Honesty is the best policy when selling pre-owned aircraft in the business aviation sector, according to brokers. Sellers should provide full information up front in the knowledge that serious potential buyers will almost invariably conduct a rigorous selection procedure.

The aircraft should be in good condition with a sale contract, complete documentation and excellent pictures because it saves time and money for all parties involved when the seller discloses all relevant facts instead of just highlighting the positive aspects.

Charter operators and management companies, brokers, experienced owners and service providers all confirm that the seller must be realistic about the value of their aircraft. The price must be based on up-to-date, accurate and quality research of the marketplace.

Tax efficiency is also becoming an increasingly important factor in buying and selling aircraft and EBAN, in its December issue, will examine the issues involved in registering aircraft with offshore authorities.

What aircraft management companies report

Pre-owned offerings must compare favourably with new aircraft prices

Caly Roberts of the Private Jet Company based in the Isle of Man points out that sellers of pre-owned aircraft must compete with what's available new. Serious buyers will almost invariably compare what is available in both markets.

She says: "There are some great deals to be found in the pre-owned aircraft market but it is imperative that the client has a representative who understands the complexity of requirements. These include the correct aircraft equipment, warranty programmes, maintenance records, full service history and 'no damage' reports. This list is very long and laborious and needs the input of a specialist aircraft buyer."

Sellers have to put themselves in the shoes of the potential buyer. Roberts says: "The purchaser may quite often have a type of aircraft in mind or have been recommended an aircraft because it is a 'good deal.' However, what seems to be a bargain at first glance may turn out to be a much less cost-effective asset in the future as the buyers examines what is on offer.

"Serious purchasers recognise it is extremely important to identify the correct aircraft for their usual missions and payloads. Good advisers implement a thorough fact-finding exercise and come up with the best aircraft. This fact-find would analyse a whole host of items."

She points out: "The seller should be aware that there are currently some fantastic deals out there for new purchase aircraft. We have very strong relationships with the manufacturers - in most cases we can provide enormous financial incentives for the clients acquiring aircraft. Our ideal scenario would be to buy a new aircraft to operate for two years (under full warranty) then sell it on, starting the process again. This has meant that, even in the current economic climate, all our aircraft are doing well financially."

Sellers of pre-owned aircraft, therefore, must compete with the financial incentives buyers can command when acquiring new.

Roberts says: "Both new and used aircraft must be test flown and delivered. Once the purchase is complete some aircraft require importation and registration." She says it is important for buyers and sellers to appreciate tax efficiency.

Some of the benefits for buying and selling aircraft offshore in jurisdictions such as the Isle of Man include a favourable taxation regime designed to encourage business, neutral nationality registration prefix, absence of insurance premium tax and secure mortgage register.

Other issues include having a relevant time zone and a jurisdiction offering Standard & Poor's and Moody's AAA rating.

Roberts says: "Aircraft acquisitions can be complex and multi-faceted. The main priority for the seller is to ensure that all the intricacies are taken care of so the buyer stays with the process."

The aircraft is only worth what a buyer will pay

Sellers need to appreciate that the aircraft is only worth what a buyer is prepared to pay in the light of a saturated and fast-changing global marketplace.

George Galanopoulos, md of London Executive Aviation (LEA), points out: "The market for pre-owned business aircraft is flooded right now. Two or three years ago, any used business jet would sell easily and the owner only needed to make minimal effort to secure a sale. Now, however, if you want to sell your aircraft, you need to prioritise basic concerns like smart presentation. Good-looking aircraft will undoubtedly sell more easily than poorly-presented ones, but we wouldn't advise owners to undertake interior refurbishments to try to raise the price of the aircraft. After all, the chances that an owner's taste in interiors will be the same as the buyer's taste are very slim."

Galanopoulos highlights the importance of ensuring that aircraft maintenance records are complete. "If there has been an incident, be honest about any damage that may have occurred. The pre-purchase inspection will certainly expose any attempts you make to hide previous damage, and your chances of selling that particular jet to that particular buyer will clearly then become nil. Your reputation might also be harmed by word-of-mouth."

For an understanding of current market prices, Galanopoulos advises owners to look at 'Aircraft BlueBook' or 'Vref' industry guides used by finance companies, but warns that pre-owned aircraft valuation is nonetheless an imprecise science. "You can look at the past sales history of an aircraft type as an indication of market prices but, in the end, an aircraft is worth what someone is prepared to pay. You need to be realistic that prices in a flooded market will be low. Ultimately, the price you choose to set, and accept, may simply depend on how eager you are to sell."

In such a complex and fluctuating arena as aircraft sales and valuations, Galanopoulos notes: "To achieve the best possible price, you should take the advice of a broker who understands the increasingly global nature of the aircraft marketplace. As little as five years ago, 80 per cent of aircraft sales transactions were completed in the US. That dominance no longer exists. "If you want to find the best price for your aircraft you need to work with a broker who follows the emerging markets, including Russia, the Middle East and the Asia-Pacific region, that are now competing with the US and Europe for used aircraft sales."

But he notes: "Of course, if you are looking to sell in Europe, an aircraft that is already registered in Europe will be easier to sell, at a higher price, than a US-registered aircraft."

Galanopoulos points out that rules for UK value added tax (VAT) on aircraft sales are changing on 1 January 2011. From that date, the zero-rating will only apply to "aircraft operated for reward primarily on international routes."

He notes: "Owners will realise it is a lot more financially viable to add aircraft to an AOC rather than trying to operate the jet privately themselves."

Sellers, therefore, have to take into account whether the aircraft is a desirable addition to a charter fleet.

Simple steps can ease the process, but avoid adding personal touches

Ocean Sky's aircraft management md Andrew Hughes strongly recommends an organised, streamlined sales strategy. "Resist the temptation to work with multiple brokers or agents," he advises. "Doing so can cause confusion and frustration in the market, as potential buyers see the same aircraft being pushed from different angles. Having chosen a sales organisation, make sure you agree the terms and conditions in advance."

Certain simple steps, says Hughes, can really help potential buyers make an initial assessment of the aircraft. "Prepare a detailed specification sheet and provide professional photographs, showing the aircraft to its best advantage."

Presentation matters but Hughes warns that personal touches can be a mistake. "Make sure the interior is clean and tidy but don't be tempted to spend money on refurbishment. Buyers will see more appeal in modifying aircraft to their own tastes and specifications. Similarly, the exterior should be clean, of course, but think twice before making any modifications to the appearance. If the aircraft needs new paint, for example, then simply reflect this fact in the price - leave the buyer with the option to paint the aircraft in the scheme of their choosing."

He adds: "One final point on maintenance: if the aircraft is not enrolled in any maintenance programmes, it may be worth obtaining buy-in quotes from several providers. That information will help the buyer understand all the long-term cost factors when considering your jet against other aircraft on the market."

Hughes confirms that owners seeking to sell need to be realistic about the value of their aircraft and keep up-to-date with the current marketplace conditions. "Work out the parameters. What is a reasonable asking price? What's an acceptable offer?," he adds.

Ocean Sky also underlines the point made by The Private Jet Company that sellers of pre-owned aircraft are competing with the attractions of buying new and manufacturer marketing strategies.

The Lineage 1000 was showcased at the Ocean Sky Jet Centre at London Luton for two days in late September. The aircraft was shown to a series of potential customers, in a busy schedule that included both on-the-ground demonstrations and demonstration flights. The sales drive harnessed Jet Centre's FBO services. The stop was part the demonstrator aircraft's global tour.

Sellers of pre-owned aircraft have to compete not only with what is available new but the sophisticated marketing campaigns of manufacturers.

What the aircraft brokers advise

Disclose all the facts and save time and money

The aircraft should be in good condition with a sale contract, complete documentation and excellent pictures, according to aircraft broker Klaus Kuehl, owner of K-aircraft Jets & Props. "It saves time and money for all parties involved when the seller discloses all relevant facts instead of just highlighting the positive aspects."

He advises: "Don't show only the well-preserved rear seats when you take pictures - also take photos of the interior and panel in such high resolution that the potential buyer can read the inscription on the panel." K-aircraft provides 360* panorama pictures.

The seller needs to check the Aircraft BlueBook and investigate the prices of similar aircraft for sale. "Contracts are invariably attuned to prevailing aircraft prices," Kuehl says. "The owner can minimise liability by selling the aircraft as seen re-checking all the information available about the place of jurisdiction."

Payment usually takes place in advance into an escrow account. Another tip is to persuade potential buyers to inspect the aircraft on the seller's home base. "Otherwise it can happen that you fly thousands of miles and you still have not sold your aircraft," Kuehl warns.

More than 80 per cent of pre-owned aircraft sold in the business aviation sector involve a broker. Much of the secret of success in preparing an aircraft for sale involves choosing the right one and providing all the information required.

Comprehensive marketing is critical. Tim Barber, md of JetBrokers Europe, says: "Make sure that the aircraft will be constantly advertised on the principal listing websites and services, as well as print media. Social media increasingly has a role to play in aircraft sales and the chosen broker should be active in this area. The broker should have a good network, a strong team and transatlantic representation to maximise sales coverage."

The company's president John Merry adds: "Be realistic on the price - this is the most important point. If your expectation is 25 per cent above what your broker is suggesting make an agreement based on the understanding that if there is no interest at your desired price you will move downwards fairly swiftly. There are still far too many aircraft advertised at prices that are out of sync with the market."

Barber says that sellers have to market to individuals looking for the best aircraft at competitive prices and corporate jet operators maximising the opportunity to expand their fleets with pre-owned business aircraft prices lower than they have been in years.

He reports an increase in activity since the beginning of 2010 and is cautiously optimistic about the business aviation market for pre-owned aircraft as the sector recovers from the global economic downturn.

"Pre-owned aircraft remain a sensible proposition for those looking for a deal, just as white tails offer good deals for those with buying power," Barber says. The weaker Euro has resulted in a general increase in prices for sellers as aircraft are generally traded in US dollars.

"There is a gradual improvement and increased market interest in Europe. Clients interested in the mid to heavy jets are on the increase and a rise in interest coupled with reduced inventory reflects this movement," he reports. "While conditions are still tough, improvement is expected over the next 12 months with Europe seeing more movement across the range of jets than the US."

Barber warns: "We have seen a return of buyers to the market but most are looking for a bargain and will hold out for a purchase. Deals continue to fall through because of unnecessary haggling, sometimes over the most minor issues. Inventory remains high as buyers are unwilling or unable to take on extra debt and risk so it remains a challenging and exciting time."

The pricing game that often obscures the actual value of the aircraft

Tim Blockley, md PremiAir Global, points out that one of the major challenges owners and brokers have faced in the last two years has been how to price aircraft in what has been a very weak market.

"So many aircraft are tagged at 'make offer' it proves very difficult to know where the market price lies for certain aircraft. BlueBook offers a guide but often we've seen real world selling prices to be very different and often not in the direction the owner would like. At the other end of the spectrum we see aircraft advertised at totally unrealistic prices and they just languish on the market, not attracting any significant interest. Stimulating interest in an aircraft and then being realistic with negotiations is essential to making a sale in a market which remains full of choice for the comparatively small number of buyers out there."

Blockley says sellers and their professional advisers must take a detailed and pro-active approach to selling an aircraft utilising client networks, industry partnerships and databases to specifically target potential buyers.

All leads need to be followed up, prospective buyers checked out, and viewings and inspections arranged. "The processing of contractual details through to closing needs to be meticulous," Blockley adds.

Do not allow emotional attachments to cloud your judgement

Oliver Stone, executive director of Business Air International (BAI), says the two single greatest influences on a speedy and successful sale are education and expectations. He says: "These are far more important than other ingredients, whether they are photos, advertising, or connections - knowing comparable sales prices as opposed to asking price. Sellers need to keep a firm hold on the understanding that they are selling an asset with volatile price movement rather than a beloved part of one's life."

Enter into the process with detailed, exact knowledge of what has traded, and at what levels, Stone advises. "Comparable sales are the only true way to figure out what pricing the market will bear. Always ask yourself and your team to update the comparables as much as possible. Keep abreast of the number of transactions occurring each month and readjust accordingly. Try as much as possible to forget that this is your aircraft with all the memories associated with it. The buyers out there do not share your fondness."

BAI advises sellers to keep a keen eye on the inventory levels of similar types of aircraft as well as the specific make that is for sale. "Aircraft markets are very pure supply and demand curves, and small increases in supply can have great impacts upon pricing," it warns. "An increase in supply in a similar size, but different type, aircraft will affect the pricing on that market and may drive buyers to that type rather than yours." Sellers cannot expect buyers to take into consideration the price paid for the aircraft.

Stone says: "The marketplace does not care about the money you will make or lose when selling your aircraft. Prices are well known and largely commoditised. If you are not priced at the market's level, you will not sell. Think of aircraft markets like a much smaller and unregulated stock market. If shares of a company are trading for €30 no one will buy your shares for €45 because that is what you paid. At the same time, if you price your share at €15 you will attract a good number of buyers and sell quickly."

Stone warns: "The effort required to push deals through is twice what it used to be. It takes a huge amount of time and focus to not only find someone interested in buying an aircraft but an equally large amount of effort to keep them focused on your transaction to see it through. Deals are becoming more and more complex, sometimes with large numbers of different parties involved." These include lawyers, tax accountants, engineers, maintenance facilities, customs agents, aviation authorities and flight crew. "All of these have to be of the same mindset and same agenda as the buyer and seller in order to close. Only one has to dissent in order for the transaction to fail."

BAI warns that many online listings may not be aircraft that are legitimately for sale. "For a number of reasons, people post very high prices, leave aircraft advertised that have long since been sold or are no longer available, or were never for sale, online," Stone says. "These postings do not matter. The only true indicator of value is the actual selling price, a number that is often materially different than the asking price posted online."

Maintenance keeps an aircraft airworthy but only the rarest of cases such as engine overhauls add value. "Extensive maintenance will help the aircraft sell faster but having an airworthy aircraft is an implied part of the sale," Stone points out.

Similarly, the latest avionics or a new interior will aid a faster sale and may recoup the money invested but any increase in selling price may be modest.

Stone says: "We see a trend of the majority of buyers purchasing the easiest deal. People are buying an aircraft as it is supposed to make their life more convenient, more enjoyable, and to save time. They will do what they can to avoid the headache that projects often entail. It is therefore incumbent upon the seller to offer an easy deal and incorporate into the offering a way to remove the headache."

The seller needs to treat the buyer with respect. Stone points out: "It pays to remember that, as a current aircraft owner, you fit the mould of the prospects you are selling to. They are as successful, hard negotiating and as intelligent as you are. Approach this as if you are selling a deal and in the knowledge that the best deal wins."

The final tip is to make a response to every offer received, even those regarded as derisory. BAI points out: "Real buyers are sparse these days; do not dismiss one when the cost of a counter offer is effectively zero. A low offer may not signal a lack of intent, but more a fear of leaving money on the table. It is not a personal insult but an offer to buy an aircraft: treat it accordingly."

What the experts and service providers report

The safety and security of the transaction can make or break a sale

In the current market deals can collapse for the simplest of reasons which may leave finances and documentation vulnerable, hence the increased usage of escrow services, according to Geoff Gates, md, Securus Escrow. He points out: "One of the key elements in the sale or purchase of any aircraft is the swapping of documentation and monies between buyer and seller. Specifically the buyer pays a deposit to hold the aircraft and the balance of the purchase price is paid on closing. At the same time the seller provides documents of title to the aircraft and signs the bill of sale transferring title to the buyer."

Gates says: "With the develop-ment of the Asian market's purchasing power, business aviation has seen growth in purchases from the East. The amounts involved can be of significant value, and often involve cash in a variety of currencies being transferred."

Traditionally, US escrow companies have been the main resource for those seeking assurance in these circumstances but the UK based Securus Escrow is now among those in Europe to offer the European and Asian markets an option to work within more sympathetic time zones. It works with Gates and Partners and points out the advantages of buyers and sellers carrying out their aircraft purchases and sales within European and Asian banking hours.

Gates says: "A deal might have parties based in the US, UK and Switzerland and a requirement to operate within UK business hours with individual client accounts held with a triple A rated bank. The parties involved need to be sure that their money is safe while lawyers complete the transaction. The process also needs to ensure independent checks on the buyers and sellers to make sure they are who they say they are. The extra level of security for all involved helps ensure that sales do not break down or cause problems at the last moment."

All parties should sign agreed terms. Gates says: "There have been instances where a buyer from the US was selling to a European company without any agreed terms relating to the transaction of funds. If there are no instructions to abide by then parties can end up in legal dispute, often without defined jurisdiction, which costs everybody time, money and a lot of stress. Use of escrow companies removes this kind of risk."

Andy Hoy, md of pre-owned aircraft at ExecuJet Aviation Group, says utilising an escrow service can certainly avoid many pitfalls. He adds: “Securus Escrow offered a seamless and efficient service which resulted in our deal completing in a timely and well organised manner. Their escrow service ensured that all parties were satisfied the deal was being handled professionally.”

Factors governing the choice of a blanket or target approach

Trevor Whetter, ceo of Chameleon Products, says sellers need to decide which marketing approach to adopt. He says ways of selling include:

• The full marketing approach involving placing the aircraft on to web sites etc.
• A low key 'under the radar' initiative which involves using strategic partners with good contacts;
• Word of mouth

Whetter says: "Whichever approach is chosen, the seller needs to deliver a good product, be professional and make sure the customer is happy as he will tell his friends who hopefully may also wish to buy."

He advises: "Be straightforward, simple to deal with and most of all very patient. Customers are always right (sometimes incorrect, confused or misguided) but never wrong.

"The art is to avoid wasting time with people who have neither the resources nor the inclination to buy an aircraft. You can waste time and money on 'window shoppers' so substantiating the credibility of the buyer quickly is paramount."

He says that sellers should never try to sell an aircraft in isolation to its needs. "Always try to provide them a complete back up package of support for their new purchase. Don't get confused between marketing and selling - they are very different and never forget no deal is done until the money is in the bank."

The company's own marketing strategy involves adding appeal by naming each aircraft after its interior. Whetter says: "We are working on five B737-500s and we have our oyster aircraft (oyster colour interior); blackbird (black leather seats); polar (polar-coloured leather); moulin rouge (red interior and silver).

For sellers, the sales and marketing strategies that count are the ones that work for them. An aircraft is never sold until the cash is paid over and the aircraft is delivered and that will only happen if there is a buyer prepared to pay the seller's price.