Friday, February 17, 2012

Aircraft Sales and the Pre-Purchase Inspection

The purchase or sale of a used aircraft will include a pre-purchase inspection, but what exactly is that and what should you expect? 

After your aircraft is marketed, you will eventually be presented with various offers from people wishing to purchase the plane. Accepting the offer is only the beginning of the sale of the aircraft. Basically, an offer to purchase is a theoretical offer. The buyer basically says that if the aircraft is everything you have represented it to be, then he or she would be interested in purchasing it for x amount of dollars. The pre-purchase inspection is how we separate the theoretical from the actual.
To undergo a pre-purchase inspection, the aircraft is moved to a service facility that is mutually agreeable to both buyer and seller.  Generally this will be a manufacturer’s approved repair facility as they will have the necessary knowledge and experience to perform a competent review of the plane. And that’s really all this particular inspection is, a review of the aircraft.
The technician will review the logbooks to make sure that they are complete and up to date. He or she will ensure that there are no missing entries and that everything that is supposed to be signed off has been. They will review what is typically referred to as a “due list” and see what maintenance and inspection items are coming due for the aircraft in the near future. Additionally, they will perform a visual inspection of the plane, inside and out, to see if there are any indications of hidden damage.
Once the inspection is complete, the repair facility will typically have a list of items that have to be done and a second list of recommended items. Items that have to be repaired will include Airworthiness Directives and Mandatory Service Bulletins from the manufacturer. These items are not negotiable and if the aircraft has any of these, under most circumstances, they need to be addressed before the aircraft even leaves the facility. A savvy seller will ensure all AD’s and Mandatory SB’s are completed before the aircraft goes to its inspection to eliminate the negative effect these items have on negotiations. The second list, typically made up of maintenance items and Service Bulletins, will be a recommendation of what the repair facility thinks the aircraft needs. At this point, the buyer will look over the work needed on the aircraft and modify his or her offer accordingly. In other words, if it is discovered the aircraft needs $100,000 worth of repairs, the buyer may lower his or her offer by $100,000 to compensate, or perhaps offer to split the charges with the seller. Regardless of the results of the inspection, this is when the final price is settled on for the aircraft. Once buyer and seller agree to a new price, or agree to stick with the original price, the aircraft can move into escrow and the sale can be closed. A good pre-purchase inspection is vitally important to the purchase or sale of a jet aircraft, but as long as the plane is as represented, it’s nothing to worry about. For a more in depth look at these inspections, check out this article in Aviation Week.

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