Originally published as a blog for AINsight for Aviation International News on 11/6/20
It seems like all we have done lately is count! Now it is time to take out a calendar and count the days. We are still getting calls every day from prospects asking if it is possible to get a plane bought and put into service by the end of the year. Given the complexity of the entire process that task is getting more and more difficult by the day.
The first thing that must happen, and happen in just days, is to find the plane to buy. Believe me if you are contemplating this exercise, know you are not at the head of the line. Many of the best choices are already in play and the remaining planes may not either be the best pedigree, the best equipped, the most solid choices overall. That is not to say that you couldn’t wake up in the morning and find that perfect plane coming to market. It is just this end of the year rush that may have taken many choices off the table.
Let’s say you can find that perfect choice. Next you or your representative or flight department personnel will want to go see it, and review at least initially the logs and records. That may take as long as a week to set a visit and accomplish the cursory review. Many of the people calling us are first time buyers. Therefore, on a parallel course there will need to be a search for either pilots, or better yet, a management company. These searches do not just fall off a tree. This is a carefully executed search that has many critical facets. The management company will among many other operational pieces, have to locate hangar space in the appropriate city and find contract pilots ready to take the important flights to qualify for the bonus depreciation by year end.
Once you have the plane identified then the all-important contract phase begins. This could take up to 10 days to accomplish. Given the rush to get planes purchased and in service, the maintenance facilities are slammed with pre-buys. Getting a slot and having the confidence to pay the inspection cost up front usually does not occur until you have the certainty of a contract signed by buyer and seller.
These are all precious days. Another tricky part can occur if during the inspection items are discovered that parts or engineering requirements start to hold up RTS of the aircraft. COVID-19 has presented several supply chain complications.
Can it all be done if one starts the process on November 6th? Some would say yes if you for instance found a plane new at one of the factories. Getting that into service would be a much easier path. No pre-buy, easier contracting process and fewer into service risks. I have seen buyers wave a pre-buy at year end. That is risky and a path we would not recommend.
The list of critical path players needed to accomplish a transaction will include an aviation attorney, tax strategist, management company, maintenance company, and a broker.
I do not want to take any wind out of anyone’s sails but just approach these year-end-starting-today transactions that have a must close mandate with eyes wide open.