CJI Masterclass: What first-time sellers need to know

The first CJI Masterclass focused on jet sales. (G650 image courtesy of Mesinger Jet Sales).

Planning your sale, engaging expert advice and acting early was the advice to first-time business jet sellers at the first CJI Masterclass, Building a successful selling transaction. The recent online Town Hall meeting, sponsored by Mesinger Jet Sales, explored what first-time sellers need to know before closing their first pre-owned jet sale.

“A lot of selling is about getting ready to sell,” the Masterclass host Jay Mesinger, CEO and president of the company told attendees. It was timely advice for many new owners. “In the past pandemic years, we had so many buyers come in, that there’s bound to be a whole host of people who were first-time buyers but are now becoming first-time sellers. And first-time sellers are going to need the programming of how to do a sale correctly”

A good starting point is planning the sale and recruiting the right quality and type of advisers to conclude the sale successfully. In addition to selecting a broker, sellers needed to choose a specialist aviation lawyer, maintenance facility to complete a pre-purchase inspection (PPI) and specialist financial help. Plus allow enough time to conduct due diligence.

‘Not as excited about the idea of selling’

Fully engaging first-time sellers in the sale of their jet is the primary mission of Sue Carriere, partner with business aviation law firm Carriere, Little & Leach. “One of the things I find with sellers – especially first-time sellers – is that they are not as excited about the idea of selling as they are about the idea of buying. So, getting them engaged to provide the information I need is my first goal,” said Carriere.

Focusing only on aviation law, Carriere works with clients’ advisers to ensure liability protection, tax mitigation, and FAA compliance. “Tax planning is as important on the selling side as well as the buying side,” she said. “They may have fully depreciated the plane by taking advantage of bonus depreciation or, in rare cases, keeping them for a long time. Now they need to engage an aviation savvy tax planner because it’s a very specific area of taxes.”

Sellers need to ask: is there recapture of the depreciation? “A lot of people never hear those words until it’s too late,” said Carriere. So, It’s important to plan the tax ramifications for the sale of the old plane, as they are planning a replacement strategy for the new plane.  Also sellers needed to engage specialist help weeks if not months before closing the deal.

Mesinger highlighted the need to seek specialist advice and for buyers to keep their advisers “in their own swim lane”. He told delegates: “To think your broker is going to be your tax consultant … is wrong and not a fair position for what should be a winning team.”

‘Eleventh-hour hold up’

Another plea for early action by first-time sellers came from Luci Johnson, operations, documentation and servicing manager with PNC Aviation Finance. “A lot of times when selling an aircraft, the lender is the last party that is brough to the table,” said Johnson. “But, in reality, we should be one of the first as soon as the seller is marketing the aircraft. Reach out to your lender with regard to what the pay off may be. There may be a shortfall that arises and we don’t want there to be an eleventh-hour hold up for the closing.”

As a regulated bank, PNC Aviation Finance has laws and regulations which it must adher to and protocols in place to ensure compliance. Providng PNC with the information it needs sooner rather than later is an important means of concluding a successful sale as soon as possible, said Johnson. “Do not reach out to your lender two days before closing. We need plenty of time,” she said. “We can respond very quickly but we want that to be the exception and not the norm.”

For Todd Duncan, chairman, Duncan Aviation, it is all about closing the deal and mitigating risks by bringing together a team of experts. That is particularly important with the recent shift in the balance of power in transactions. “This has gone from a sellers’ market to a much more balanced market in terms of aircraft sales,” said Duncan. “That’s why it’s especially important to talk about the team you [sellers] need and what their duties are.”

With specialist advice, sellers can gain true insight into the value of their assets and eliminate surprises within the pre-purchase inspection. PPIs are a critical part of aircraft transactions and one that has been overlooked in recent years, he said.

‘Difficult to schedule PPIs’

While finding slots had proved challenging, Duncan said availability had improved for some categories of aircraft. “For the past year, it’s been difficult to schedule PPIs,” he said. “We, and others, have tried to carve time out of our schedules. Within a two-to-four-week period we can take in small to medium-sized projects, depending on the scope of that pre-buy.” Larger aircraft are more difficult to get in and can take a month or two months.

His final advice to sellers, like his fellow speakers, was about the importance of planning. “The more they plan before hand, the better off they will be.”

Meanwhile, Mesinger, from Mesinger Jet Sales explained the need for the new Masterclass series like this: “What is usual and customary in aviation is always changing. What was usual and customary during the pandemic is not necessarily so today. So, we thought we would capture the new usual and customary in this new Masterclass series.”

The next free, one-hour CJI Masterclass – How to have the perfect ownership experience – takes place on May 22nd, 2024. You can listen to the first Masterclass here.

The more sellers plan their transactions, the more successful they will be, according to panelists.