Preparing for and Executing an Aircraft Transaction's "Main Event": The Pre-Buy
By: Duncan Aviation

A change of ownership can be a dramatic event in the life of an aircraft. A pre-purchase evaluation is normally part of the ownership change and the aircraft's evaluation often becomes the "main event" of the transaction. During a thorough evaluation, the aircraft's past, present and future are carefully scrutinized. Buyers and sellers negotiate. Brokers and attorneys push and pull the schedule. Service center specialists pour over the aircraft and answer questions for all. The scene is set. Multiple players, each with different agendas, combine with a host of possible outcomes to create this dramatic main event. 

Purpose:

The objective of any pre-purchase evaluation is to help finalize a buying decision. The evaluation serves to identify issues that may affect the purchase price of the aircraft. Beyond this basic objective, it is important to remember that all the participants in this event are trying to limit their liability and reduce risk. The buyer is especially at risk if an evaluation is not done prior to the aircraft purchase. At Duncan Aviation, we always recommend a good pre-purchase evaluation as a way to minimize the risk involved in buying an item as complex as an aircraft.

The Players:

Compared to a scheduled maintenance event, a pre-purchase evaluation becomes more of a "main event" because there are multiple players involved. They have different goals and timetables in mind. The seller wants the airplane sold quickly with limited additional expenses. The buyer usually wants a complete assessment of the aircraft that will validate the selling price and remove the risk of unexpected repairs. Usually, aircraft sales professionals (brokers or aircraft acquisition specialists) assist the buyer and seller, and add their own agendas and timetables, as do the attorneys involved with the contracts and negotiations. Drama builds as the final player in this cast is added-the maintenance facility. 

As a provider of these evaluations, Duncan Aviation is often caught in the middle between buyer and seller, broker and attorney. But our goal is clear-provide a thorough and fair technical evaluation of the aircraft. Maintenance facilities that perform pre-purchase evaluations provide their expertise to all the parties involved in order to maintain solid relationships as the event progresses. With all these different players, good communication is critical and may determine the transaction's success. 

Pre-Planning:

The key to any successful maintenance event is pre-planning, and a pre-purchase evaluation is no exception. The aircraft buyer, who normally contracts for the evaluation, should do some basic prep work before scheduling with a facility, or even selecting an aircraft to purchase. 

The answers to these questions, and others, will help determine what kind of evaluation will be needed. This information may also eliminate certain aircraft from consideration. At Duncan Aviation, our maintenance sales team works through these kinds of questions to help buyers get the right kind of evaluation and to help them avoid a major buying mistake. Answering these questions before the "main event" begins will help assure the event's success.

The Evaluation Basics:

Once the pre-planning questions have been addressed, work can begin on the actual aircraft evaluation. A thorough evaluation should include a look at the aircraft's past, present and future. The aircraft's past can be reviewed in the maintenance history and aircraft records. A physical inspection of the aircraft and engines will tell you about the present. Evaluating the future of an aircraft involves looking at upcoming maintenance requirements and future mandates that will be required. At Duncan Aviation we recommend that each of these areas be looked at to make a good buying decision. Another important recommendation: Have all the evaluation done by technicians with good, current experience on the aircraft you are buying. A really good evaluation requires expertise and knowledge of that aircraft's strengths and weaknesses.

The Past:

An aircraft's history begins the day the aircraft leaves the factory. How has maintenance been handled (or not handled)? Are the logbooks in order? The importance of accurate records cannot be overstated. In fact, if the success of a pre-buy could be predicted, it could often be based on one item-the condition of the aircraft records. At Duncan Aviation we feel that any good pre-purchase evaluation should start with a review of the maintenance records. Organized and complete records indicate that the aircraft has probably been handled in the same careful manner. Sloppy, missing or unorganized records could mean that maintenance was handled in a haphazard fashion. This part of the evaluation should begin with an inventory of the aircraft records. Reliable maintenance facilities can assist operators in identifying and locating all needed paperwork.

The Present:

The second phase of the evaluation is a current physical look at the aircraft. This part of the evaluation can be done using an official Chapter 5 maintenance manual inspection or a customized evaluation offered by the maintenance facility. At Duncan Aviation we can do either type and often do a combination of both. Again, our maintenance sales team works with customers to get the best evaluation for the situation. To get the best evaluation, consideration must be given to any special maintenance requirements of the transaction, the upcoming maintenance needs, and also the specific desires of the buyer or seller. Getting the right physical evaluation is foundational to the success of the transaction and we advise customers to know what they want, and understand what they are getting.

Whether the physical evaluation is done using a Chapter 5 inspection or a custom guide, the aircraft and engines should get a good look that includes system checks, major component checks, and a thorough look at the structure. All of these areas should be inspected with special attention to any known problem or high maintenance area for that type of aircraft. Once again, it is very important that the evaluator have a high level of experience and knowledge on that type of aircraft.

The Future:

Are required avionics modifications on the horizon? Is a major, costly inspection due in the next year? The third part of the aircraft evaluation should look at the aircraft's future. This area is especially important because there may be major maintenance or modification requirements coming that will be expensive and/or time-consuming. The buyer must be aware of these events in order to negotiate the right price for the aircraft. As an example, the buyer of a $2 million aircraft could be faced with a major inspection, landing gear overhauls, engine overhauls and RVSM certification that might all total more than $800,000! Finding that out after purchasing the aircraft would be a major blow to any new owner. At Duncan Aviation, we take the maintenance status reports and sit down with customers to go over these future requirements. We provide cost and downtime estimates where needed. This future look at the aircraft is just as important as the past and present, and again, it requires expertise.

Other "Main Event" Activities:

Normally, an airplane is purchased with the intent of having it in service upon completion of the transaction. Putting the aircraft into service may require some additional work. A qualified maintenance facility can help work through these requirements while performing the evaluation. This other work may include Part 135 requirements, fireblock certifications, weight & balance checks, etc. If paint and interior touch-ups or a registration number change is needed, now is the optimal time to perform these tasks. 

Before the aircraft leaves the maintenance center, get verification that all maintenance is current, including any outstanding service bulletins, airworthiness directives, etc. Be prepared for operation before leaving the maintenance facility by asking for assistance in transferring warranty programs for components, engine, APU, parts programs, etc., and inform the maintenance tracking program of recent work. Pre-purchase time also provides an excellent opportunity to become familiar with the aircraft, including inspection programs, general maintenance issues, and where to go if help is needed. Consider the maintenance facility your partner during and after the purchase.

That's a lot!

"Whew!" Now you can see that the pre-purchase process really is a "main event." There are a lot of people involved, choices to be made, and usually some surprises along the way. Your best chance for a happy ending rests with the experienced crew doing the work. What you are really buying is knowledge and expertise on your aircraft. Not all issues can be anticipated, but preparation and the experience of aviation experts provides the best opportunity for success. 

SIDEBAR

Some pre-planning questions to answer include:

* Will the aircraft be operated under Part 135 or 91?

* If Part 135, what information will your local FSDO require?

* Where will the aircraft operate? 

* What kinds of trips will it take? Will any be international?

* Is a foreign-registered aircraft being considered?

* What is the maintenance (major event) history of the aircraft being considered?

* What maintenance program is the aircraft on?

* Is the aircraft on a known maintenance tracking plan?

The information in this article was provided by Duncan Aviation, a full-service aircraft support company with refurbishment facilities in Lincoln, Nebraska (800.228.4277), and Battle Creek, Michigan (800.525.2376).