Jay Mesinger

Questions & Answers

June 30, 2005:

Q: In the standard wording seen in the description of precedents to closing on an aircraft acquisition, does the term ‘airworthy’ mean everything, or just the inspected portions of the aircraft?

A: That is a great question with a complex answer.

You may know that in the purchase of an aircraft, there are no surviving representations or warranties.

This means that you could buy an airplane and if on the very next day, any system on it fails, tested or not, there is no recourse.

The airworthy issue is very similar. Typically, one would see a complete set of precedents for closing.

They usually include, but are not limited to: ‘The aircraft will be delivered airworthy, with all systems functioning normally and to manufacturer’s standards.’

The real answer is that only the systems tested or inspected must function correctly. When you

go to a facility to have a prebuy completed, the report given does not speak to every single item on the aircraft being airworthy, it only speaks to the items reviewed or inspected. This is a critical difference in expectations.

Many buyers would just assume that the term airworthy describes the entire aircraft and every single one of its systems. Wrong!

Today, many of the inspecting facilities are getting away from the term airworthy. They have no way to speak to that depth of scope. Many are even getting away from giving distinctions to discrepancies turned up in the inspection.

Instead, they are simply saying the aircraft cannot be returned to service unless this item or that item is corrected. This can lead to a very confusing dilemma when trying to match the actual condition of the aircraft to the contracted condition of the aircraft.

Q: Is there a general rule of thumb about the amount of brokers’ commission? Do they generally share commissions?

A: The simple answer to the question of amount is that there are no simple answers. I often wish there were.

It is different across the board. Some brokers charge a flat fee, some a percentage, and others, a percentage with a cap. Unlike boating or real estate, there are no norms or standards.

The second part of your question is a little more complex.

Again, unlike real estate, where a selling broker is tasked by design to share their commission with the buying broker, this practice does not exist in the aircraft business.

In the first place, commissions in aircraft sales and purchases are not as high as real estate commissions. This means that each participant is tasked with compensating his or her own representative.

This is not to say that a buyer will not tell his or her representative to get their commission from the seller. This is really short-sighted of the buyer.

If the buyer’s broker has to be paid by the seller, who is already paying his or her broker, then no one is really working for the buyer.

When the buyer begins to feel good by thinking he is not going to pay any commission, he should really begin to realise that no one is really working for him. Big mistake.


- Jay Mesinger