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Contract Issues Remain Hot as Jet Sales Cool

Contract Issues Remain Hot as Jet Sales Cool

NAFA Member, David G. Mayer, Partner at Shackelford, Bowen, McKinley & Norton, LLP, discusses the preowned market.

The preowned market for business jets is trending away from the near-manic demand and harsh seller terms we have experienced over the last few years. Ostensibly driven by the pandemic fears and the exuberance of first-time buyers, purchase prices skyrocketed and enabled sellers to restrict the due diligence of purchasers who often willingly accepted severe contract limitations to close an aircraft deal.

Despite and perhaps because of these extreme market conditions, the momentum in the preowned aircraft sales market remains strong and resilient—but not impervious—to inexorable headwinds of high inflation, rising interest rates, global economic and geopolitical risks, stock market wealth contraction, and incessant discussion of a recession.

Amid these strong market forces and slightly rising inventory of used jets for sale, pricing and contractual terms in aircraft purchase and sale agreements (APAs) appear to be rebalancing roughly to pre-pandemic norms. This comes even as some sellers resist lowering their sales prices or easing back on negotiating four major issues in APAs: hard and soft deals; aircraft delivery condition; inspection scope; and defaults and remedies for purchasers and sellers.

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This article was originally published by AINonline on March 10, 2023.