40 Steps You Need To Know Before Buying A Private Jet

40 Steps You Need To Know Before Buying A Private Jet

You would assume if you have the bucks, how hard can it be to buy a private jet?

There’s financing, but you’ve done plenty of deals. There are negotiations and contracts, but you have an entire in-house team of lawyers to read the fine print. You’ll need a management company, but call three or four and let them submit RFPs. Tell them it’s a rush!

You’ll need pilots, but even if there’s a shortage, it sounds like the type of supply and demand problem money can solve.

What’s an extra $50,000 in salaries when you are buying a $50 million plane and want to be flying it by the beginning of next month?

After attending Corporate Jet Investor last week in Miami, I spent the next two days at CJI’s Aircraft Transaction Masterclass.

My decision to go back to school was spurred in large part by what seems to be a sea change in how first-time private jet buyers are entering the market.

It used to be after lengthy time spent flying privately through charter, new buyers dipped their toes in the pool. They might buy a light jet or turboprop. It might even be with the advice from the local operator they were chartering from to help guide them.

What does it take to buy a private jet?

There are 40 steps to buying a private jet, many of which require specialist professional lawyers, ... [+] PRIVATE JET CARD COMPARISONS

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The normal scenario was a growing business that went from two or three nearby locations to a dozen places in several states, meaning it was no longer easy to stop in and see what’s going on by driving. After a while chartering, buying made sense.

Today, business is more global, and many business jet users need private aircraft solutions that can take them near and far, often hopping an ocean for a meeting, and then going someplace else on a distant continent.

That means new billionaires and other UHNW buyers who have less experience in private aviation. Making a mistake buying a used $2 million light jet can be expensive, but when purchasing aircraft with price tags ranging from $15 million to $75 million, the cost of doing it yourself can be exponentially bigger.

That’s not to say anyone approaches buying a private aircraft naively. However, executives at Corporate Jet Investor and the Aircraft Transaction Masterclass say it’s not unusual for newbies to believe that their same business and personal infrastructure - CFOs, in-house legal teams, or family office and financial advisors - are capable of doing it for them.

With that in mind, below are 40 steps CJI has identified that are part of buying a private jet:

1. Choose your broker/dealer/transaction adviser. They should easily save you more money than their fee. The same is true for a specialist aviation lawyer
2. Select an aircraft to match your needs/view aircraft
3. Make an offer/agree Letter of Intent (long form vs short-form, standard versus bespoke)
4. Legal counsel review transaction structure and assess tax issues
5. Deposit placed in escrow (negotiate terms of release)
6. Buyer’s lawyer/buyer negotiates finance term sheet with financiers
7. Buyer's lawyer conducts due diligence on title, searches for liens etc
8. Start negotiating the Aircraft Purchase Agreement and who pays what
9. Aircraft Purchase Agreement signed
10. Log book review by buyer’s technical team, check back-to-birth records
11. Appraisal for finance (if required)
12. Test flight/re-location flight – who is paying for this in Aircraft Purchase Agreement
13. Pre-purchase inspection
14. Finance documents reviewed
15. Sale document drafting starts
16. Tax advisers determine structure and importation route (if required)
17. Decision on aircraft registration, ownership structure (may require specialist counsel)
18. Choose operator if needed
19. Legal opinions on different jurisdictions requested
20. Seller rectifies discrepancies from pre-purchase inspection/negotiates changes or buyers walks away
21. Buyer reserves registration number
22. Export certificates, certificate of airworthiness
23. Final documentation review
24. Assignment of Maintenance Plans
25. Final closing points agreed
26. Insurance arranged
27. Liens and discharges
28. Money wired to escrow by financier/buyer
29. Ferry flight
30. Tax ruling opinions issued (depending on jurisdiction)
31. Seller de-registers aircraft
32. Closing call
33. Signing
34. Escrow agent receive proof of de-registration
35. Agent files bill of sale, registration application
36. Liens filed with International registry (Cape Town)
37. Registration – in U.S. Federal Aviation Administration issues flight wire
38. Importation of aircraft (if required)
39. Miscellaneous bills settled – satellite communications, maintenance programs
40. Protect asset value – hangar, engine covers etc. – ready for when the aircraft is sold

I plan to delve more into the subject of buying private jets in the future. In one case study of an actual transaction, a company that thought they had bought a private jet, found out even though they had been making payments, in fact, the structure of the deal meant in fact they didn’t own the plane they had been using. With that in mind, I hope a quick takeaway is that it makes sense to enlist specialist professionals in the process.