An In-Depth Guide into Aircraft Procurement

There are various reasons as to why people and organizations buy aircraft. When making this big decision, many factors usually come into play. Aircraft procurement isn’t an easy task. Need I say how big an investment this is?

Many parties are usually involved in aircraft procurement. An advisor or broker can help guide you throughout the whole process. Legal work such as contracts requires the help of an attorney. Tax obligations need to be overseen by an accountant. The inspection of the aircraft has to be conducted by a qualified aircraft mechanic.

An analysis is the first step that should be undertaken when procuring an aircraft. A thorough analysis needs to be done to avoid being caught up with future risks. You need to assess your requirements.

Your travel needs should come into play when you are procuring an aircraft. How many times have you flown in the last year? How far? How many people accompanied you? Were those trips for business or leisure? Were you flying in and out of airfields or major airports? These questions can help give insights into the type of aircraft you need. Model comparisons can lead to you settling for several models that fit your needs.

A new aircraft will cost more than an old one although it comes with warranties. Yet, older planes are much more expensive when it comes to maintenance. A lifecycle expense analysis can shed light on the cost you may incur to operate and keep an aircraft. This can help you decide whether to go for a new or old aircraft.

There are additional expenses that come with procuring an aircraft such as storage, operation, annual maintenance, and crew. You need to go for an aircraft within your budget. You also need to consider whether your aircraft will be generating any revenue for you. Additionally, will its acquisition come from financing or will it be self-funded?

Your advisors need to carry out extensive research on the models that you have settled on. They should point out their key features, strengths, and weaknesses. They should also inform you about their typical costs.

Finding the right aircraft in the market is the next step to take. Don’t just wait for feedback from your seller’s agent. Do your own research too. Dig deep into aircraft listings to obtain detailed information. Gather essential information about the aircraft including all its trips, the maintenance crew, and its maintenance locations.

Once you and your team of experts are satisfied with the aircraft listed, it’s time to review it. Make sure you see the aircraft for yourself before procuring it.

A letter of intent spells out details such as the terms of sale, the aircraft’s price, and the deposit amount. A deposit amount of 5-10% is usually paid to an escrow agent or the broker. An expiration date is also given that helps you withdraw from the deal if you’re not pleased.

A prepurchase inspection follows thereafter. This can be overseen by your advisor. Ensure you have a licensed aircraft mechanic who is a specialist in the specific model for inspection. Discrepancies and deficiencies will be provided during this stage if any.

You need to have an experienced attorney during your purchase agreement. Terms such as the deposit amount, the purchase amount, refund terms, and warranties are covered here.

Technical acceptance happens after the conclusion of the aircraft’s inspection. Price adjustments have already been agreed upon here. Your deposit becomes non-refundable during this stage after the execution of the technical acceptance.

The aircraft’s title needs to be transferred. This is done in the closing and delivery stage. Money changes hands during this step through the appointed escrow. The aircraft has to be insured during closing. It can now be physically handed over to you as its new owner.

Aircraft procurement isn’t an easy task or a day’s job. Proper analysis and research need to be carried out to find an aircraft that fits your needs. Experts need to be involved to help you make the right decision.

A Brief Guide To Aircraft Leasing

The term “aircraft leasing” implies the process where an airline leases an aircraft from a leasing company or another airline. It significantly lowers the financial pressure on an airline in purchasing a new aircraft. If the airline happens to be a start-up airline, it becomes highly beneficial because the leasing capital costs are relatively lower.

Dry, wet, and damp are the three common ways to do leasing. A dry lease involves the lessee operating the aircraft using its Air Operator Permit and usually has to do with all the services associated with the aircraft. When it comes to a wet lease, the lessor’s Air Operator Permit is used to operate the aircraft, and the lessor offers services including maintenance, cabin crew, etc. Though it’s quite similar to a wet lease, the lessor provides no cabin crew services in a damp lease.

The risks involved in leasing are completely financial. The lessor’s major risk is the financial position of the specific airline it leases the aircraft. In case the airline company becomes bankrupt, the lessor is at high risk to get back the aircraft in great operating condition. Currency fluctuations are another risk to the airline’s profitability since the aircraft leasing rates are usually fixed over a long period. Hedging is sometimes a solution to this.