use of available resources during pre-buy (otherwise known as survey). We have all had bumps in the road as we move deals towards completion. Sometimes, it can be tough to get sellers and buyers to agree on price and terms when the pre-buy list is distributed. Here is a short story illustrating how the use of these skills assisted in delivering the best possible outcome.

Earlier this year, we had a light jet at an OEM service center for a pre-buy. It had come directly from a well-known non-OEM service center facility where a complete inspection had just been conducted for the seller, based on the calendar requirements of the maintenance program, prior to the deal being structured. The seller assumed that no major issues would be found as this inspection had just been completed.

At the OEM service center, during the pre-buy, however, a section of the leading edges was removed for a detailed inspection of the area. It was discovered a countersunk screw that was ¼" too long had inadvertently been installed in the corner of the panel. As this fastener was headed toward being flush on the outside, it was gouging into the structure underneath. The damage was beyond the allowable percentage of skin thickness. The service center had to call OEM Engineering to devise a repair, which could take up to three weeks at an undetermined cost. They did offer a 30 flight hour waiver so we had the option to move the aircraft to P&I, the next scheduled stop after closing. Either way, it had to be fixed.

The non-OEM shop that conducted the inspection sent representatives and ultimately took responsibility for the improper fastener. They agreed to cover the cost of the repairs but found it unacceptable to wait three weeks to get a repair scheme from OEM Engineering with no cost estimate. The buyer was willing to close and have the repair made during P&I but the company who offered to pay the bill, understandably, wasn’t going to offer their checkbook carte blanche.

I went to the buyer and presented the idea of having an independent DER devise a repair procedure and take the aircraft back to the non-OEM facility to conduct the repairs. This would accelerate the schedule and allow them to fix their own mistake. Thankfully, they agreed! We finished the inspection, settled the bill and had the aircraft towed back across the airport. The DER was able to quickly formulate a plan, and the work was completed in about two weeks. We were very fortunate all parties were very reasonable. Everyone proceeded with integrity and patience so this one was able to get done.

Jim Odenwaldt has extensive flying and technical experience with all Beechcraft products and sales expertise with all models of Hawker/Beech, Citation and Gulfstream. After graduating from Embry-Riddle in 1989, Jim worked as a CFI and maintenance technician. While with American Beechcraft Company, he was responsible for aircraft sales in the mid-Atlantic region. In addition to his ATP, Jim is an A&P and type rated in the Beechcraft Premier.

Elliott Aviation is a second-generation, family-owned business aviation company offering a complete menu of high quality products and services including aircraft sales, avionics service & installations, aircraft maintenance, accessory repair & overhaul, paint and interior, charter and aircraft management. Serving the business aviation industry nationally and internationally, they have facilities in Moline, IL, Des Moines, IA, and Minneapolis, MN. The company is a member of the Pinnacle Air Network, National Business Aviation Association (NBAA), National Air Transportation Association (NATA), and National Aircraft Resale Association (NARA).

Soaring with Tubreaux Over the Seabase at Oshkosh

This year was my first trip to Oshkosh for EAA AirVenture. I knew going in that there would be too much to see in one week – especially when I was seeking great stories to take in and put to print. But volume wasn’t my goal – a rich experience was what I needed. And on Thursday, I received the richest experience that many people don’t – even experienced pilots. I took my first ride in a seaplane!

I rode out to the Seabase, wondering how many patrons have never set foot in this area of Oshkosh. After all, it is a bit of a drive – about 20 minutes by bus (free to get there, $3.00 to return), and since the warbirds and airshows are all right there and easily accessible, the temptation to "go with what you know" is strong.

But once I emerged from the walking trail from the parking lot and campground to the base itself, I couldn’t help but wonder what those that have overlooked it know what they’re missing! The lush green land overlooking Lake Winnebago exudes a naturally relaxing atmosphere. The shelter house, built to handle maybe a couple hundred visitors at once, plus a giant fire pit on the shore still smoldering, reminded me of many of my scouting experiences. If Henry David Thoreau was alive today, this is where he’d hang his hat.

While there were docks around, all were in use. So when pilot Jeremy Williams of Tubreaux Aviation (pronounced "Two Bros") landed and floated up in his 1959 P-18 Super Cub, I shucked my shoes and socks and waded on out. It’s no easy trick for a large guy like me to slide into the rear seat, but I wasn’t deterred! Once I was strapped in and headset was in place, we glided out into the lake, accelerated, and off the water a moment later.

Now I’m not a big fan of heights (I know, I picked an odd profession then, didn’t I?), but Williams’ skill on the stick made the ride as smooth as glass, and I never once felt uncomfortable. He offered to let me try my hand, but I was enjoying myself way too much to change it up. As with anything that’s truly great, the ride was over way too soon, and I climbed down the float back into the water.

Shortly thereafter, I sat down with Wyche Coleman, co-owner of Tubreaux Aviation, to find out more about what makes them tick. I was surprised to find that giving fluffy journalist seaplane rides was just one thing they do!

"Luke Lambard and I built a hanger together. I was constantly being approached by people wanting to learn how to fly, since there wasn’t a place in Shreveport at that time training for licenses. So rather than sending people to Dallas for instruction, we decided to branch out. Jeremy was our first instructor – now we’re up to five full-time instructors."

Coleman and Lambert didn’t stop there, however. "When crew chief Dax Wanless expressed a desire to open his own maintenance shop, we saw the need and made the investment. Now we have three full-time mechanics with 20+ years of experience as an A&P/IA, we’re seeking a fourth, and looking to add avionics as well. We recently added acquisitions and sales to services offered, although we’ve been doing this for years already. There is no other place in Northern Louisiana that can teach you to fly, help you buy your aircraft, hanger and maintain it, all in one place!"

Coleman, an ophthalmologist by trade, has been coming to Oshkosh for a while, first flying there as a part of the 2003 Stars of Tomorrow (all pilots under 30 at that time). Now his brother Kevin, at 23, was flying in the airshow for his second year.

Once our conversation had ended, I wondered around to get a few photos, take some more video, change batteries in the camera, etc. – anything I could think to do to remain at the Seabase just a little longer. When we return in 2014, you’ll likely find me there again!

Check out the video of the Super Cub coming in for a landing, from the open door cockpit!

180 degree panoramic view of the Seabase in Oshkosh, 2013