Transaction #871 – Remember February? And What does that Tag on the Mattress Say? Transacting an Aircraft During a Pandemic.
Self help books and books written about business typically say one of the important ingredients to happiness and/or success is to make sure you continue to introduce yourself to new things and become adept at them. Never stop learning.
OK, well LEAS transaction #871 helped force feed us with learning a new concept – how to transact an aircraft from start to finish during a pandemic. If selling an aircraft during a pandemic was in the ole aircraft sales manual I would have breezed past that chapter like reading the fine print on a mattress tag. It would never apply. Wrong.
We represented the seller of a late model Gulfstream which we placed on the market in February 2020 (remember February?). This was a very well equipped aircraft with great pedigree and excellent cosmetics. It seemed quite straightforward to determine its value and how long it might take to sell.
A prospect made arrangements to look at the aircraft in late February (remember February?) and it was a typical showing like many others we do. The showing itself happened to take place in the first few days of March. The buyer came to look at the aircraft on a normal day, in normal fashion. There were no big headlines about pandemics, politicizing of wearing masks, in fact nobody was wearing them we were just hearing about this strange outbreak in Wuhan (I had to look up where Wuhan was). Why would I want to stock up on Lysol wipes or toilet paper??, we have plenty.
After the showing, things began to change over the ensuing couple of weeks as March progressed, and we all know what happened. The buyer then came back to us in late March with an offer, just as the pandemic and the fear and uncertainty associated with it gripped the country. We had a very frank discussion with our client about what we all thought the future held – and at that time I can say safely did not amount to much.
A price was put on the table from a credible buyer, who we knew had the ability to perform, who was professionally represented by an IADA Accredited broker, and had already seen the aircraft (remember this is late March). The price was a big pill to swallow but we knew we had a real buyer and, um, well, when were we going to see the next buyer if we did not like this deal? Check the ole aircraft sales manual – where was the pandemic chapter again? Oh there isn’t one, all I have is the fine print from this mattress tag….. and that’s not telling us much. After plenty of best guess discussions with our client and placing a real value on certainty in a deep sea full of uncertainty, the buyer and our client came to an agreement. They proceeded to negotiate an aircraft purchase agreement with each parties respective counsel in normal fashion but with all due speed. A slot was reserved at the service facility the parties agreed to. However after that happened the rules began to change, and we all had to adapt.
We learned that nobody from either party would be allowed to go inside the inspection facility. What? The seller’s crew were required to drop the aircraft off at the service facility and be escorted off the premises to the airline terminal. No going inside the facility. No unloading the log books. The test flight was flown by Gulfstream test pilots with no one allowed on board. The kickoff/induction meeting was all done via conference calls and Zoom calls. The updates from the facility were all done daily via email but none of the buyer’s representatives nor the seller’s were allowed to physically be there.
The prepurchase inspection and test flight were thankfully relatively straightforward with no unusual issues. The communication that took place between the inspection facility, the buyer and the seller’s respective teams was key, and it was effective. Would it have been better to have our representative on site managing the process? Of course but we couldn’t, so we relied on strong communication to take the place of being there.
From our respective home offices and dining room tables we proceeded to monitor the progress through to the closing, which occurred last week.
So now we know how to transact an aircraft in the throes of a pandemic. I cannot say we know it all, but we know enough about how to do it. So much so that we are in the midst of a few more. In this case the buyer and seller both walked away pleased. It turned out that the seller sold at a price that we were able to see many weeks later as representative of the market and the seller purchased a very good aircraft.
Is there a new norm that requires deep understanding? Yes, I think there is. The lesson learned was that this can be done, but what is required is a team of experts that really knew what they were doing back in February (remember February?). It really helped having experienced teams on both sides of the transaction. A realistic understanding of the shifts in market values need to apply. The market has not collapsed, but prices have adjusted and that adjustment varies somewhat among aircraft category and type. We are now one of those experts who had lots of experience, industry relationships, and depth before the pandemic, that have adapted to the circumstances and can continue to make this happen for you as a buyer or seller.
The lesson learned from Leading Edge Transaction #871 is that we LEARNED that we CAN do this. Aircraft are trading during the pandemic and will continue to do so now in greater numbers. We used our depth and experience, adapted our procedures to fit the situation and now we KNOW how to make it happen. The people who had the most experience and the best practices transacting aircraft in February (remember February?) are still the people to rely on during the pandemic. Seasoned experts are the ingredients that should be added to aircraft transactions when the circumstances that a pandemic creates are in effect. If so it will provide the best odds for success.
By: Joseph Carfagna, Jr.
President, Leading Edge Aviation Solutions