Podcast: Play in new window | Download
I grew up waterskiing on a shallow inland lake with smooth water and boats motoring about freely. It looked perfect, and it was… if you knew where NOT to go. See, some parts of the lake were littered with submerged tree stumps. You couldn’t see these tree stumps. But, you could feel them… when you hit one, boat repairs were mentally painful and monetarily pricey.
New, and sometimes experienced, players on the lake almost always ran into a stump, learning the hard way:
Get a map (expert) and find someone familiar with lake (industry) layout. Avoid hitting those hidden, underwater obstacles.
Like my lake, buying a business jet seems straight forward. And, with a map and expert, it can be. Helping us today is Rene Banglesdorf, Co-Founder and CEO of Charlie Bravo Aviation: business jet research, sales/acquisitions, and solutions that make clients more competitive.
Rene’s an avid writer, speaker, and serves on the board of Phoenix Arising Aviation Academy that teaches STEM through aviation and is VP for GA, Business Aviation, and the Helicopter Industries for the Int’l Aviation Women’s Assoc.
Today, she’s sharing her purchase process expertise to help us avoid the hidden, underwater obstacles that exist when buying a business jet.
Focus on Jet Delivery
First, aircraft owners and operators have plenty on their plates. The added “buying a business jet” distraction isn't wildly important goal each workweek. Many factors can quickly fan out the flames of ownership excitement. So, focusing on delivery day helps hinder the inevitable headaches and headwinds that accompany any large investment.
Second, business aviation is far outside most principles circle of competence. Some business concepts do cross over (e.g. get the right people on the bus, in the right seats). But, the technical and legal aspects differ dramatically from most other enterprises. What's the takeaway? Partner when an established, track-record-proven firm that is known for results that match your expectations.
Business Jet Buying Process
In this episode, Rene underscores the importance of matching mission to airframe BEFORE viewing aircraft. Climbing aboard a Bombardier Challenger 350 doesn't make sense when a KingAir 350 meets 80% of the on-demand travel need (or vice versa).
Step 1 – Find an Aircraft, Make an Offer
Once “how I'm going to use the asset” is clarified, it's time to assemble a list of aircraft candidates and calculate the offer. The temptation to base an offer on comparable aircraft is natural (like Real Estate best practices). But, in the private jet world, sales comps. are very limited. So, how do you create a competitive offer? This is where working with the right aircraft broker becomes key… someone familiar with the market, airframe, and serial numbers available for purchase.
Step 2 – The Letter of Intent
When buying a business aircraft today, standard practice involves sending a purchase letter of intent (LOI) to the seller. The LOI lists the important items… from purchase price to scope of inspections to pre-buy repair expectations paid for by the seller.
Step 3 – Show Me the Money
Now, it's time to send a financial deposit to escrow. The best practice here is to utilize an escrow company in Oklahoma City, where the Federal Aviation Administration (FAA) lives. Geographic escrow company relationships here help reduce red tape and push paperwork along faster. The takeaway? You can focus on delivery day, not every single detail that's likely outside your knowledge database anyways.
Step 4 – View Your Prospective Aircraft
With the majority of background research complete on the most suitable airframe available, it's time to actually visit and view the airplane in person. Keep in mind, paint design and interior fabric colors can be changes to align with your style and statement.
What matters is what you can't see.
The safety factors hidden in aircraft logbooks, untold without seeing support facility status (is the hangar clean, does the current owner's staff tuck in their shirts… the simple stuff), and obscured behind the shiny magazine sales listing can be quickly uncovered in person. It's time for a lower-level look at this airplane… from maintenance history to airworthiness items due in the future. Dig deep and look for the million dollar land mines that might detonate after your name is on the registration certificate. What's the takeaway? Be in business with the right broker-partner, who is tasked with uncovering the above, so you can focus on delivery day.
Step 5 – Pre-Purchase Inspection
It's now time to take the airplane apart. The pre-purchase inspection exists to identify items you can't find on paper. For instance, corrosion and cracks can ground an airplane instantly. Yes, you the buyer will pay for this inspection. But, finding issues now prevents having to make expensive repairs after delivery because nobody “lifted the hood.” Armed with a pre-purachse inspection report, you can accept, reject, or possibly negotiate the deal.
Step 6 – Create The Company
Often, owners and operators place an aircraft in an entity to hold title, tackle tax, implement insurance, manage assets, etc. Their are lots of decisions to be made here and only the principle can make them. An aircraft broker-partner can assist here so you can stay focused on…
Step 7 – Taking Delivery
With final funding complete, it's time to climb aboard your new game-changing asset and fly away. Maybe you'll leverage the business jet to make more relationship time for family, associates, business partners and prospects. Maybe you'll increase productivity, close more sales, or improve product/service quality throughout your companies. No matter your motive, the ROI of buying a business jet starts today. The sky is the limit!
Mentioned In The Show
Comments
What have you learned today about buying a business jet?
Share your view, in the comments below, or confidentially here.
Subscribe in iTunes | Give an iTunes Rating (here's how)
