aircraft transactions

  • NAFA Administrator posted an article
    The FAA Registry as a Clearinghouse for Non-US cross border transactions see more

    NAFA member, Tobias Kleitman, President and Founder at TVPX, discusses using the FAA Registry as a clearinghouse.

    How does a UK registered aircraft owner sell its aircraft to someone in China? Or someone in Russia sell an aircraft to someone in South Africa? 

    It’s not as simple as signing a purchase agreement and transferring title after inspections and acceptance. These transactions are complicated by the requirement that the importing registry needs to have assurances that the aircraft is safe to fly and meets their airworthiness standards from the exporting registry. This is a challenge when the two registries don’t have a bilateral agreement in place.

    Per the FAA website “Bilateral agreements facilitate the reciprocal airworthiness certification of civil aeronautical products imported/exported between two signatory countries” https://www.faa.gov/aircraft/air_cert/international/bilateral_agreements/overview/

    ´╗┐Without a bilateral agreement, the importing registry cannot get the assurances they need that the aircraft is in airworthy condition.

    In the example above, The UK Civil Aviation Authority (CAA) cannot issue an Export Certificate of Airworthiness in favor of the Chinese registry. Given the number of aircraft registries that exist, there are countless examples of where this problem can arise. However, buyers and sellers can often solve this dilemma by taking the interim step of registering the aircraft on the FAA registry, which has bilateral agreements with 48 different countries. The aircraft can be brought up to US standards, if necessary, and deemed airworthy, prior to transferring it to a new registry, when the new registry has a bilateral agreement with the US. The buyer can then proceed to register the aircraft on that registry after first deregistering from the FAA Registry.

    In the UK to China example, the seller would transfer the aircraft from the UK registry to the US FAA registry for a short period of time. The UK Civil Aviation Authority would issue an export certificate of airworthiness in favor of the US. 

    Since it is not likely that the UK owner qualifies for US citizenship per the FAA regulations, the UK owner/seller would use an FAA non-citizen trust to hold title to the aircraft and register it on the N registry. Once the aircraft is N-registered, an FAA Designated Airworthiness Representative (“DAR”) would inspect the aircraft log books, maintenance records, safety equipment, etc., and if the aircraft meets the FAA standards for airworthiness, the DAR would Issue a Standard Airworthiness Certificate. At the same time, the DAR would review the bilateral agreements between the US and China to make sure the aircraft meets the Chinese airworthiness standards, and then issue an Export Certificate of Airworthiness in favor of China. The UK owner/seller would then own an aircraft that can be sold to the Chinese buyer, and CAAC (the Chinese (B) Registry) could register the aircraft with the confidence that the aircraft is airworthy. At closing, the owner trustee for the UK beneficiary would transfer title to the Chinese buyer. 

    As an alternative, it is also possible to structure the transaction so that the Chinese buyer, rather than the UK owner/seller, utilizes the short-term trust and is responsible for hiring the DAR and having the Certificates of Airworthiness issued. The buyer may want assurances prior to closing that the aircraft will meet the FAA’s requirements. This assurance can be gained through a thorough pre-buy inspection.

    There are many other variables in these types of transactions that buyers and sellers and their advisors need to address. VAT taxes and export trade compliance from the country of export, US import and subsequent export trade compliance, and potential state sales and use tax exposure need to be carefully considered. In the current environment, COVID-19 and travel restrictions can also impact the ferrying of the aircraft between countries. 

    Using the FAA registry as a clearinghouse can be an effective bridge to facilitate aircraft transactions between two non-US aircraft owners and their respective registries.   

    The TVPX group of companies provide Owner Trust Services through TVPX Aircraft Solutions, Inc. Customs Brokerage, Freight Forwarding, and DAR support services through TVPX, Inc., and Aviation Insurance Services through TVPX Aviation Insurance, Inc. to the business and commercial fixed wing and rotor wing aviation industries.

    This article was originally published by TVPX on October 21, 2020.

  • Tracey Cheek posted an article
    Patience Is Key for Successful Aircraft Transactions During COVID-19 see more

    NAFA member, NBAA, shares a review of their recent webinar about processing aircraft transaction documents during the COVID-19 pandemic.

    The FAA Aircraft Registration Branch continues to process aircraft transaction documents during the COVID-19 pandemic; however, the process has been slowed. In a recent NBAA News Hour webinar, experts discussed how to successfully complete aircraft transactions during these challenging times.

    VIEW THE RECORDED NBAA NEWS HOUR WEBINAR

    Peter Korns, NBAA’s senior manager of tax, operations and workforce engagement, moderated the webinar. Scott McCreary – shareholder and aviation group leader of McAfee & Taft – and Chris Younger – principal at GKG Law, P.C., – provided expert guidance.

    The FAA aircraft registry maintains information on more than 300,000 civil aircraft to facilitate aviation safety, security and commerce. The registry accepts and processes documents to register and operate aircraft in the United States, as well as to “perfect” or validate interests in an aircraft, explained Younger. The registry typically accepts filings by mail or commercial delivery services, via email or in person at the FAA Public Documents Room in Oklahoma City, OK.

    Several new, temporary policies are in place to mitigate concerns about COVID-19 exposure and ensure appropriate social-distancing practices for filers and registry employees. The Public Documents Room is currently closed for direct filing, although parties may leave documents in a nearby bin for regular pickup by registry staff. All mailed documents are subject to a 72-hour quarantine period, which means those documents will not be processed or file stamped until at least 72 hours following receipt or acceptance. Filers should be aware that due to this quarantine, the accepted date of the documents is not the same as the file stamp date.

    Fortunately, the FAA has expanded the ability to file documents by email. McCreary summarized new email filing procedures, including a requirement for documents to be digitally executed through a digital signature program, such as DocuSign. As is the case for mailing documents, an email receipt message does not constitute the date of formal filing with the FAA.

    Younger added that import and export processes can also be more complicated as a result of the COVID-19 pandemic. For example, imports from Mexico are subject to a 72-hour quarantine.

    The FAA Reauthorization Act of 2018 designated registry employees as “excepted” or “essential employees” in the event of a government shutdown or emergency furlough.

    Although it’s unclear if the legislative language is broad enough to cover the COVID-19 crisis, the experts see no signs at this time of a disruption of operations or possible closure of the registry. However, the experts caution this is a fluid situation, and there is no projected timeframe to return to normal registry and transactions procedures.

    “In business aviation, there’s always an urgency to get transactions closed,” said Younger. “Now there’s an increased tension because the process is slower to be more protective of FAA employees.”

    Aircraft transactions can still be completed, but patience is key.

    This webinar, titled “FAA Transaction Guidance During the COVID-19 Crisis,” is just one in a series of educational opportunities NBAA has planned for the coming weeks. Learn more, register for upcoming webinars and view recordings of past webinars on the NBAA News Hour site.

    This article was originally published by NBAA on April 13, 2020.

  • Tracey Cheek posted an article
    2019 Aircraft Transactions - It Is Not Too Early To Plan For A Successful 2019 Closing see more

    NAFA member, Amanda Applegate, Partner with Aerlex Law Group, discusses how to plan for a successful aircraft closing in 2019.

    As we move into the last several months of 2019, whole aircraft transaction volume will increase, particularly in December. Personally, I have a number of clients who are ready to proceed immediately with a purchase or sale once either the right inventory can be sourced or once a buyer is found for the aircraft that is listed for sale. Assuming the right aircraft can be found for buyers or the right buyer can be found by sellers, as transaction volumes increase those providing support services such as aircraft consultants, insurance agents, escrow companies and pre-buy inspection facilities may start to see the stress of the demand. As always, having a well-established acquisition or sales team and a process plan can help insure that nothing gets missed, that the closings go as planned and are completed in the 2019 calendar year. Ten items to consider to help closing occur in 2019:

    1. If you are considering selling in 2019, list the aircraft for sale as soon as possible to allow enough time for the sales process to conclude before the end of the year.

    2. If you are considering buying in 2019, you should already be looking for the right aircraft. Inventory is lower in many aircraft categories than it has been for years. Therefore sourcing the right aircraft is taking longer than it has in the past and may require expanding the search to outside of the United States.

    3. Many inspection facilities have long wait times to schedule a pre-buy inspection. As soon as an aircraft is sourced or a buyer is found (or perhaps even before), look for a pre-buy slot and try to hold it if possible. As a seller, if certain inspections are coming due, perhaps scheduling these in conjunction with a potential pre-buy inspection may help with reserving a slot.

    4. If you have an existing aircraft and plan to replace it, consult your tax team early in the process. Your tax team may recommend that both transactions occur in the same year since 1031 likekind exchanges are no longer available.

    5. If you are seeking depreciation in 2019 (bonus or straight-line), then the aircraft being purchased needs to be placed into service and used for business (preferably exclusively for business if closing is near the end of the year) before the end of the year.

    6. When support service providers are busy, checklists and a team leader become imperative. There must be one person leading the team who is checking to make sure all aspects of the transaction are completed prior to closing (i.e. assignment of mx. programs, insurance, funds, lender agreements, management agreements, international registry account set up, etc.).

    7. The last day of the year in 2019 is on a Tuesday. In the past, the FAA registry has closed early on holidays and also for weather. It is recommended that 2019 closings be completed no later than December 27, 2019 in order to allow time for the aircraft to be placed into service before year end and avoid any unexpected closing delays that could occur.

    8. Lenders are starting to require all ancillary documents be in place prior to funding. If the aircraft is going to be managed, chartered or on maintenance programs, the lender may require all of these documents be in place along with its own consent agreements, prior to closing. It is likely that these documents will not be allowed to be done as post-closing items, so plan enough time to get all relevant documents in order prior to year-end. Alternatively, consider paying cash and arrange financing after closing.

    9. If the transaction is a crossborder transaction, make sure all parties are realistic on the amount of time the import/export process will take and that there will not be any delays in getting the Aircraft on the new country registry.

    10. Having upgrades done at the same time as the pre-buy inspection often saves downtime on the aircraft for the buyer. However, it may also push the closing into 2020. Therefore, if a 2019 closing is important a close review of the calendar should be made to make sure the upgrades can be completed and the aircraft returned to service prior to the end of the year.

    This article was originally published in BusinessAir Magazine, August 2019, Volume 29, No. 8 and on Aerlex.com on September 12, 2019.

  • Tracey Cheek posted an article
    Jetcraft Launches Industry's First New and Pre-Owned Market Forecast see more

    NAFA member Jahid Fazal-Karim, Jetcraft's Owner and Chairman of the Board, releases industry forecast predicting more than $150 billion in sales over the next five years.

    Jetcraft, the global leader in business aircraft sales and acquisitions, has released a 5-Year New & Pre-Owned Business Aviation Market Forecast – the first of its kind to predict both new and pre-owned aircraft transactions.

    The new forecast anticipates 11,765 pre-owned transactions over the next five years, equating to $61bn in value, and 3,444 new deliveries, representing $90.5bn. By 2023 it is expected that industry value will reach nearly $30bn per annum.

    Jahid Fazal-Karim, Owner and Chairman of the Board at Jetcraft, says: “This is the first forecast to precisely analyze both new and pre-owned business aircraft transactions over a five-year period. The findings show that our industry will continue to grow in size and scale, hitting nearly $30bn per year in revenue by 2023, a truly impressive figure.

    “New aircraft unit deliveries are predicted to stay flat throughout the forecast period while generating higher revenues, due to the increase in large aircraft transactions. Meanwhile, the pre-owned market is forecast to grow at a proportionally faster rate than new.”

    Pre-owned business aircraft transactions are expected to outpace those of new deliveries four to one by 2023, according to Jetcraft’s forecast.

    Fazal-Karim continues: “Buyers who in the past exclusively bought new aircraft are now more willing to consider pre-owned if it suits their mission, partly due to better opportunities for aircraft refurbishment and increasing MRO capabilities.”

    Jetcraft’s forecast also maintains the clear shift towards large aircraft, both in pre-owned and new unit deliveries and highlights that the average retirement age of a business aircraft is 32.

    Fazal-Karim concludes: “Our new forecast better reflects the current aircraft ownership experience and provides a more focused view of the industry. We are set for a dynamic five years, both in pre-owned and new aircraft transactions and I look forward to Jetcraft playing its part.”

    Jetcraft’s full 2019 5-Year New & Pre-Owned Business Aviation Market Forecast is available to download at https://www.jetcraft.com/knowledge/market-forecast.

    This article was originally published by Jetcraft on May 15, 2019.

  • Tracey Cheek posted an article
    Aircraft Transactions see more

    NAFA member YYZlaw discusses the three main categories of aircraft transaction agreements.

    Aircraft transactions are complicated processes that require detailed knowledge of aviation regulations, business practices, taxation of aircraft assets, and international law – knowledge that YYZlaw has been steadily building over many decades. These processes can be boiled down to three main categories of agreements: i) contracts of purchase and sale, ii) lease or finance agreements, and iii) aircraft management agreements.

    Contract of Sale Negotiations – Aircraft Purchase Agreement

    The acquisition of an aircraft, whether for business or personal use, requires consideration of multiple financial, regulatory and transactional components. Depending on the types of parties involved, different risk considerations will need to be assessed.

    When dealing with Original Equipment Manufacturers (OEM) such as Bombardier, Dassault, Embraer, Gulfstream, Textron, etc., it is important to ensure that the deal negotiated between the OEM and the purchaser is adequately reflected in the ultimate aircraft purchase agreement. The negotiation and inclusion of allowances relating to maintenance and parts programs, initial and recurrent training offerings for pilots and aircraft maintenance engineers, and future trade-in options and upgrade eligibility need to be accounted for as well. Liquidated damages provisions in aircraft purchase agreements need to also be carefully assessed to ensure that such clauses are reasonable in the circumstances.

    When an aviation transaction doesn’t directly involve an aircraft or engine manufacturer and is concerning a pre-owned aircraft, the purchase negotiation will need to account for the validity of title and any registered or hidden defect in title. This process can be complicated where an aircraft is owned by a seller in one jurisdiction, with the aircraft registered in another jurisdiction, and the buyer being located in yet a third jurisdiction. At all stages it is important to be mindful of the taxation and importation challenges which need to be managed.

    In most aircraft purchase negotiations, the condition of the aircraft is assessed and verified through a pre-purchase inspection. Typically, this process doesn’t commence until the aircraft purchase agreement has been entered into, however, there are transactions that occur differently and which require customized legal structures to protect the interests of the parties. Despite any such pre-purchase inspection verification, the vast majority of transactions involving pre-owned aircraft make no representations or warranties other than those relating to the aircraft’s state of title.  These transactions are considered “as-is, where-is” transactions as the seller makes no warranties as to merchantability, functionality or fitness for purpose, and it remains entirely the obligation of the purchaser to satisfy itself as to the condition and functionality of the aircraft being purchased. To protect the purchaser, title and lien searches against the aircraft are recommended before the conclusion of the sale. Depending on the national state of registration of the aircraft, such searches may include domestic title/security registries (Personal Property Security Registry (PPSA) or the Quebec Register of Personal and Movable Real Rights (RPMRR)), and the International Registry. Finally, registration of the aircraft with the appropriate national civil aircraft authority is necessary before it may be operated, and it is our advice that the purchase of such assets is also registered on the International Registry. It is important to note that the ownership and lien status of a Canadian registered aircraft cannot be reliably determined by the information contained on the Canadian Civil Aircraft Registry (CCAR).

    All purchase negotiations, irrespective of the parties involved, must deal with various documents: A letter of intent, an aircraft purchase agreement and a warranty bill of sale are all typical documents, in addition to the establishment or maintenance of the corporate vehicle of the purchasing entity, if one hasn’t already been formed.

    Lease and Finance Negotiations

    The purchase of aircraft assets involves a high upfront capital investment; companies may either require financing or select to finance a purchase for various tax considerations. Depending on the risk profile and the lending institution, this aircraft financing usually takes the form of either an aircraft lease or a securitized loan. Certain financial institutions offer asset-based financing, while others assess an aircraft purchaser’s creditworthiness to make lending decisions. Regardless of the type of financing obtained for an aircraft acquisition, such financing will inevitably require consideration of the choice of law, and the repossession and enforcement rights available to an aircraft financier. While insolvency and delinquency are not ordinary occurrences, these are perhaps some of the most important provisions in a lending/lease agreement that must be ascertained, in addition to the economics of the deal. When purchasing an aircraft with financing, whether a lease or loan, restrictions may be placed on the aircraft in question and additional time is necessary to complete the transaction.

    Aircraft Management Negotiations – Aircraft Management Agreement

    While some private buyers are pilots or companies with existing in-house flight departments, most corporations require an aircraft management company to provide crew and maintenance services. YYZlaw can act as a liaison between the purchaser and the management company, ensuring that the company acquiring the aircraft asset fully understands its rights, fees and obligations under such aircraft management agreement. This document may also be referred to as an aircraft services agreement.

    While some companies have and wish to use an established in-house legal team, advice from a third-party expert, such as YYZlaw, can increase the efficiency of a transaction and provide assurance to both the seller and the purchaser from the letter of intent through to the delivery of the aircraft.

    This article was originally published by YYZlaw on June 22, 2018.

  • Tracey Cheek posted an article
    Aircraft Broker Hagerty Jet Group Sees Gulfstream G550 Boost see more

    NAFA member Hagerty Jet Group discusses boost in Gulfstream G550 transactions.

    Aircraft brokerage Hagerty Jet Group has seen stronger-than-expected transaction volume for preowned Gulfstream jets in the first quarter of the year. The Savannah, Georgia-based Gulfstream specialist observed higher transaction volumes in the past quarter than in the previous 12 months, particularly for the airframer’s G550. In the first quarter of the year, there were 16 sales of the long-range twinjet, nearly double the average of the past three years.

    Hagerty also noted a spike in off-market aircraft transactions, as six of those 16 G550 sales were not publicly advertised, or were unknown by market participants. The company believes this is an indication that many buyers are frustrated by the lack of good available inventory and sought out direct purchasing opportunities with unlisted aircraft.

    That could cause sellers on the market to adjust their pricing to move their aircraft. In its just-released Quarterly Market Update for Gulfstream aircraft, Hagerty expects prices to soften in the second quarter, based on the 14 price reductions seen in the first quarter on the G550, with an average decrease of 9 percent. It also anticipates a decrease in overall demand as global economic uncertainty lingers, led by fears of a 2020 recession, Brexit and U.S./China trade relations. As the impact of the so-called “Trump-Bump” from a year ago fades, Hagarty believes the industry is normalizing again.

    View Quarterly Market Update for Gulfstream Aircraft Q1 2019 here.

    This article was originally published in AINalerts on April 5, 2019.

  • Tracey Cheek posted an article
    Aircraft Transactions see more

    NAFA member YYZlaw discusses the complicated processes involved in aircraft transactions.

    Aircraft transactions are complicated processes that require detailed knowledge of aviation regulations, business practices, taxation of aircraft assets, and international law – knowledge that YYZlaw has been steadily building over many decades. These processes can be boiled down to three main categories of agreements: i) contracts of purchase and sale, ii) lease or finance agreements, and iii) aircraft management agreements.

    Contract of Sale Negotiations – Aircraft Purchase Agreement

    The acquisition of an aircraft, whether for business or personal use, requires consideration of multiple financial, regulatory and transactional components. Depending on the types of parties involved, different risk considerations will need to be assessed.

    When dealing with Original Equipment Manufacturers (OEM) such as Bombardier, Dassault, Embraer, Gulfstream, Textron, etc., it is important to ensure that the deal negotiated between the OEM and the purchaser is adequately reflected in the ultimate aircraft purchase agreement. The negotiation and inclusion of allowances relating to maintenance and parts programs, initial and recurrent training offerings for pilots and aircraft maintenance engineers, and future trade-in options and upgrade eligibility need to be accounted for as well. Liquidated damages provisions in aircraft purchase agreements need to also be carefully assessed to ensure that such clauses are reasonable in the circumstances.

    When an aviation transaction doesn’t directly involve an aircraft or engine manufacturer and is concerning a pre-owned aircraft, the purchase negotiation will need to account for the validity of title and any registered or hidden defect in title. This process can be complicated where an aircraft is owned by a seller in one jurisdiction, with the aircraft registered in another jurisdiction, and the buyer being located in yet a third jurisdiction. At all stages it is important to be mindful of the taxation and importation challenges which need to be managed.

    In most aircraft purchase negotiations, the condition of the aircraft is assessed and verified through a pre-purchase inspection. Typically, this process doesn’t commence until the aircraft purchase agreement has been entered into, however, there are transactions that occur differently and which require customized legal structures to protect the interests of the parties. Despite any such pre-purchase inspection verification, the vast majority of transactions involving pre-owned aircraft make no representations or warranties other than those relating to the aircraft’s state of title.  These transactions are considered “as-is, where-is” transactions as the seller makes no warranties as to merchantability, functionality or fitness for purpose, and it remains entirely the obligation of the purchaser to satisfy itself as to the condition and functionality of the aircraft being purchased. To protect the purchaser, title and lien searches against the aircraft are recommended before the conclusion of the sale. Depending on the national state of registration of the aircraft, such searches may include domestic title/security registries (Personal Property Security Registry (PPSA) or the Quebec Register of Personal and Movable Real Rights (RPMRR)), and the International Registry. Finally, registration of the aircraft with the appropriate national civil aircraft authority is necessary before it may be operated, and it is our advice that the purchase of such assets is also registered on the International Registry. It is important to note that the ownership and lien status of a Canadian registered aircraft cannot be reliably determined by the information contained on the Canadian Civil Aircraft Registry (CCAR).

    All purchase negotiations, irrespective of the parties involved, must deal with various documents: A letter of intent, an aircraft purchase agreement and a warranty bill of sale are all typical documents, in addition to the establishment or maintenance of the corporate vehicle of the purchasing entity, if one hasn’t already been formed.

    Lease and Finance Negotiations

    The purchase of aircraft assets involves a high upfront capital investment; companies may either require financing or select to finance a purchase for various tax considerations. Depending on the risk profile and the lending institution, this aircraft financing usually takes the form of either an aircraft lease or a securitized loan. Certain financial institutions offer asset-based financing, while others assess an aircraft purchaser’s creditworthiness to make lending decisions. Regardless of the type of financing obtained for an aircraft acquisition, such financing will inevitably require consideration of the choice of law, and the repossession and enforcement rights available to an aircraft financier. While insolvency and delinquency are not ordinary occurrences, these are perhaps some of the most important provisions in a lending/lease agreement that must be ascertained, in addition to the economics of the deal. When purchasing an aircraft with financing, whether a lease or loan, restrictions may be placed on the aircraft in question and additional time is necessary to complete the transaction.

    Aircraft Management Negotiations – Aircraft Management Agreement

    While some private buyers are pilots or companies with existing in-house flight departments, most corporations require an aircraft management company to provide crew and maintenance services. YYZlaw can act as a liaison between the purchaser and the management company, ensuring that the company acquiring the aircraft asset fully understands its rights, fees and obligations under such aircraft management agreement. This document may also be referred to as an aircraft services agreement.

    While some companies have and wish to use an established in-house legal team, advice from a third-party expert, such as YYZlaw, can increase the efficiency of a transaction and provide assurance to both the seller and the purchaser from the letter of intent through to the delivery of the aircraft.

    This article was originally published by YYZlaw on June 22, 2018.

  • Tracey Cheek posted an article
    2018 Aircraft Transactions - Final Quarter Countdown! see more

    NAFA member, Amanda Applegate, Partner with Aerlex Law Group, discusses the top 10 items to consider if your aircraft transaction closes in 2018.

    As we approach the last quarter of 2018, analytical data and industry experts are predicting a quarter that will be extremely busy with both aircraft purchases and sales. Personally, I have a number of clients who are ready to proceed immediately with a purchase or sale once either the right inventory can be sourced or once a buyer is found for the aircraft that is listed for sale. Assuming the right aircraft can be found for buyers or the right buyer can be found by sellers, as transaction volumes increase those providing support services such as aircraft consultants, insurance agents, escrow companies and pre-buy inspection facilities may start to see the stress of the demand. As always, having a well-established acquisition or sales team and a process plan can help insure that nothing gets missed, that the closings go as planned and are completed in the 2018 calendar year. Ten items to consider to help closing occur in 2018:

    1. If you are considering selling in 2018, list the aircraft for sale as soon as possible to allow enough time for the sales process to conclude before the end of the year.

    2. If you are considering buying in 2018, you should already be looking for the right aircraft. Inventory is lower in many aircraft categories than it has been for years. Therefore sourcing the right aircraft is taking longer than it has in the past and may require expanding the search to outside of the United States.

    3. Many inspection facilities have long wait times to schedule a pre-buy inspection. As soon as an aircraft is sourced or a buyer is found (or perhaps even before), look for a pre-buy slot and try to hold it if possible. As a seller, if certain inspections are coming due, perhaps scheduling these in conjunction with a potential pre-buy inspection may help with reserving a slot.

    4. If you have an existing aircraft and plan to replace it, consult your tax team early in the process. Your tax team may recommend that both transactions occur in the same year since 1031 like-kind exchanges are no longer available.

    5. If you are seeking depreciation in 2018 (bonus or straight-line), then the aircraft being purchased needs to be placed into service and used for business (preferably exclusively for business if closing is near the end of the year) before the end of the year.

    6. When support service providers are busy, checklists and a team leader become imperative. There must be one person leading the team who is checking to make sure all aspects of the transaction are completed prior closing (i.e. assignment of mx. programs, insurance, funds, lender agreements, management agreements, international registry account set up, etc.).

    7. The last day of the year in 2018 is on a Monday. In the past, the FAA registry has closed early on holidays and also for weather. It is recommended that 2018 closings be completed no later than December 28, 2018 in order to allow time for the aircraft to be placed into service before year end and avoid any unexpected closings delays that could occur.

    8. Lenders are starting to require all ancillary documents be in place prior to funding. If the aircraft is going to be managed, chartered or on maintenance programs, the lender may require all of these documents be in place along with its own consent agreements, prior to closing. It is likely that these documents will not be allowed to be done as post-closing items, so plan enough time to get all relevant documents in order prior to year-end. Alternatively, consider paying cash and arrange financing after closing.

    9. If the transaction is a cross-border transaction, make sure all parties are realistic on the amount of time the import/export process will take.

    10. Having upgrades done at the same time as the pre-buy inspection often saves downtime on the aircraft for the buyer. However, it may also push the closing into 2019. Therefore, if a 2018 closing is important a close review of the calendar should be made to make sure the upgrades can be completed and the aircraft returned to service prior to the end of the year.

    Please contact Amanda Applegate at 310-392-5200 or aapplegate@aerlex.com.

    This article was originally published by Aerlex Law Group on September 25, 2018 and in BusinessAir Magazine, September 2018, Vol. 28., No. 9, p. 48.