The 10 Questions You Must Ask Before Purchasing a Private Jet
If you are a first-time buyer of a business aircraft, you should be asking yourself many questions before embarking on the quest to find the perfect plane: How often will I fly and how far? How much will I need to work or sleep en route to my destinations? How much luggage will I need to stow? How tall are my typical passengers and how much luggage will they bring? How long will I stay at each destination? How comfortable am I with the idea of other people chartering my plane?
Once these questions have been considered, you should seek expert advice on what type of aircraft will best suit your needs. You will also want help negotiating a good price, finding any hidden issues with the aircraft, financing the purchasing, closing the sale, and hiring the personnel who will fly and maintain the plane.
Buying an aircraft is a complex process, and receiving the right advice can be key to completing it in a satisfying fashion. Members of the Robb Report Private Aviation Advisory Board were therefore asked to weigh in on the top questions you should ask a broker or advisor to determine if he or she is the right person to guide you through the purchase.
1) Who pays your fee?
Begin by asking the broker or advisor about his or her revenue stream. Most brokers are like real estate agents in that they are paid only when a deal closes. While it is normal and expected for a broker to take a fee from a seller for selling his or her aircraft, you may want to hire a broker—and pay a fee—for that person to steer you through the buying process. If your broker is also representing sellers, you should know which possible transactions would carry a conflict. Sometimes brokers take referral fees from other brokers for funneling buyers to a specific listing. Some brokers will receive fees from both the buyer and the seller in a specific deal. This is not illegal, but it may affect the quality of the advice you receive. A reputable broker will disclose these potential conflicts, but you need to ask about them. “We are in an unregulated field,” says Kevin O’Leary, the president and CEO of Jet Advisors. “You need to ask the advisor or broker to sign something that says he’s not making money from someone else in this transaction.”
“You have to understand the advisor’s position in the market,” says Lee Rohde, the president and CEO of Essex Aviation Group. “I only do acquisitions. You’ll never see me list a plane, and I never take referral fees. Some people buy and sell jets and do take referral fees. Not that there’s anything wrong with that, but I’d be skeptical that the plane the broker is listing is the best plane for you.”
Walter Kraujalis, the president of AeronomX, says that brokers who both buy and sell should be transparent. “If I’m selling a plane that might be a fit for a buyer, I disclose that conflict. I have to say, “Look, this guy is paying me to get top dollar, and you are paying me to get bottom dollar, and the two shall not meet.’ ”
Some advisors itemize their fees for other possible eventualities. For instance, if after consulting with the advisor you decide to use charter or fractional services instead of buying an aircraft, he or she still needs to be compensated for advising you. You should know going into the process what that fee might be.
2) Do you specialize in a particular type of aircraft or a particular type of ownership option?
Many brokers focus on one type of aircraft or one type of ownership option. Some deal only in fractional shares, some only in helicopters or light jets or large jets. This is not necessarily a negative, unless you decide during the process that you want something other than what the broker is offering. In that case, you might need to hire someone else. Other brokers may not say that they specialize, but they have done deals only with jets from one manufacturer. Ask questions about the breadth of research being brought to the table.
“We come in with multiple iterations of spreadsheets of all kinds of options in every category and all of the costs associated with them,” says Kraujalis. First, he says, clients look at the spec numbers and pictures of the planes that will meet their travel needs. “Then we go to the airport and touch some of the planes. Then you should charter some of them, see how they feel. Then we talk about the [secondary] marketplace and how many sellers there are and how motivated they might be. It’s a process.”
Not surprisingly, board members suggest retaining someone with knowledge about a wide variety of aircraft and buying options, as well as financing, the legalities of ownership, and working with a management company.
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