Buying&Selling.qxp_Finance 17/05/2022 09:17 Page 1
BUYING & SELLING AIRCRAFT
AVBUYER.com
Who Loses in an Aircraft Seller Default? With pre-owned business aircraft Sellers so firmly in the driving seat in today’s lightning-fast market, what’s the fall-out in the event of a Seller default? Mike Zabkar discusses the impact, along with how to safeguard against it…
W
e are in the midst of exceptional market demand, and retail pricing seems to have no bounds. The days of agreeing on the terms of a deal with a good old-fashioned handshake were over long ago. The corporate buyer, once the backbone of aircraft sales, has fallen behind High NetWorth Individuals (HNWIs), wealthy families, and trusts. Market demand and availability has clearly influenced aircraft purchase/sale agreements. The “As-Is” paragraph has taken on a different meaning, i.e. “No Pre-Purchase Inspection (PPI), no kicking of tires - just ‘light the fires’, and you’re off”. These days, even mid-PPI (where they occur), if the Seller gets a better offer, they’re gone, “See Ya!”. Sellers are prepared to pay the existing Buyer’s expenses and rush to the highest bidder – ‘contract be damned’! It’s worth lingering on the “See Ya” for a moment to ask how the ‘default’ is worded within the agreement. Who is losing out? Obviously, the Buyer is losing out, 32 Vol 26 Issue 6 2022 AVBUYER MAGAZINE
having, in good faith, put up a deposit, signed a contract, scheduled a facility, technicians, pilots, and more. But how about the Buyer’s broker? How many potentially hundreds of hours get invested into seeking out the right aircraft – or at least the one with the fewest compromises – for the Buyer? In the case of a Seller default, a reasonable contract holds the Seller accountable to reimburse the Buyer for all direct expenses, inspections, etc. Frustrated and upset, the Buyer will either move on, looking to the broker to find another aircraft, OR in many known cases have said, “I’ve had enough of this market” and continue to charter, or stay with their current airplane. As for the Buyer’s broker, it’s not as simple as finding another aircraft and getting paid… In today’s market, brokers are working more hours, incurring more expenses through advertising, and travel, and in most ‘Default’ instances they lose out on an anticipated commission.
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