How Not to Save Money Ahead of a BizJet Sale

What are some common mistakes business jet sellers do that unintentionally limit their pool of prospective buyers? Dave Higdon shares some insights…

Corporations can occasionally make decisions to save money that they later regret, after those decisions end up costing them more money than they saved. Such dichotomies occur at all levels of business and personal life, usually because of a knee-jerk reaction to some stimuli.

In Business Aviation, buyers and sellers can sometimes risk jeopardizing a transaction because decisions that supposedly “ save them money ” impact the prospect of getting the aircraft financed, or cost the buyer in some other way.

Indeed, it’ s because of the potential for these known unknowns to impact the options for financing the transactions, that business aircraft experts counsel using professionals to help manage the purchase – or sale – of a business jet or turboprop. Short-Term Gain, Long-Term Loss

Let’ s start with the oft-repeated discussion about whether to continue with an hourly maintenance program once a decision is made to sell the plane.

These programs help insulate operators from expensive surprises when it comes to engine, airframe, avionics, and APU maintenance. Coverage varies, depending on the program and the level selected (it’ s important to know exactly what the program covers).

The most comprehensive coverage comes in the form of a ‘tip-to-tail’ program incorporating everything. Other programs may cover only one of those elements.

Financing entities like these programs because they can boost the residual value of an aircraft. But many a financing opportunity has gone awry because the seller chose to reduce the operating

cost of the airplane for the short-term by dropping the hourly maintenance program.

Where a financing deal is still available, the reduced value can be reflected with the requirement for a higher down-payment, higher interest rate, or shorter term of the loan. Potential buyers may look at the less favorable terms and lose interest.

Thus, it’ s best to stay with an existing hourly maintenance program to leave as many options open for would-be buyers as possible, and enhance your chance of a quicker sale.

Clear Title or No Joy

Another area in which a seller ’ s past actions may come back to complicate a sale relates to possible title disputes. Many industry professionals recommended checking the Federal Aviation Administration ' s (FAA’ s) file on the aircraft offered for sale – before listing it for sale.

That way, if there are issues that could complicate a sale, this would be the ideal time to address them, thereby avoiding an unhappy surprise during the closing process.

Title complications can occur for a variety of reasons that are wholly related to paperwork on the airplane. A missing signature on a title transfer, or a registration clouded by an erroneous spelling of the owner ' s name (or the company ’ s name if so registered) are two examples.

Typically these problems can be cleared up with the registered owner filing corrected paperwork with the FAA. Getting this right may require the help of an attorney or a title-insurance firm,

however.

But it is likely the cost of correcting paperwork problems will be easier to resolve ahead of the closing process – and out of sight of the world, thus reducing the risk of scaring away a prospective buyer.

Having ensured all of the paperwork is correct, the seller should then make sure all of the relevant documents are assembled ahead of closing on the deal.

Lien on Me…

Another unwelcome surprise could be lurking in the FAA file on an aircraft – a lien filed against the plane. Liens come in a variety of forms and need to be resolved before a buyer is likely to proceed with 