If you’ve ever sold an aircraft, you know that it can be a time-consuming endeavor. According to both AMSTAT and JETNET, the majority of the approximately 3,400 fixed-wing turbine aircraft currently for sale worldwide have been on the market for more than six months, and a third for more than a year.
Historically, when the business aviation industry hears the term “auction,” the associated connotation typically is not well regarded. In fact, “fire sale” may be what comes to mind. It may be time for aircraft owners and brokers to expect more of the process of buying and selling business aircraft. And no, that doesn’t mean “auction” in the distressed property kind of way, or how you might think of the real estate or automotive markets. Much like the high-end classic auto auctions, sellers can set the reserve and be assured that the buyers are not just “tire-kickers” but proven, vetted buyers with the financial resources necessary to buy.
Moreover, a consignment auction actually can empower sellers, by providing them with a means to create urgency in the sale process. Many sellers will generate increased interest leading up to the event, and quite possibly receive an increased number of offers, because putting the aircraft up for auction signals the seller is serious about selling. The increased interest is a result of the finality of the auction date. Buyers seek to buy before the auction to avoid competing at auction. Multiple offers may be used to increase the competition (and value) among potential buyers for your aircraft.
When buying or selling an aircraft via auction, there are many benefits to consider:
- Pre-Purchase and Post-Purchase inspections and the due diligence process all are predetermined as part of the consignment process, and do not require weeks or months of negotiation simply to agree to a scope.
- All aircraft also are subject to pre-auction offers and may sell prior to the auction event, and are eligible to sell after the event.
- Closing documents are form agreements drafted by industry legal aviation counsel, which can be reviewed by your own legal team, and agreed to by both the buyer and the seller prior to the auction.
In addition, the bulk of the marketing and vetting of potential buyers is handled for you by the auction house. The auction itself is promoted and advertised by the auction house across aviation publications, traditional business publications, and a database of 7,500 current targeted aircraft owners. Details available on individual aircraft inventory will include year of manufacture as well as total engine/airframe hours and Hourly Cost Maintenance Program status. Potential bidders apply to participate with a bank letter of guarantee or capital deposit, an important vetting that eliminates any uncertainty regarding the buyer’s ability to close.
“What if,” you may say, “my aircraft doesn’t sell at auction? Have I wasted more time than I saved?” Just by taking your aircraft to auction works as a motivator to potential buyers in the market prior to the auction date – so much so that you may well have your aircraft sold before it even comes to the auction block.
But what happens if you don’t sell prior to the event OR at the event? You may find that discussions that begin at the auction often may lead to a completed deal down the road. The process might never have been consummated without the “jump start” of the auction process bringing motivated sellers and qualified buyers together in a transparent process where both have certainty as to how they can proceed to closing the transaction.
Aircraft are meant to save time, not waste it. And auctions represent a faster, more effective means of buying and selling aircraft, streamlining a once-opaque process into a truly enjoyable experience. BAA