A prebuy crunch
If you think finding the airplane of your dreams or a buyer willing pay the asking price for your aircraft presents a challenge, try locating a facility where you can get a prepurchase inspection. The uptick in preowned-market activity, demand for ADS-B installs, and a technician shortage are among the factors creating a prebuy crunch.
“It’s very, very difficult right now to get slots,” says Brian Proctor, CEO of the Mente Group brokerage, and president and chairman of the National Aircraft Resale Association (NARA). “The biggest threat to transactions is [the lack of] prebuy facilities,” he says.
Debi Cunningham of West Star Aviation confirms the crunch. “The only advice to give right now is to attempt to preschedule any event when possible and prepare for longer down times,” says Cunningham, a vice president of marketing at the maintenance, repair, and overhaul (MRO) company.
Adding to the strain: operators that typically perform scheduled maintenance in-house but need ADS-B installations are having both done simultaneously at MROs to minimize downtime. “That’s consuming capacity [that could otherwise be used] for prepurchase inspections,” says Michael Parrish, vice president of maintenance, paint, and interior sales at Elliott Aviation. “It’s not just a question of manpower, it’s also hangar capacity,” he adds.
Even if you can get a slot, a facility might prove unable to complete inspections in the agreed-upon timeframe, leaving potential deals in limbo. Janine Iannarelli, president of the Par Avion brokerage, says a Falcon she’s representing is undergoing a prebuy at a well-regarded facility, and the inspection has extended beyond its scheduled completion date. “They are overwhelmed in their shop, and they are borrowing people from one project to work on another,” Iannarelli says.
When shopping for an inspection facility, Iannarelli suggests, principals should ask, “How do you manage communication with your clients so they have access to data about what is being done on the aircraft in a timely fashion—meaning today or tomorrow—without having to pick up the phone every day?”
If you can get a slot, also, keep in mind that MROs typically lack the resources to perform upgrades and refurbishments that prospective purchasers often schedule in conjunction with a prebuy. You may have to postpone such improvements, and if you’re considering a project airplane purchase, pay careful attention to a shop’s estimated timeline.
Parrish expects ADS-B–driven work to prolong the slot deficit to the Jan. 1, 2020 equipage mandate date and beyond. West Star believes “a shortage of technicians is the primary issue right now,” Cunningham says, and the company puts its hopes in efforts like Senate Bill 2506, an aviation tech-development program, “to ensure that the 120,000 new technicians that the industry will need over the next two decades are available.”
Meanwhile, with guaranteed inspection slots for 2018 mostly spoken for, Proctor says NARA is in discussions with MROs about reserving slots in 2019 for its members. In addition, he says, NARA—whose members include some of the industry’s largest brokers—is developing guidelines that would simplify prepurchase inspections and make them “minimally invasive.”
“We may see a change in the way people buy airplanes,” should prepurchase protocols become less intrusive, Proctor acknowledges. “The market for pristine preowned airplanes will be better [demand-wise], because buyers can accept risk there,” he says. “But buyers of older airplanes will be less willing to pay full price. It you think the worst case downside risk on a Challenger 300 is $350,000, I believe that will impact the way you negotiate the purchase.”