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Your Acquisition Team

by David Wyndham 1. April 2006 00:00
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An old African proverb says it takes a village to raise a child. Regarding an aircraft acquisition, it takes a village, and a big pile of money! Given the amount of money involved in such a transaction; it pays to do your homework and assemble your Acquisition Team. You need to know these people and where to find them!

The first team member is the technical analysis person. This person is responsible for defining the mission and developing the measurable criteria for judging the ability of the aircraft to perform its mission. This person should be familiar with aircraft performance measures, and have available information that enables them to predict passenger loads, trip lengths, etc. Being a pilot, this person is you!

The next person to get on the team is the financial analysis person. That individual needs access to what it costs to own and operate aircraft. They will work with the financial department/CFO in determining what the financial ramifications are of various forms of ownership, charter, finance/lease including pre/post tax considerations. This person will do the Life Cycle Costing. You can contract this out, or do it yourself. Regardless, you'll likely need the help of…

A banker or financial institution. There are a number of ways to structure the acquisition of an aircraft. Financing is more than just getting a good interest rate. What are the tax and balance sheet implications of the acquisition? If leasing, what are the return and buy-out options? Is paying cash the best alternative for you?

Like ol' Ben Franklin said, the only certainties are death and taxes. If the aircraft is for business use, or mixed business and personal use, you need a tax advisor. How do you plan to structure the ownership of the aircraft? Where and when will you take delivery? Do you need to do a tax-deferred like kind exchange? Are there sales or use taxes due and if so, who is responsible for collecting and remitting them? Do this well before closing and there should be no surprises.

Speaking of aviation attorneys, one needs to be consulted to ensure that the contracts are appropriate and that the various regulatory issues are addressed. Will there be a management agreement? Will the aircraft be held in a separate LLC? Are there leases, timeshare agreements, charter? While your family lawyer can be a help, best to work with someone who does aviation law for a living.

Don't forget your insurance broker. They need to be kept informed as to what, when and how the aircraft is to be used. If you don't mention all the uses for the aircraft you may not be insured. What are your insurance company's requirements for the pilots? Will it be different if you acquire a different aircraft?

Last, and perhaps most important on this list, is the aircraft sales professional. They can make or break the experience of acquiring an aircraft. This individual needs to know the state of the aircraft sales market. Make sure they know your corner of the market. If they handle "anything from Bell 47s to 747s" I'd look around some more. If you are looking for a light jet, you want someone who knows that end of the market intimately. If your desired aircraft is a hot commodity, you'll need someone who knows when an aircraft is for sale before it is listed. Ask for references.

A good broker/dealer will also know who to contact about title searches, pre-buy inspections and appraisals. If they say you don't need one for a pre-owned aircraft, run away! Have those inspections done by someone who is familiar with that model and independent of the seller and buyer. BTW: Always have a Title Search performed before purchasing ANY aircraft.

Despite the all the used airplane/car/boat/goat salesman jokes, there are good, honest ones out there. Ask for references, see if they listen to you and offer sound advice. The broker typically works for the seller, but a good one realizes that a successful sale requires finding common ground between a buyer and seller.

Anyone with Internet access can "find" aircraft for sale, Globalair.com as an example is an excellent source for locating aircraft in the pre-owned market. Globalair.com also has tools and services such as A.Buyer (a tool to track aircraft on the market), loan calculator and Title Services to name a few.

The aircraft sales professional needs to act in an advisory role and as a facilitator to make sure the deal closes with all parties happy as a result. They won't know all the answers, but should know where to find them.

Acquiring an aircraft should never be done in a hurry. There are many issues to cover and remember the PPPPPP rule! (Prior Planning Prevents Pitifully Poor Performance). Don't set yourself up for a turbulent ride through the closing. Assemble your team in advance and things will happen smoothly.

If you have gone through the process of acquiring a corporate aircraft and would like to share your thoughts on the "Acquisition Team" please contribute to this interactive discussion. Your contribution could help someone remember to do the PPPPPP rule!

 



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