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Best Practices for Smooth Aircraft Transactions

Aircraft transactions can be complex and take a while to close. But why – and more importantly, how can we fix that? 

We are constantly looking for ways to save our clients time and money, with efficient and secure practices. Over the years, we have dealt with numerous issues involved in buying and selling an aircraft that we believe can be remedied – providing a smoother closing.

We do not, however, need to reinvent the wheel here. After all, many other industries have seemingly been able to streamline their sales process and reduce the time it takes to close, with three common business practices – standardization, transparency, and automation.

Standardization

One of the things that can make aircraft transactions complicated is simply putting together a purchase agreement. There can be a big lag between the Letter of Intent (LOI) and the aircraft purchase agreement.

Sometimes, the escrow company will not receive the agreement (which contains the specifics of the deal) until the day before closing. Time is needed, however, to study the aircraft purchase agreement and make sure everything is followed properly – one day is not enough and can wreak havoc on the closing.

Similarly, a lag can occur with the pre-buy process and inspections, where items can be found that must be fixed. On the flip side, some transactions can go from LOI to the aircraft purchase agreement and close in a matter of days. It depends on whether the aircraft is ready, and the buyer has their funds in place. 

These things speak to the need for standardization in aircraft transactions, from the purchase agreement itself to the processes followed. 

Aircraft transactions are often international with many entities involved – each with their own input and way of doing things. Our industry, accordingly, touts the need for tailored transactions, often unnecessarily complicating the process.

The details of a deal can be upheld in a standard format though – making the specifics easier to spot and follow through on. If standard language within a standard framework (a standard contract) is used, parties to the transaction can address the real outliers more quickly.

This could streamline getting from an LOI to an aircraft purchase agreement – eliminating the need to weed through a 45-page contract to potentially find something unexpected buried within.

Transparency

In addition, many times the buyer will put their personal funds into the deposit, and then set up a company to own and operate the aircraft, which can also cause a delay – setting up a new company and then vetting that company. 

Another issue can occur if the buyer decides to pursue financing late in the transaction – it usually does not work out well and can ground the transaction altogether. After all, appraisals and inspections of the aircraft take time, along with adhering to Know Your Customer protocols, all of which a financier will require.

While wanting anonymity in owning an aircraft is not unusual, it is just not possible when it comes to financing. All parties, all the way down to the bottom, must be known – there must be true transparency.

There is a lot that goes into purchasing, financing, and registering an aircraft. Ultimately, the financier and the escrow company must know the aircraft and the parties involved – and the sooner the better. It is important to have everything together financially, documents ready to file at the FAA, and parties registered on the IR, all in advance of closing.

Automation

Automation can help speed and secure the closing – allowing, for instance, a documented trail to follow in the exchange of information between parties. Many businesses use project management tools internally to track correspondence and procedures, which is of immense help, especially in the event of an error.

The use of digital signatures via a secure platform is another great advancement in this respect – helping to close transactions quickly. This does not however take away from the due diligence required at the beginning of an aircraft transaction.

In Closing

While the global nature of aviation, with multiple entities involved, will always have the potential to weigh down aircraft transactions, lift off could be smoother with the adoption of these best practices across the industry. 

Standardization, transparency, and automation are key in this endeavor, and Wright Brothers Aircraft Title is happy to be at the forefront of this push for progress and modernization in the aviation industry.

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