Private aircraft are time machines—speeding travel from place to place in privacy, security, and comfort. Individual and corporate owners may differ in the reasons they use, sell, or buy private aircraft, but virtually all of them find that a buy-sell transaction is complex and challenging.
A top-flight aircraft broker appreciates these dynamics and guides a seller or a purchaser (client) through a purchase or sale transaction as a member of a team of experienced industry professionals.
The right broker for the client and the transaction can facilitate a smooth process. Conversely, an unsuitable aircraft broker can generate frustration, recrimination, delay, and less-than-favorable terms and economics. Thus, clients should make a strong effort to choose the right broker.
Choosing the right broker takes diligence that informs a client’s own judgment that a broker will represent the client’s best interests grounded in the broker’s personal qualities, integrity, market knowledge, industry relationships, interpersonal skills, honed negotiating capability, and deep aircraft-specific knowledge. There’s more, so let’s start with understanding the person or organization who may fit the bill.
What Is an Aircraft Broker?
An aircraft broker here refers primarily to a full-time professional who represents a client in the sale or purchase of a whole used aircraft under a written broker’s agreement. A purchaser’s broker is also called an acquisition or buyer representative.
Aircraft brokers generally do not arrange charters, manage aircraft, or sell fractional shares in aircraft. They differ from “aircraft dealers” who hold aircraft in “inventory” for sale to or trade with clients or third parties. Like a dealer, a broker can purchase aircraft on-market (advertised) or off-market (confidential).
A broker is not an aircraft consultant who mainly provides technical advice and transaction support free of buy/sell pressures or conflicts of interest that brokers and dealers may otherwise confront. In this hybrid world, certain aircraft brokers are also aircraft dealers and vice versa, and consultants can act as brokers.
How To Find the Right Broker
A prospective seller or purchaser—especially first-time purchasers—may not know how or where to find the right aircraft broker. Some potential clients question whether they need an aircraft broker or do not appreciate the value added by a broker.
They can and do successfully complete transactions without brokers, particularly if they hire aviation lawyers or aircraft consultants to assist them. Still, I see them unknowingly accept disadvantageous pricing or contract terms or make other avoidable mistakes.
Clients seeking brokers should identify those professionals with positive reputations confirmed by references or referrals from trusted sources that have only the best interest of the client at heart, including aircraft consultants, flight department personnel, pilots, aviation lawyers, FAA counsel, escrow agents, and management companies.
Aviation industry organizations such as the International Aircraft Dealers Association (IADA), Global Licensed Aircraft Dealers Association (GLADA), and the National Business Aviation Association (NBAA) provide lists of brokers. Private companies also have lists.
I like to assist my clients in identifying or vetting a broker for the personal fit—one with the appropriate experience, a broker who can help produce the client’s desired results and team seamlessly with the other transaction players. These other players include flight department personnel, pilots, aviation lawyers, FAA counsel, escrow agents, and management companies.
Quality Aircraft Brokers
Regardless of how clients identify a broker, they should conduct due diligence on the broker and his or her company, including by meeting the broker in person. For a purchaser, the meeting should include a robust conversation about the client’s budget, anticipated flight hours, and other travel plans—domestic or international—called the mission. A broker should laser focus on the mission and possible charter deployment of the aircraft to guide a client to a sound purchase decision and touch on using any financing or leasing.
Brokers should also openly describe their organizations, their marketing and transaction tools and strategies for the client, staffing expertise, similar customers to the client, market knowledge such as relevant aircraft prices and trends, and aircraft available for sale. A client should be convinced the broker’s service model will meet the client’s needs.
For purchasers, brokers should set realistic expectations on the deal process and the impact of the shortage of pilots and pilot training slots and the current lengthy delays in scheduling pre-purchase inspections.
Unfortunately, not all brokers act in the best interest of their clients or interact so transparently. Although IADA has developed a member accreditation process and adopted a code of ethics for admitted brokers, brokers have no U.S.-regulated fiduciary duty or governmental licensing requirements. As a result, the client should look for red flags that a broker may not be honest or ethical and, instead, may self-deal or act in bad faith to get paid.
For example, a client should look for unnecessary back-to-back structures created by a broker only to hide the broker’s fees or obscure the broker’s lack of cash at risk in the transaction. One of my clients almost suffered a $2 million loss in sales price when the broker understated the sales price and structured the sale so he could resell the jet and pocket the $2 million shortfall.
The point is not to eliminate back-to-back transactions used for valid cultural, economic, or business reasons with transparency; rather, it's just to steer clear of the wrong ones.
Negotiating Broker Fees and Contract Terms
Written contracts for services should clearly state the terms of services and exclude unauthorized brokers. I once needed to help a client settle claims of five unauthorized brokers pertaining to one aircraft.
These agreements run from a couple of pages to more than 20 pages. The most important terms consist of the duration of the engagement, perhaps 90 to 180 days; an explicit list of broker services; and the broker’s fees and marketing expense recovery with broker fees commonly of 1 to 2 percent of the sale or purchase price or a fixed fee ranging from $25,000 to seven figures. Other provisions include confidentiality, exclusivity for the broker, indemnities, and termination rights.
In setting fees, savvy brokers may assess the potential long-term client relationship, future engagements, the potential for client referrals, the difficulty of the aircraft search or sale, the price of the aircraft, and the complexity of the transaction. If recognized by the client, the fairness and balance of these factors may, and perhaps should, engender client loyalty—an attribute a client should consider.
Getting To Yes: Is the Broker the Right One?
With this meeting and diligence completed, the client should answer yes to the following questions: Do I trust and like the broker for this transaction? Will the broker work well with and respect the expertise of other key transaction team members? Are the brokerage fees and terms reasonable? No one is perfect, but favorable answers to these and other questions arising from my points above should set the stage for a positive experience.
Conclusion
A high-dollar sale or purchase of a used aircraft entails a level of complexity that almost always necessitates guidance from a skilled aircraft broker and a team of other experienced professionals. Selecting a broker requires a client’s personal interaction with one or more brokers and thorough due diligence on each of them and their companies.
Failing to make the effort can lead to disappointments, costly mistakes, and negative outcomes. Done correctly, a client’s final choice of a broker should feel just right.
The opinions expressed in this column are those of the author and are not necessarily endorsed by AIN Media Group.