Jay Mesinger

Questions & Answers

September 21, 2004:

Q: You often write about mission profile work. What happens if you compare several types of aircraft and the performance of both are very similar as well as the cost to operate them? How does one make the choice of which plane to buy?

A: If all things are equal with respect to performance and cost, pick the one you really like. I know what you are thinking. Who needs a professional for an answer that is so simple? Ultimately the one you really like should have a higher weighted value. There are a few other things to consider when making the final category/model choice. For instance, are all the planes considered equal with respect to age and regulatory compliance? Will any of the choices create aging airframe concerns? Are all of the choices stage 3 noise compliant?

These considerations affect future capitalization costs as well as residual value. Residual value is a critical factor in a good decision making process. In regards of the airplane you choose today, what it will be worth at the end of your ownership is an important factor. I recently compared 3 aircraft within the large cabin category for a client. They were all Challengers. We compared a 601-1A/ER, 601-3A/ER and 601-3R. They all had very similar performance and cost of operation. Ultimately by looking closely at the production evolution, we eliminated the 601-1A due to the number of modifications it took to get an avionics suite comparable to the 601-3A’s or 3R’s. We then focused on the differences between the 3A/ER and the 3R. We then eliminated the 3A/ER because we felt the on condition engines of the 3R had added extra value for now and in the future. We used the very matriculation of the product to help point to the right choice for this customer. By the way, our elimination process should not be used in a general sense. You might find that you look at the values of the items we consider differently, thus providing different outcomes.

Q: I have heard the term Hard/Soft deal when describing a contract for purchase of an airplane. Can you tell me what that means?

A: If a purchase contract calls for the seller to be obligated to repair what is found to be un-airworthy and correct all malfunctioning systems that are discovered during the pre-buy inspection, the buyer has the right at his or her sole discretion to accept or reject. That is a Hard/Soft deal. The seller has an obligation that is hard and fast, and the buyer has the right to reject. The alternatives to this would be Hard/Hard deal. In this case the buyer is obligated to buy as long as the seller corrects all things found that create compliance with the terms of the contract. This is very difficult to contract because the buyers would certainly want exceptions to their obligation to buy if, for instance, during the inspection they determine there has been undisclosed damage, or serious problems like a crack in a wing spar is found that could be corrected, but when fixed could lower the value of the plane. By the time you are finished building in enough exceptions that a buyer feels confident to accept, you are back to Hard/Soft. The other type of agreement is a Soft/Soft deal. In this case the buyer has the right to reject at his or her sole discretion and the seller has the right to correct items found at his or her sole discretion. This one is tough unless the seller is willing at a minimum to reimburse the buyer for the inspection expense if the seller decides not to correct contracted items. The best advice is hire a skilled aviation attorney to help create a balanced, fair contract that allows all sides the rights and privileges needed to create a Win/Win contract!


- Jay Mesinger