A focus on ethical conduct
Aircraft brokers and dealers, who are now unregulated, advocate for industrywide standards.
With millions of dollars routinely exchanged in an opaque marketplace, no certification or licensing requirements for brokers, and no government body to regulate the trade, aircraft sales and acquisitions can at times resemble a Wild West of commerce.
“There are no barriers to entry. All it takes to do multimillion-dollar transactions is a cell phone and a website,” says Brian Proctor, CEO of the Texas-based Mente Group, an aviation consultancy. By contrast, he adds, “In Texas, you need 1,500 hours of training just to cut somebody’s hair.”
Proctor is the newly elected president and chairman of the National Aircraft Resale Association (NARA), and both he and NARA—which has a code of ethics—are among a growing number in the industry calling for more regulation for aircraft brokers and dealers. (A broker represents a buyer or seller, a dealer takes aircraft in trade, and a broker-dealer can provide both services.)
For you as a buyer or seller, the risk is that your brokerage might be acting in its best interest, not yours. “If you can think of it, it’s probably been done,” Proctor says of the spectrum of potential ensuing chicanery.
To be sure, brokerage isn’t the only sphere of business aviation that faces ethical challenges. Last December, the National Business Aviation Association (NBAA) released a statement that said
“all industry participants—whether representing the buyer or the seller of any products or services—should conduct themselves in a manner that seeks to avoid even the appearance of improper behavior when engaging in business transactions.” It called for companies to provide policies and training “on issues of ethical behavior.”
An NBAA spokesperson said no specific behavior prompted the document, which was championed by “a group of people within the membership.” Given the “complex” nature of aircraft transactions and flight-department operations, added the spokesperson, “sometimes even people with the best intentions may be unaware of all the ethical considerations that may be involved.”
In January, the NARA board unanimously endorsed the statement. NARA has about 40 broker-dealers on its rolls, a small fraction of the some 1,060 aircraft brokers in the U.S., yet they represent an outsize proportion of deals: members handled about 60 percent of the 4,600 retail aircraft transactions conducted in 2017, according to the organization. (Brokerages must have been in business five years and must conduct a minimum of 10 transactions per year to be eligible for membership; membership fee and annual dues are $8,000. Many brokerages that meet these and all other qualifications choose not to join.)
The call for more broker oversight extends beyond NARA. Following last year’s annual NBAA convention, Jay Mesinger, founder and chairman of Colorado-based Mesinger Jet Sales said, “I’ve never heard as much conversation around integrity and ethics. It’s clear we as an industry are going to embrace and create a real code of ethics.”
Some who tout regulation look to California and Florida statutes that govern yacht brokers as models for aircraft transactions. These states require those brokers to be bonded, undergo a criminal background check, successfully complete an accreditation program, and hold a state sales agent’s license for two years before becoming a licensed yacht broker; and sales contracts and commissions are standardized.
NARA has recently embarked on an initiative to create a certification program for brokers and dealers. “We’re building the strategic plan this year,” says Proctor. “The timing is right. There is a significant opportunity for the industry to grow up and mature, and I think the appropriate organizations are starting to look at this pretty hard. We’ve got to build discipline into the industry. At the end of the day, we all benefit by having more efficient markets.”
NARA has recently updated its own policies and procedures for handling questions about the conduct of its members. Previously, grievances were filed through a board member but, says Proctor, “We have developed a new ethics committee and we will have links on the website to make the process of filing a complaint a little easier.”