NAFA member, Amanda Applegate, Partner, Aerlex Law Group, discusses the aircraft buying process.
In all types of transactions, you run into the phrase “time kills deals” and I actually believe that can be the case with aircraft purchases, especially when there is limited inventory, such as we are facing in certain aircraft categories in 2021. When it takes weeks to draft an initial purchase agreement or return comments on a purchase agreement, those avoidable delays can impact the success of an aircraft purchase. But lately I have encountered what I consider to be artificial deadlines that put unnecessary pressures on aspects of the Aircraft purchase process.
In a typical aircraft purchase transaction, after the purchase agreement is executed by the parties, the Aircraft is moved to an inspection facility and undergoes a pre-purchase inspection, the scope of which the parties have usually already agreed upon. However, neither party really knows with absolute certainty how long the inspection is going to take nor what is going to be found during the inspection and thereafter, how long the correction of discrepancies will take. Recently, during purchase agreement negotiations, I was asked to state that the inspection would not take longer than 7 days. As long as the parties agree on the scope of the inspection prior to the start of the inspection, I don’t understand or accept why the purchaser would or could possibly commit to the amount of time the inspection will take. While there is an estimated number of days from the inspection facility the purchaser does not control the schedule of the inspection facility or its workers.
Additionally, I have been asked to establish a hard closing date by which time the transaction must close. Depending on the date selected, this can be reasonable as the parties don’t want to be committed to a transaction for numerous months, but again it must be done in a way that the purchaser is not obligated to commit to a process and timeline that is outside of their control. Neither the purchaser nor the seller know at the time the purchase agreement is executed what discrepancies will be found or how long it will take to repair the discrepancies in order to return the aircraft to service. If there is a hard closing date established by the parties that can’t be achieved once the process has started (through no fault of either party), then either the agreement will terminate or the parties will have to agree to amend the purchase agreement.
This Aerlex Law Group article was originally published in BusinessAir Magazine, March 2021, Volume 31, No. 3.
