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Look for Professionals When Acquiring an Aircraft

Look for Professionals When Acquiring an Aircraft

Aircraft demand has skyrocketed. The widespread return to traveling, the reduction of commercial flights and many more factors have nudged people toward the benefits of corporate aviation.  

However, the aircraft buying process is competitive, and many prospective buyers have put rational decision-making aside to outbid and secure the aircraft they want. Some buyers even short-cut key processes and due diligence to meet their travel needs as soon as possible. This can result in less-than-ideal situations for all parties involved, including buyers being in an upside-down position on their aircraft when they look to sell.  

It’s important to remember that aircraft ownership and management is a long game. Hiring qualified and knowledgeable aircraft industry professionals from the initial steps to the purchase and through the back end will result in a smoother ownership process.  
 

Pitfalls in the current market 

The purchasing process for an aircraft is very different from other large purchases and should not be treated like other assets, such as real estate or equipment. Many prospective buyers can get caught up in buying on emotion or cutting corners to save time and costs. In addition, some potential buyers eager to own an aircraft may avoid the valuation process to outbid other prospective buyers and get the deal done.  

To ensure a sound financial decision, prospective buyers should first hire advisors who are experts in business aviation. Experts can aid in proper valuation and recommend a loan structure for purchasing an aircraft.   

“Most people want to finance airplanes for five or more years, but the typical ownership is three to four years,” said Keith Hayes, senior vice president and National Sales Manager for PNC Aviation Finance. “So, somewhere during the life of their loan, there is a good chance they will elect to sell their plane and pay off the corresponding loan early. If the loan is not properly structured up front, in today’s “inflated” market, there is a good chance the client may owe the lender more than the future value of the plane….this potentially leads to an unhappy client that cannot move forward with their plans to purchase a new plane.”  

The current registration backlog has also led many new buyers to look for ways to speed up the process. Instead of relying on expert aviation services, many new buyers try working with a referral or friend not trained in the aviation business.   
 

How to manage the aircraft acquisition process 

1.  Understand your emotions 

So, other prospective buyers suddenly want the shiny new airplane you want– that’s okay. Remember, the aircraft will never know you own it. Keep perspective and view the process as another financial transaction.  

2.  Embrace change  

Sales calls started on foot, going door-to-door, but now, executives look to private air travel to visit their customers more efficiently. So, just as transportation has changed, our investment strategy should too. Given the current conditions, an aviation business professional can educate you on the evolution of aircraft ownership.   

3.  Avoid bias 

Many biases creep in and derail sound financial decisions. For example, success bias occurs when we become emotionally attached to assets that have been successful for us. Avoid bias and rely on professionals who monitor the aircraft market daily to give you the most accurate picture. 

4.  Work with a third-party aviation expert 

Hire someone who does not have a stake in your decision to help guide the aircraft purchase from an outside perspective. As mentioned previously, hiring an aviation expert to guide you through the process is critical.
 

Final Thoughts 

Prospective buyers should always work with reputable aviation professionals when purchasing an aircraft. Experts focused exclusively on business aviation are equipped with the latest information to ensure you have a smooth experience throughout the life of the transaction. This is especially important when navigating current market conditions so that you can get flying as soon and as safely as possible.  

 

NAFA thanks PNC Aviation Finance and Keith Haye's for his contribution to this article published by NAFA on January 17, 2023.

 


 January 13, 2023