The race to close preowned business aircraft deals in the face of a shortage of inventory is already beginning to result in legal cases surrounding unhappy acquisitions, said Paul Lange from the Law Offices of Paul A. Lange. Speaking at the National Air Transportation Association’s Aviation Business Conference last week, Lange said his office is seeing a “tremendous amount of aircraft transactions and like everybody else, we're seeing a tremendous amount of people who were not in business aviation before.”
These transactions are coming from a range of people, both new and those returning to business aviation, he said. “The challenge right now is that we see transactions that are just insane, the risk levels that people are taking,” Lange said. “Things that would never fly before are now happening. They're self-insuring. They're taking aircraft seizure risks.”
He said he had one deal where the buyer walked away from a deal where the risk threshold was literally criminal, as the seller was under house arrest in Eastern Europe. “But it still took about a day for the buyer to think about that,” Lange said. “That kind of tells you where this insane market is and that tremendous risk. It's kind of scary.”
Lange noted that people are worried about losing the deal, but they may have problems after it. “We’ve had a fair number of depositions in our office already on deals gone bad,” he noted. This involves situations such as aircraft coming from Africa with no lawyers involved and showing up with $500,000 worth of “surprises” that nobody wants to pay.
Others involve aircraft that are imported improperly into one country and a few months later are improperly exported to the U.S. “There’s no way to fix those problems without fixing the downstream [issues],” he said.
These deals can affect aircraft management and Part 135 operators that may not know that the aircraft they take in are at risk for seizure.