Transaction & Risk Support

The cost of an aircraft is not just a one off; the ongoing commitment costs such as maintenance, hangarage, and operations, can be a considerable annual outlay. These costs need to be considered in advance to reduce the risk of the aircraft not being a viable long term asset.

Having the correct leadership to coordinate a transaction is essential to mitigate risks. Buying a business aircraft is a complex process with unique attributes which require the expert advice of specialists who understand the context of a business aircraft transaction and have experience in dealing with them.

Appointing an experienced and appropriate leader (usually an aircraft transaction lawyer) to manage the transaction will save time and money. The transaction leader will build a team of specialists, including relevant legal counsel, tax advisor, financier (if applicable), insurer, and corporate service provider to give advice at the appropriate times throughout the transaction.

A good leader will carefully select a team who will complement each other and ensure the advice provided by each advisor fits together in the transaction map. The leader will have the overview of the transaction and if one piece of advice conflicts with another will be able to review the situation and find alternate solutions to minimise risk.

Adding people and money to a transaction does not always reduce timescales. This is especially true when it comes to processes such as aircraft licence applications, registration and other governmental processes. Therefore, it is important to understand and recognise points throughout a transaction which require set periods of time (or jobs to be completed in the right order).

For example, while an aircraft delivery date coming forward may present an opportunity, if there is insufficient time to have the ownership and registration correctly arranged then problems will arise.

Planning an appropriate transaction timeline (and understanding how long each element will take) will allow for a smoother transaction; then, if the unexpected happens, time will be available to positively react to the event.

Every client is unique and every aircraft transaction is unique. There is no one size fits all.

Cost reality vs myth: It is important to manage client expectations and ensure they understand what can reasonably be expected from their transaction: what can be achieved, the process and timescales. Failure to give an accurate picture of the transaction increase the risk of a disappointed client. For example, a popular myth is that the initial and ongoing costs of an aircraft can be offset by making it available to charter; the client should be made aware that this is virtually never true.

True costs of ownership: similarly, it is important the client understands the true expense of buying and owning aircraft. Aircraft are expensive assets that depreciate in value and come with high running costs. It is almost never true that buying an aircraft is an investment in an appreciating asset (of course the time and efficiency saving should not be underestimated). Managing the client’s expectations with reality is strongly advised: if the anticipated aircraft usage is less than 100 hours a year, there may be a strong argument that charter is preferable to ownership.

Outline potential risks: even with the best management in place, external factors can still impact a transaction, for example if the aircraft can’t be delivered on time due to a technical error or adverse weather conditions. A good team will be able to outline certain scenarios and decide on a plan B, but the client needs to be aware of such possibilities and have realistic expectations from the outset.

Heraclitus said, “The only constant is change.” Even so, most transaction managers prefer predictability.

Mission, team, timing, and expectations can, for the most part, be managed internally by the client and their advisers. The wider environment, however, whether political, social, or economic, introduces risks that cannot be controlled and must instead be monitored and managed as they arise.

Transactions can be delayed or even derailed by external events. While surprises can never be eliminated when buying an aircraft, a well prepared team should continually assess the global landscape, identify emerging risks, and anticipate potential obstacles wherever possible.

Surprises cannot be handled in advance when buying an aircraft, but the team should be looking to minimise environmental risks by assessing the current global situation and predicting possible obstacles further down the line.