Corporate aircraft sales are booming. Never before has the industry witnessed this much activity in such a short time. Business aviation was already rising when COVID-19 shot demand into orbit in early 2020. The pandemic introduced new challenges to transacting aircraft. With travel and physical presence limited, buyers and sellers relied on digital records and industry reputation. While executing a non-site, prepurchase inspection (PPI) proved challenging during the lockdown, it returned as essential for conducting business in 2023. The result is blending two worlds, digital and physical, into one new reality. Regarding aircraft maintenance professionals inspecting aircraft, one thing has not and will not change: Trust but verify.
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Where to Begin
Purchasing an aircraft can seem like a daunting challenge at first. Millions of dollars may be at stake in a jet deal, and a poorly maintained aircraft could also fail in service and jeopardize the well-being of passengers, family members, and crew. But just as much may be riding on a much smaller deal on a light piston airplane. As with any business endeavor, it’s better to engage the assistance of experts—regardless of the nature of your aircraft transaction, and gather tips from pros who specialize in business aviation that applies to your process.
Typically, the first step in any aircraft acquisition is for the buyer to submit a letter of intent (LOI) to the seller. Soar Aviation Law LLC, an aviation law firm based in Cleveland, notes that the driving factor for submitting an LOI is to address each party’s understanding of the critical business elements of the transaction and capture and document those terms. The PPI is a vital element of the LOI, addressing essential details such as inspection requirements, scope of work, and inspection-conducting facility.
I recently spoke with Par Avion Ltd. founder and president Janine Iannarelli, who leads the international aircraft marketing firm exclusively representing buyers and sellers of business jets. Iannarelli reiterates that choosing the maintenance facility or technician is a critical decision, and while both parties must agree, it is better to have a third party without bias. Ideally you want to bring on board a representative with specific product knowledge. Be wary of influence, and take care to avoid preferential treatment.
Iannarelli says the service center has a standard protocol and checklist for these events. The team will look for problem areas for regions, any corrosion or previous findings, and check prior operations and ownership history. This language is in a mutual agreement, spelled out in a contract with a scope of work. Additional items may be added to the scope of work based on the inspection, and it can be amended as needed. With travel restrictions relaxed, her best advice is to travel to look at the aircraft. Both buyers and sellers will need to have representatives on-site.
Another aspect of shopping for an aircraft is if the airplane has an existing maintenance program. Soar Aviation Law says of maintenance programs, “Aircraft that are enrolled in maintenance and subscription programs, such as those covering airframes, engines, and maintenance tracking, are often more marketable and more valuable.” Additionally, it is often necessary to consult with the maintenance program about the transfer of ownership and coverage rates. Be sure to obtain a price quote to continue the coverage. This fee will be factored into the total cost of ownership.
Records/Aircraft Logbook Review
As with any aircraft maintenance event, one does not start by pulling panels in the hangar. First of all, what are you looking for? Secondly, what happens when you find it? Third, is this part supposed to be installed? Aircraft logbooks tell the story of the airplane, engine, and propeller(s). Each piece of the airplane has its serial number-specific logbook. If the aircraft is a twin engine, two engine logbooks will be present.
As there is quite a bit of component swapping during aircraft maintenance, it is imperative that the serial number listed as installed on the aircraft physically resides in that position. Frequently parts get swapped out during troubleshooting or to avoid an aircraft on ground (AOG) situation, and those need to be recorded correctly. One, do the records match the aircraft? Look for the serial numbers of components. Airworthiness directive (AD) status and service bulletin (SB) compliance are other factors to consider. Remember, ADs are mandatory, and owners must comply to stay airworthy. Speaking of airworthiness, what authority governs the operation of the aircraft? Is it the FAA, European Union Aviation Safety Agency (EASA), Civil Aviation Administration of China (CAAC), or another regulating body? If you intend to operate the aircraft under a different regulating agency, there may be additional paperwork to complete.
If the above instances are valid, importing the acquired aircraft to another country could be required. Soar Aviation Law advises that during the visual inspection, if the aircraft is found to comply with an-other governing body, it is important for the buyer to have a designated airworthiness representative (DAR) present to determine if the aircraft will be considered airworthy in the U.S.
A wealth of information can be gleaned from reviewing the aircraft records. Tony Kioussis, former president and CEO of Asset Insight LLC, and I sat down to discuss prepurchase inspections. Kioussis has spent his career dealing with aircraft, and his current venture is AvPolls, which provides insight into the aerospace industry’s collective viewpoint. He offers some good advice when beginning a records review.
According to Kioussis, if a seller does not allow sufficient time for a detailed check of the aircraft and its records, it might be a sign of hidden issues. “I would never acquire an aircraft without the opportunity to conduct a detailed PPI,” he said. I asked Kioussis about some lessons he has learned in the aircraft brokerage business. He acknowledges that each aircraft model has its known issues. According to him, it is best to conduct the PPI utilizing a facility that knows the model well—such as the OEM. One item that can be overlooked is an entry to the log that might seem routine but one that has a more important story to tell. If an aileron has been “replaced,” what required its replacement? Was it replaced because a tug struck it? That would mean the aircraft had sustained damage that might affect its valuation.
The pandemic definitely affected business aircraft sales. During COVID, access to an aircraft by the buyer’s and seller’s representatives to the PPI facility was often limited. Record reviews were often more limited than buyers would like. Because of the “purchasing frenzy” that was created during the pandemic low inventory led to a seller’s market. That not only dramatically raised prices, especially for newer, lower-time aircraft, but also allowed sellers to limit, if not outright refuse to allow, a PPI of their aircraft. Some buyers, especially first-time ones, were not advised by an experienced acquisition consultant. As a result, some were willing to acquire an airplane under “as-is, where-is” terms. Any experienced buyer will tell you that doing that may not only cause you to pay more for the aircraft than it is worth but also increase your cost for maintenance in the future and potentially negatively impact your selling price for the asset at the time of replacement.
- RED MORE: Looking Beyond a Pre-Purchase Checklist
Aircraft Condition Inspection
Once the records review is well underway, it is necessary to inspect the aircraft physically. One line on the job card may be to perform a borescope inspection (BSI) of the engines. Here, the team can check for specific trouble points for this aircraft. At this point, begin to cross-check the physical serial numbers against the paperwork.
Working with industry experts when launching these maintenance evolutions is important. Crew Chiefs Corp. is just such an organization. With teams stationed all around the globe, Crew Chiefs can serve as an on-site representative for prebuys, completions, and refurbs. Mark Thibault, chief technical officer, and Warren Curry, COO, of Crew Chiefs, discussed the logistics of prepurchase inspections with FLYING.
There is no industry standard for the scope of services performed during an aircraft PPI. The scope of work dictates the depth of the inspection. A complete PPI is conducted at a service center or MRO facility. When necessary, a condensed aircraft survey conducted by an aircraft technical expert, typically in a hangar or even on the ramp of an airport, without an MRO’s involvement may be needed. Buyers may choose these abbreviated surveys when the MRO lacks the space or the time to close the deal is tight. They consist of a detailed visual inspection of the aircraft and a thorough aircraft records review without involving removing panels.
For full work-scope PPIs, the following are essential elements. The maintenance inspection team ensures adherence to the scope of work. The teams then assess the discrepancies and take action as needed. Typically, a seller is financially responsible for correcting all airworthy findings, and the buyer is financially responsible for all findings not considered airworthiness issues. It may be necessary for the maintenance team to accompany the aircraft on an acceptance test flight.
The buyer should receive daily status reports and a final comprehensive report with all activities, observations, and assessments, including associated pictures. To better understand the process, Crew Chiefs highlights five focus areas during the inspection:
- Condition surveys: Conduct a comprehensive inspection of the cockpit and cabin for aesthetics, form, fit, and function. Make an exterior zonal flow inspection to assess paint, flight control surfaces, engine inlets, tire and brake wear, as well as any areas exhibiting corrosion, damage, or defects.
- Conformity inspection: Make one if the buyer’s intended use involves Part 135 (AOC) and the state of registry compliance.
- Program reviews: Assess the status of any engine/APU/avionics, OEM programs, third party warranties, or component warranties.
- Verification of sales specifications and loose equipment: Review the aircraft’s options and equipment to ensure compliance with the proposed aircraft purchase agreement.
- Oversight of BSI and cold soak flights: This requires third-party involvement, such as an engine OEM or service provider, operator, or current owner(s) and pilot(s) but allows for a better under-standing of any existing engine discrepancies and operational and system checks.
We also discussed some universal truths that, regard-less of aircraft model, prospective buyers should be aware of:
- Ensure contractual obligations to rectify discrepancies for the seller and buyer are clearly agreed upon before inspection.
- Obtain professional advice on the recommended scope of the prebuy inspection based on aircraft type, total hours, age, and intended utilization.
- Use a third-party inspection service for an objective assessment. Do not use the current owner’s maintenance personnel.
- It is always recommended to complete an engine borescope inspection from the engine OEM or engine OEM-authorized facility if possible.
- Conduct a test flight—sometimes called an observation or acceptance flight—to evaluate aircraft performance and conduct in-flight operational and systems checks.
- Maintain daily awareness of the progress and status of the prebuy inspection, especially if a technical representative was not hired to protect your interests.
- Understand pending inspections that may significantly add to the cost of aircraft ownership within the first couple of years.
- Ensure all documentation, records, and logbooks are reviewed for completeness, organization, and compliance.
- Ensure you use a highly reputable provider to review the prebuy inspection results.
Once the inspection team wraps up and the reports are filed, it’s time to sit down and negotiate. Sometimes, the two parties may need to close the deal before accomplishing the entire squawk list. Soar Aviation Law points out that currently the most common reason aircraft deals cannot close is because of supply chain issues. The aftermarket parts supply is constrained and not all parts are readily available to return the aircraft to service. In this case, the parties can agree on a reduced price based on the estimated cost to repair, or each can agree on a holdback amount to be held by the escrow agent after closing. The hold-back is used to pay for the repair of the outstanding discrepancies.
This article first appeared in the September 2023/Issue 941 of FLYING’s print edition.
