The Aircraft Sales and Acquisition

aircraft-sales-acquisition-ukThe decision to sell or acquire an aircraft should be based on technically and financially accurate information. Before deciding on acquiring an aircraft, one must identify the aircraft type.

There are several critical reasons for acquiring a new aircraft:

  • The existing aircraft is no longer in working condition.
  • The operation of the existing aircraft is not cost effective.
  • The travel needs to have been modified: For instance, long distance travel cannot be serviced by the existing small jet/turboprop operated by the company. On the other hand, if the company has shut down an international division, then having a long distance aircraft would not be a sound business decision.

A mega purchase in a dynamically evolving market could be risky. According to research conducted by aviation sector experts, as aircraft become old, the cost of maintaining the aircraft increases, while the total number of days the aircraft has to be sent for maintenance also increases.

Additionally, for aircraft that are not produced commercially or those having limited production, the availability and pricing of spares could be a serious operational issue.

For commercial airlines, the revenue loss from not being able to fly the required no of days would have a greater impact than any additional cost due to maintenance. Finally, modifications in technology can result in cost-effective solutions – fuel effective fan-jet engines replaced turbojet engines.

The modifications in navigation requirements for airspace in the future (RVSM capable avionics, 8.33 MHz radio spacing) and Stage III/IV would make outdated models technologically obsolete or expensive to upgrade.

Before finalizing an aircraft, it would be prudent to have an acquisition plan based on the following criteria:

  • Determine and quantify the transportation requirements.
  • Identify necessary and preferred needs.
  • Select the aircraft with optimal competencies in catering to the transportation requirements.
  • Analyze the various costs of acquisition: acquisition, operating, and residual values.
  • Consider taxes and market depreciation.

An acquisition plan must have the following features:

  • The organization’s actual aircraft requirements.
  • Critical missions and assessment parameters.
  • Information sources.
  • Technical review.
  • Fleet size.
  • Financial planning.
  • Tax planning.

The process of selling a commercial aircraft can be very complex and should be based on several factors:

  • Adhering to regulatory compliance issues.
  • Meeting taxation requirements.
  • Ensuring liability protection.
  • Identifying market forces – fuel cost, economic development, environmental regulations, market liberalization, and airplane competencies.
  • Forecasting long-term demand.

In the current economic environment, the aircraft transaction market could transform quickly. This results in both opportunities and risks to owners and the probable buyers.

Sellers must leverage a strategic and emphasized method to sell the aircraft based on a commercially viable market position. Buyers must evaluate a wide array of market deals before identifying the most optimal aircraft purchase.

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