In introductory calls with clients we are routinely asked if we are pilots. Why? Does an aviation transaction lawyer need to know how to fly an aircraft in order to be skilled at the legal aspects of buying, selling, financing, registering and advising on the regulatory aspects of an aircraft? I think it’s because people naturally associate an aircraft with a pilot. The legal skills required of a lawyer that handles aircraft transactions are significantly different from, and in many ways completely unrelated to, the mechanical operation of an aircraft. After all, the acquisition of an aircraft involves the knowledge of aircraft registration law, FAA regulations, permissible operating structures, state tax issues, federal tax issues, among others. There is one thing that a safe pilot does have in common with a good aviation transaction lawyer: experience -experience with navigating the routine and complex transactional issues, none of which are the same in every deal, but all of which demand in-depth knowledge and experience. So perhaps the questions shouldn’t be “are you a pilot” but rather “do you have the knowledge and experience to pilot us through this transaction safely and effectively so that our goals are achieved.”
The next question is usually “do you have a plane.” I’m workin’ on it (but don’t tell my wife).
A quest is a search for something and in this case, the quest eventually turned out to be a profitable aviation business with humanitarian interests at heart.
During the recession there are a lot of industries suffering significant hits. A turboprop manufacturer in Idaho was just getting its business underway during the same time frame when the recession hit the hardest, giving short shrift to his dreams and plans – temporarily. The business owner, Paul Schaller, snatched victory from the jaws of defeat and niche marketed his turboprop planes for missionary and humanitarian outfits requiring access to dangerous and remote regions. His company name: Quest.
“While this might sound nice and like a worthwhile cause, this also happens to be a burgeoning $300 million market that hasn’t really gone very far since the early 1960s. This particular plane, a ten-seater $1.45 million Kodiak, is certified by the Federal Aviation Administration (FAA). Since that happened, Schaller’s deliveries have blossomed from virtually zilch to over 27, with customers standing in line,” recounted Stewart H. Lapayowker, Esq., an aviation transaction lawyer who focuses his practice on aircraft transactions in Fort Lauderdale, Florida.
Who would argue that using a plane for rescue work is a luxury? Not a lot of people and its usefulness has proved itself over and over. It’s not just the fact that the plane and the business of saving people are in demand, it’s also that this industry employs others. “In other words, it provides jobs in many areas of the business aviation industry. Odd that people seem to think this kind of work and using a plane to get to places is acceptable, when other companies who do the same thing – but do work related tasks – is out of line and unjustified,” Lapayowker commented.
Consider the fact that this small company is now making three Kodiaks a month and has back orders for 120 planes on the books. Quest expects to makes close to $60 million next year. “Part of that revenue will go back into the local community; part will go to the government. In other words, business aviation turboprop planes are more than pulling their own weight when it comes to contributing to the economy,” added Lapayowker.
“This is a heartwarming story with a moral attached to it and that moral happens to be that despite an aircraft industry that is having trouble during the recession, it is possible to make a comeback. Business aviation is the lifeblood of the country, no matter what form it takes – turboprop aircraft or business jets. They all have value that contributes to the economy of this country,” said Lapayowker.Read More
Think booming business that provides jobs to Americans, even during a recession. Think smart business means smart business aviation use.
In a world that loves to pounce on excesses, it isn’t hard to find hundreds of people tsk-tsking over the use of corporate jets for private purposes. It happens. However, just because there are some companies or executives that do abuse an asset, does not mean that all companies and executives do it. In fact, the exact opposite is usually the case. It’s just that it makes good grist for the publicity mills to be able to point out instances where corporate big shots pulled a big blunder and used company jets to do their “thing,” while taxpayers footed the bill.
“Fortunately, as bad as a story like that might seem, there is a nugget of reality and truth in it, and that is using business aviation to run a company is not only smart, it means the organization is well managed. For those having trouble with that concept, consider the thousands of miles some companies need to put on to make and maintain a profit. While the profit does go to the company, it also goes to the coffers of the nation, keeping trade open across the nation. In other words, business aviation means the country’s economy is thriving thanks to the mobility and flexibility of using planes to do business,” explained Stewart H. Lapayowker, Esq., an aviation transaction lawyer who handles airplane jet transactions in Fort Lauderdale, Florida.
Business flights are a reality in the world today, and if they weren’t, America would not be what it is capable of becoming now and in the future, thanks to the capacity of planes to make vital connections viable. “Whether it’s getting to a distant office on the other side of the country to handle a production problem, sending sales teams for training on a new avionics model, or getting a critically ill person to the nearest high tech medical facility, business aviation is crucial to America’s well-being,” added Lapayowker.
If a business executive had to make four stops in one day, each involving a meeting and resolution of shipping glitches that were holding up the uninterrupted flow of goods to the four destinations, would that executive take a commercial airline to those locations? If one location was New Mexico, one in Washington, one in Maine and one in Montana, and they were all within a two day time frame, that executive could not efficiently take commercial airline flights to all of those places. Logistically, it would be a nightmare.
Using a corporate jet would deal with the geographic issues and make those meetings doable. In the process there would be a business resolution that would allow the company to continue to flourish. One trip, working on the aircraft, holding meetings and doing deals, makes financial sense. “Travel time involved is kept to a minimum using business aviation. Put another way, the return on investment that a business airplane provides for a company goes directly to its bottom line, which can only be a good thing in business,” said Lapayowker.Read More
Hoofing it to that far away destination may be an alternative, but not a viable one. Flying, on the other hand, now that makes far more sense.
Typically, most Americans figure they get things done faster because they have a car to get from point A to point B. Many of them also forget that they spend about half the day on the road getting to all the places they need to go. Don’t forget that it isn’t just going from home to work either; it’s taking the dry cleaning in, drop the kids at school, go for a hair appointment, hit the post office, the grocery store, pick up your cat at the vet and so on. That’s a small snapshot of a day in the life of an average American needing to travel a whole lot in one day to get things done.
The average American is much like the average (to not so average) business that has to travel a whole lot in one day to get things done. The major exception here, of course, is the fact that the point A to point B journey typically involves thousands of miles and may mean having to get to different countries as well. Obviously driving is out of the question. Enter the necessity of flying to do business.
Here is the problem though. Most Americans think that corporate jets are just for joyriding. Really, who could blame them for that impression given some of the stories they’ve read in the news lately, and now the rest of the business aviation industry is suffering because of it.
Not everyone or every business that uses jets to get around is doing it because they have the money to do so. This isn’t about wealth. This is about doing business in a country so vast that it is impossible to accomplish much unless one has the ability to respond quickly to various business developments.
It’s almost a no-brainer to look at the thousands of miles some companies need to navigate to understand why they need business aviation at their disposal. They fly because they need to in order to stay in operation. If they didn’t fly, they wouldn’t have a company and would not be contributing to the economy.
Think that company executives should be taking commercial airline flights? You’re right, they should when it makes sense. However, there is no sense in trying to book a commercial flight to a place where no commercial airlines fly and there is no airport. In other words, if you can’t get to where you are going commercially, then you should utilize corporate aviation.
That makes sense to those in business. It doesn’t make sense to the general public, because they have not been there and done that. So really, it’s a matter of education about the business aviation industry and why it is vital to America. Company operated aircraft are about flexibility and productivity, about making money that goes into the nation’s coffers, and about providing jobs to Americans. What more could you ask for?Read More
Business aviation is not about flying in the lap of luxury at the drop of a dime. It’s about keeping the nation moving in more ways than one.
Unfortunately a great many people in America think that corporate jets are the toys for the boys behind the desks of big companies. While it is true that corporate America does use planes to do business, they do not, for the most part, hip-hop from place to place just “because they can.” Business aviation is one of the cornerstones of what makes this great country prosper.
Many people aren’t aware of the fact that business aviation contributes well over $150 billion to our economy each year. This industry also gives jobs to over 1.2 million people; jobs that are stable and pay good wages. This can’t always be said about the rest of the economy. In addition, a large majority of the general aviation aircraft in service around the world are made, run, serviced, and taken care of in the US. That’s not exactly small potatoes when it comes to being a reliable, trustworthy, innovative, and critical industry that is part of the lifeblood of American commerce.
While there are some aviation companies that do manufacture their planes abroad, they bring them to the US to complete. The US has a sterling reputation for aircraft components, even aircraft completion centers, paint, engines, automation systems, electronics, and avionics. Think about the dollars this industry pumps into the economy.
Business aircraft manufacturing is a major source of good jobs in the US, the kind of employment that can continue well into the future. Interestingly enough, it is also one of the very few industries that still actively contributes to maintaining a positive trade balance. At this time in our economic development, we desperately need industries that boost our economy, providing some light at the end of the tunnel during this major recession.
Another fact that not too many people realize is that business aviation lets companies quickly and safely get tools and materials from one place to another; the kinds of materials that can’t be taken on board a commercial airline. Operating a business aircraft lets those doing business get from one destination to another, solving problems as they crop up during the course of doing trade. This increased mobility helps companies solve their problems rapidly, effectively and efficiently.
Don’t forget that any business aviation aircraft needs support crews, maintenance personnel, pilots, technicians, dispatchers, schedulers, and other critical employees to keep their planes in the air doing business. Overall, the big picture for business aviation is one of contributing to a growing economy, striving to stay current in the 21st century, contributing an enormously valuable service to the nation, and allowing commerce to flourish under some tough conditions.
Do corporate jets mean the big boys are playing at the taxpayer’s expense? The nation’s trade balance sheet shows otherwise.Read More
If you’ve seen the new Star Trek movie or are a fan of earlier movies, you may recall that every officer is tested in what is called the “Kobayashi Maru” scenario. This involves the trainee being placed in an untenable position – he or she needs to choose to try to rescue another ship while facing certain death or save his own ship and let hundreds of passengers on the other ship perish. Kirk finds a solution (he cheats the test) but the point is that he doesn’t believe in the “no-win” scenario.
While there may not be a perfect solution for every issue encountered in an aircraft transaction, something can typically be done to accommodate fundamental issues that arise, and having a positive mental attitude while dealing with a difficult seller or buyer (or their representatives) is an important part of getting the deal done. Transactions are fluid, can change on a daily basis, and involve give and take. There are times when rigidity is important, but at other times rigidity can result in a busted deal with all parties circling their wagons. Some empathy and a little creativity can make all the difference.
We wish you all the best for 2010.
We are expecting a sizable year-end push to complete aircraft transactions. It is important for prospective buyers and sellers to plan ahead for these desired purchases. In addition to the time required for purchase agreement negotiations, the parties must consider other factors that may affect the timeline of the purchase.
Inspection facilities – only have a limited number of slots available for inspection and the parties (typically the purchaser) will be forced to pay for overtime to ensure the timely completion of the inspection.
Loan Negotiations – Depending upon the complexity of the loan, negotiations may take several days, accompanied with multiple drafts, to finalize. Backup documentation required by the lender may also slow the process.
Team availability – Try to give your transaction team as much notice as possible of when a transaction will occur. Even a brief “I have something cooking for a December close” message will alert your team so that personnel and resources can be allocated to timely address your needs.
A Note on Bonus Depreciation
We also are expecting an increased interest in bonus depreciation. Aircraft purchasers should be wary of advertisements that claim certain aircraft are eligible for bonus depreciation. A complex analysis is required to determine whether or not an aircraft is “new” especially if the aircraft has already been delivered to the first purchaser, who claims to be a “dealer” and also claims to have not placed the aircraft in service. A serious aircraft purchaser seeking confirmation that an aircraft is eligible for bonus depreciation should engage an experienced tax professional to review the facts and circumstances of the aircraft purchase.Read More