2019 Aircraft Transactions – It is not too early to plan for a successful 2019 Closing — Originally published in BusinessAir Magazine, August 2019, Volume 29, No. 8.
As we move into the last several months of 2019, whole aircraft transaction volume will increase, particularly in December. Personally, I have a number of clients who are ready to proceed immediately with a purchase or sale once either the right inventory can be sourced or once a buyer is found for the aircraft that is listed for sale. Assuming the right aircraft can be found for buyers or the right buyer can be found by sellers, as transaction volumes increase those providing support services such as aircraft consultants, insurance agents, escrow companies and pre-buy inspection facilities may start to see the stress of the demand. As always, having a well-established acquisition or sales team and a process plan can help insure that nothing gets missed, that the closings go as planned and are completed in the 2019 calendar year. Ten items to consider to help closing occur in 2019:
1. If you are considering selling in 2019, list the aircraft for sale as soon as possible to allow enough time for the sales process to conclude before the end of the year.
2. If you are considering buying in 2019, you should already be looking for the right aircraft. Inventory is lower in many aircraft categories than it has been for years. Therefore sourcing the right aircraft is taking longer than it has in the past and may require expanding the search to outside of the United States.
3. Many inspection facilities have long wait times to schedule a pre-buy inspection. As soon as an aircraft is sourced or a buyer is found (or perhaps even before), look for a pre-buy slot and try to hold it if possible. As a seller, if certain inspections are coming due, perhaps scheduling these in conjunction with a potential pre-buy inspection may help with reserving a slot.
4. If you have an existing aircraft and plan to replace it, consult your tax team early in the process. Your tax team may recommend that both transactions occur in the same year since 1031 likekind exchanges are no longer available.
5. If you are seeking depreciation in 2019 (bonus or straight-line), then the aircraft being purchased needs to be placed into service and used for business (preferably exclusively for business if closing is near the end of the year) before the end of the year.
6. When support service providers are busy, checklists and a team leader become imperative. There must be one person leading the team who is checking to make sure all aspects of the transaction are completed prior to closing (i.e. assignment of mx. programs, insurance, funds, lender agreements, management agreements, international registry account set up, etc.).
7. The last day of the year in 2019 is on a Tuesday. In the past, the FAA registry has closed early on holidays and also for weather. It is recommended that 2019 closings be completed no later than December 27, 2019 in order to allow time for the aircraft to be placed into service before year end and avoid any unexpected closing delays that could occur.
8. Lenders are starting to require all ancillary documents be in place prior to funding. If the aircraft is going to be managed, chartered or on maintenance programs, the lender may require all of these documents be in place along with its own consent agreements, prior to closing. It is likely that these documents will not be allowed to be done as post-closing items, so plan enough time to get all relevant documents in order prior to year-end. Alternatively, consider paying cash and arrange financing after closing.
9. If the transaction is a crossborder transaction, make sure all parties are realistic on the amount of time the import/export process will take and that there will not be any delays in getting the Aircraft on the new country registry.
10. Having upgrades done at the same time as the pre-buy inspection often saves downtime on the aircraft for the buyer. However, it may also push the closing into 2020. Therefore, if a 2019 closing is important a close review of the calendar should be made to make sure the upgrades can be completed and the aircraft returned to service prior to the end of the year.