If you are selling a jet it a good practice to have a clear title. By title I don’t mean the name of your plane, the sign off of the CEO or other “titles” but your actual ownership documents. In real estate transactions we have different types of deeds and there may be different types of title to property you own. The same is true for your private aircraft. If you own your plan completely you may want to make that a part of your sales pitch that the jet is free from any issues related to encumbrances, or other legal title issues. If you have issues related to the title of your business aircraft or private jet, these may be red flags that make it difficult to sell. Recently, in the Corporate Jet Insider email newsletter, this very issue was discussed and it is an article that should be read by anyone buy and of course selling a private jet.
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Jet sales are down everywhere and we may have the reason why, jet financing has changed and it may be more difficult to be approved for loans. It was reported by AIN:
With the 2009 credit crisis now abated, banks claim that they’re ready to lend, but business aircraft brokers complain that their clients’ loans are not often approved, according to business aviation analyst Brian Foley. “What every buyer needs to understand,” he said, “is that loans are evaluated very differently now.” Residual values have plummeted, Foley said, “so today’s loans are based more on the borrower’s balance sheet and less on the repossessed asset value of the aircraft, although that continues to play some role. Most banks won’t finance jets more than 20 years old. For some, even 10 years is the cutoff point.” Down payments are also higher, he added. “Gone are the days when a buyer could borrow more than the aircraft’s price–say, 115 percent–with no money down and invest the difference in improvements. Today’s buyer can expect to pay 10 to 20 percent down.” As a result of this tighter lending situation, brokers have told Foley that more than 70 percent of their pre-owned aircraft sales this year have been all-cash, surpassing that of years past. “But with lending more restrictive now, the road to recovery feels like it’s paved with quicksand,” he noted. “Even so, as far as pre-owned buyers are concerned, there is still good financing available, but only to the best credit-risk operators seeking younger, better-quality airplanes.”
It’s good to know your financing arrangements going into the transaction and have a better picture.
In light of the post yesterday where I pontificate about the recovery of the private jet industry, Marc Yahr of L&L International sends me another forecast that he recently read from GlobalAir.com. I love the ending paragraph of the post by David Wyndham:
I’ve seen Richard Aboulafia of the Teal Group present his firm’s aviation sales forecast on several occasions. As he said one time, “If you don’t like my forecast, feel free to make one up on your own.” So don’t worry so much about the future, but just take care of today. If you need a jet, go get one. If you need to sell your current jet, go get a good broker to represent you.
This is great advice from David and we all have our thoughts on the state of the aircraft industry. We are all making up our own forecasts, in some cases to ease our own fears and anxiety and in some cases we actually have some numbers and stats that back up our statements. Like an old lawyer friend of mine used to say, “92% of all stats are made up.” In my case my forecast was based on a gut feeling and the fact that it may be an old lawyer trick of making up the facts that you need in order to be persuasive. Take a moment and read through the post where Wyndham talks about his thoughts.
I don’t suppose we will see this headline in many of the experts’ outbox as they begin to look forward to 2011. In fact, I hesitated writing the title this way in case I might have a chance to jinx the possibility of it actually being the case. It appears that the slide has stopped on many fronts and we have been reporting all the probabilities and possibilities that many companies will begin to see a recovery. The thing about a slide stopping is there is only that next step, the process of recovery.
The probability of a recovery happening quickly is probably not the case here as we see the bottom of the economic woes. The likely scenario will be a plateau of the slide in many cases. Many companies will be taking 2011 to pick up the pieces and begin strategies for recovery. We see changes in the way that many people are traveling. It may be that the government will help with some type of economic stimulus and Wall Street will begin its own recovery. It may be 2012 before we see the real results of the beginning of the recovery, but we can set our sites on business aviation going to the next level.
In the United States this week we celebrate Thanksgiving. Perhaps my point is that if you have made it this far in business aviation, if your in the business of buying and selling private jets and you have made it this far through 2010 you might need to count your blessings and be thankful. In 2011 we have a fresh new year to see if we can begin the climb out of the economic problems we faced in 2010 and make 2011 the year of private jet recovery.
I was reading recently about the trials and tribulations of a the Embraer Legacy 600 that was manufactured in South America, had a mid-air collision with another jet and had to be refurbished in a sense. The jet was reported to be recovered and repaired:
The Legacy 600–now registered as N965LL–was recovered by a mobile repair team from Cleveland-based Constant Aviation, which was hired by the new owners of the Legacy to recover and repair the jet.
This is an extraordinary story about a jet that will be owned by someone and used as a private or business aircraft, but it also brings to mind man questions in my mind. The idea that this damage has occurred to this aircraft makes me wonder what other aircraft had endured over their lifetime. I think it is imperative that when purchasing an aircraft that each potential owner has a clear picture of the maintenance of the aircraft and the repairs that have been made. Not every aircraft has has had the type of history that this Embraer Legacy 600 has had, but it is important to learn about a jet’s history. It is important that you use a company that is trusted in the industry. Some of the repairs that this jet endured were reported:
The Legacy had a damaged left elevator and the left wing was missing its winglet. “Some structural repairs had to be done to get it in a position to where we could fly it,” Maiden said, “even on a ferry permit.” This included replacing the horizontal stabilizer before the Legacy left the airbase.
The humid jungle environment in Brazil was not kind to the airplane, which sat outside for a year-and-a-half after the accident, and all of its Honeywell avionics displays had to be replaced, he said. The fuel tanks were clean and the Rolls-Royce AE3007 engines had been preserved–although they hadn’t been run, they were in good shape. “We did extensive boroscoping and testing to verify the validity of the engines,” he said. The airframe was also free of corrosion. “We had a team of 10 people,” he said, “and we spent three weeks doing testing and analyzing all the systems to make sure it was a safe airplane to put back in the air.”
Not every private aircraft has a story of this one but each previously owned aircraft has a history. Make sure you work with a company that can help you learn about that history, make informed decisions, and of course buyer beware. L&L International has been doing business in this area for a number of years and they can assist you in every facet of your research and can guide your buying process.
There is nothing worse than being stuck in an airport delayed for the third time while waiting for a commercial flight to grandma’s house to celebrate the holidays. As a father of four children, I can assure you that we just do not travel during the holiday for that reason. I tend to send grandma the ticket to come to us. This could all be alleviated of course if I used a private jet for holiday travel.
Living near an international hub and airport, the local news channel always talk about record crowds and getting to the airport early and that does not even factor in the idea of weather. What that means is increased stress during the holidays. Millions of travelers all want to go home for the holidays, or they want to visit relatives and many decide that might be a good time to take a vacation from work since they have some extra time off. This usually means airports operating at capacity with millions of travelers. My luck is that all decide to get into the same line I am in and I stand for a couple hours in that line and a couple more to get through security and a few more at the gate. Meanwhile if I hopped in the family mini-van I would have been half way to my destination before I ever debarked. Private aircraft completely eliminate these scenarios.
If you are looking for that perfect holiday gift for yourself, how about a stress free way to travel during the holidays. In fact, with the time and effort saved on stress and waiting in airports, you could take a couple of trips during the holidays and actually get a few more hours of work in while traveling. I am sold. I think I may contact someone to purchase my private aircraft.
I traveled two weeks ago to Maui, Hawaii for a quick getaway week with my wife. It was a chance to get away without the kids in school, a chance to recharge the batteries and a chance for some sun on my face until after winter here in the rocky mountains. As a small business owner and the CEO and head of my own destiny, these trips can be a time crunch when setting aside time for business to be accomplished. My wife warned me she didn’t want to spend our time away with me hooked into the resort WIFI and being on my phone the entire trip. I have to say that I am impressed with the cell phone service that the Hawaiian islands have and their connectivity.
From where I live and the way I traveled, using miles earned during the year for a free trip, it takes about 8-12 hours of travel time to get from portal to portal. 12 hours in my business can be thousands of dollars in earned income and even more in potential business. I have difficulty getting any work done stuffed into a commercial airline economy seat while opening a laptop and trying to make a desk out of the few cubic feet offered. It makes for poor working conditions which also makes for poor work product.
Another issue I have doing work while traveling has to do with the privacy and security of doing work while traveling. You never know who is reading over your should and never know who is interested i “what you do for a living,” often spending time what you are doing with the nosy neighbor sitting next to you. On this trip at least I had a sleeping wife next to me that only needed a shoulder to sleep on. You can imagine how easy it was to work in that condition.
Finally, technology is only as good as your conditions allow. There was no WIFI on this flight, I ran out of power only a couple hours into the flight and no phone calls can be made easily to business contacts or others while in flight. It’s like lost time you can never get back and each hour that goes back runs up the losses associated with the trip.
Private aircraft eliminate many of these problems. I have been on a private jet where there was a private desk separate from the sleeping area. It had power outlets for my equipment, desk space for papers and books, WIFI and plenty of ways to speak to clients and business contacts through phone connections. It is a worker’s dream space while traveling. The space is as good as any private corner office. This increases the productivity and the quality of the product while making it safe. After all, private jets are just that, private.
I have been giving some thought to the recent brouhaha about the old Speaker of the House using the Air Force for travel needs and the new Speaker of the House indicating that would not happen and that the new Speaker would be taking commercial flights like the rest of the citizens. I am not sure how this can be safe when a potential person who may be the President of the free world would be traveling with the rest of the country in economy class.
Perhaps the privatization of the travel is in order. We have been doing business travel for many years and have become pretty efficient with this type of travel. We can have the competition of working to be most cost effective and being the best company to provide this travel. This takes out of the equation the excess we see with $400 hammers and $1000 toilet seats we see in the military, and creates jobs and other economic benefits for the country.
I doubt this will ever actually happen and frankly the security issues and the other things that would come out of it have not been thought about on my part. I merely believe it would be good for the private jet industry to have this shot in the arm. I know that this is always going to be an issue with travel by our politicians just as it was an issue with the car maker CEO’s during the buyout. What do you think about Speaker of the House traveling around in that latest Citation X?
There is a man down the street from my house that has the best looking garage in the neighborhood. He has one of those special floors that is painted with that special speckled paint and inside that garage is a couple of the family cars. Those cars are the best kept cars I have ever seen. The are always washed, always clean inside, and I got a peak under the hood a few times when speaking to him and the engines look like the day they came off the showroom floor. Those vehicles are the pride and joy of their owner and they would be the best vehicle to buy no matter their age. The point of the story is your private jet can also be the best buy no matter their age if you maintain them like my neighbor does his vehicles.
There are plenty of maintained private jets on the market. They have been kept up to date with all of the minimum requirements under the regulations. They never go above what the regulations require but they have been “maintained”. The business aircraft or the private jet that has been cared for properly will be the best aircraft on the market and will carry the best value. Meeting just the minimum requirements will keep your records up to date and will pass any inspection, but give me the private jet that has been cared for like the neighbor down the street. The aircraft that is always cleaned and polished, the one that has all the best of equipment that can be installed, all records of maintenance and well kept records as well as damage and repairs. All of this well done and well maintained principles make these aircraft carry their value and exceed most baseline values of other aircraft. Make sure you care for your aircraft and it will care for you when it comes to time to sell. Which business aircraft or private jet would you put at the top of your list?
President Obama is trying to pull out all of the bag of tricks he can for the economic recovery and to that he is now proposing giving small businesses a new boost. He is proposing to make it possible for small businesses to purchase aircraft with the possibility of the tax incentive. Great news for some if the legislature would pass the deal. Business Jet traveler reports more fully:
President Obama has proposed giving small businesses a 100-percent bonus depreciation tax incentive for 2011 that would increase the currently proposed 50-percent bonus depreciation deduction, retroactive to September 8, 2010. This deduction would apply to purchases of business equipment such as vehicles, computers and, of course, business jets. Business aircraft manufacturers are hailing the proposal because it would give businesses added incentive to buy aircraft now. Congress still must pass the measure. Legislation currently pending in the Senate would reinstate the 50-percent depreciation bonus that was in effect in 2008 and 2009 through the end of 2010. Supporters are hopeful that the 100-percent bonus depreciation incentive can be added to this bill.
This is a great deal if it works and we will see if it moves the needle in the current economic crisis we are finding the business aviation industry. It is not yet clear how this might help jet sales.
