Properly managing an aircraft acquisition process, structuring the ownership and operating of the aircraft from accounting, tax and FAA regulatory perspectives, negotiating purchase documentation, and properly registering the aircraft are critical to success of the transaction.
Transaction Highlights
Negotiated the purchase of one of the first Boeing Business Jets and Bombardier Global Express aircraft, and the first operational Eurocopter EC 155B VIP-configured helicopter delivered in the United States.
Representing an aircraft owner in connection with arrangements for having its aircraft appear in the MGM major motion picture James Bond 007 Casino Royale starring Daniel Craig.
Represented aircraft owner in connection with the simultaneous fleet transition involving the acquisition and trade in of 12 business aircraft.
The Aircraft Acquisition Process
The acquisition process is typically comprised of the following steps, many of which occur simultaneously:
- Identification of the aircraft. Identifying the aircraft that best fits the needs of the client typically begins with engaging someone with extensive knowledge and experience with many types of aircraft and market prices.
- Letter of Intent. After the type of aircraft is selected and several targets identified, a Letter of Intent or “Offer to Purchase” will be drafted, and the buyer’s agent will arrange for a visual inspection and demonstration flight of the aircraft.
- Aircraft Purchase Agreement. If the client decides that they would like to purchase the aircraft after the visual inspection, a comprehensive Aircraft Purchase Agreement will be drafted to memorialize the terms of the purchase. The duration of negotiations of an Aircraft Purchase Agreement is dependent upon the sophistication of the parties and whether counsel to the parties is experienced with aircraft transactions.
- Pre-purchase Inspection. After the Aircraft Purchase Agreement is executed, the aircraft will typically enter a pre-purchase inspection at an authorized inspection facility.
- Inspection Report. After the completion of the inspection, the inspection facility will generate a report detailing the items that are not airworthy or discrepant than the agreed-upon delivery conditions (“discrepancies”).
- Technical Acceptance. After the inspection report is received, the buyer will then issue its “technical acceptance” subject to the repair of discrepancies by the seller, or, in some instances, reject the aircraft.
- Closing. After correction of the discrepancies the transaction will be ready to close. It is important that by that time, all legal, registration, financing, and other applicable documents are ready for execution and should be placed with the escrow agent.
Properly managing an aircraft acquisition process, structuring the ownership and operating of the aircraft accounting, taking into account tax and FAA regulatory perspectives, negotiating purchase documentation, and properly registering the aircraft are critical to success of the transaction. Experienced aviation professionals will have the ability to foresee potential issues and address them early in the process, thereby facilitating a smooth transaction.
AVIATION RESOURCES
KEEPING YOU ON COURSE
We are experienced in working with tax, legal and financial advisors of companies of all sizes in addition to family offices, to implement appropriate operating structures and planning objectives. For first time business aircraft buyers, we can quickly assemble a team of experienced industry professionals and others to assist the client with business, technical and other aspects of an aircraft purchase and ongoing aircraft management under Parts 91 and/or 135 of the Federal Aviation Regulations.
One of the challenges of using aircraft in business is understanding the effect of personal use on an executive and the company, and strategies for addressing income tax issues.
Personal Use
Letters of intent are an important start to most aircraft transactions, and failing to give them the proper attention can create costly misunderstandings.
Letters of Intent
Understanding the aircraft acquisition process is important in order to avoid common pitfalls and costly mistakes.
Aircraft Acquisition Process
In order to register an aircraft with the FAA, an individual or company must meet specific requirements. There are methods available for non-U.S. citizens to register aircraft with the FAA.
Aircraft Registration
Public Companies have unique concerns when purchasing corporate aircraft and structuring their operations, including from the perspective of SEC disclosure of non-business use, security and confidentiality.
Public Companies
Acquiring an aircraft currently registered outside the United States takes careful planning and requires answering some fundamental threshold questions. Exporting aircraft may not require the payment of duty, but failure to make appropriate customs entries can be costly.
Import / Export
Planning opportunities exist that can defer or even eliminate the imposition of sales and use taxes in almost every state.
Sales and Use Tax
In addition to aviation counsel, a successful transaction requires having experienced aviation professionals and tax advisors.
The Right Team
Our attorneys are experienced with helping clients navigate the often counter-intuitive rules of the FAA and other regulatory authorities.
The Dilemma of Single Purpose Entities
When acquiring an aircraft, several financing alternatives are available. Which is right for you?
Financing Options
THE RIGHT TEAM. THE RIGHT DEAL.
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.
- Stewart Lapayowker