What due diligence is required during an aircraft transaction?

Aircraft transactions, whether buying or selling, require thorough due diligence to ensure that the process proceeds smoothly and that both parties are fully informed and protected. Verify the completeness and accuracy of the aircraft’s maintenance records and logbooks. Ensure that all required inspections and maintenance have been performed, and that there are no discrepancies or missing records. Confirm the aircraft’s title and ownership status. Ensure there are no liens, encumbrances, or legal disputes related to the aircraft. Verify that the seller has clear and unencumbered title to the aircraft. Verify the aircraft’s airworthiness status, including compliance with airworthiness directives (ADs), service bulletins, and any modifications or upgrades. Ensure that the aircraft meets the latest safety and regulatory requirements. Assess the aircraft’s fair market value. Consider factors such as age, total time in service, equipment, and market conditions. A professional appraisal may be recommended to determine an accurate value. Conduct a comprehensive physical inspection of the aircraft. This includes evaluating the exterior, interior, avionics, systems, engines, and airframe for wear, Arrange for a pre-purchase inspection (PPI) by experienced inspectors. The PPI provides a detailed assessment of the aircraft’s condition, identifies issues, and offers recommendations for repairs or maintenance. Ensure that all aspects of the transaction, including the sale agreement, title transfer, and registration, comply with aviation regulations and legal requirements. Consider using an escrow service to handle the financial aspects of the transaction, including deposits and the transfer of funds. This adds a layer of security for both parties. Draft or review contracts, agreements, and purchase documentation. Ensure that the terms and conditions align with your expectations and the specifics of the transaction. Consult with a tax advisor to understand the tax implications of the transaction, including sales tax, use tax, and any exemptions that may apply. Plan for any required inspections, testing, or certification processes, including non-destructive testing (NDT) to detect hidden defects or weaknesses in critical components. Verify the buyer’s financial capacity to complete the transaction. Ensure that funds are readily available for the purchase and any required deposits. Confirm that the aircraft is adequately insured, and understand the terms of the insurance policy, including coverage, deductibles, and any requirements for transferring coverage to the buyer. Plan for the delivery of the aircraft to the buyer, including any necessary logistics, import/export procedures for international transactions, and the transition of operational control. Coordinate the closing process, which includes the final inspection, acceptance of the aircraft, and the transfer of title, funds, and documentation. Review and negotiate the terms of the sale agreement, purchase contract, and any additional agreements related to the transaction. Address the transfer of ownership and insurance coverage, making sure that both buyer and seller are protected during and after the sale. Offer post-sale support to the buyer, which may include assistance with aircraft registration, importation procedures, and any necessary documentation. Due diligence is a critical process in ensuring a successful and secure aircraft transaction. It’s essential for both parties to be thorough and transparent in their efforts to minimize risks and potential complications. Consulting with aviation professionals, legal advisors, and financial experts can be invaluable in conducting a comprehensive due diligence process.