Deceptive dates

BROKERS ALMOST ALWAYS ADVERTISE business jets for sale with a “specification” that lists important equipment and facts about the aircraft. Such specifications can be notoriously inaccurate, which is why they’re usually accompanied by a disclaimer that says they’re “subject to verification upon inspection,” or words to that effect—a fancy way of stating that the broker isn’t responsible for inaccuracies. Common failings include mistakes about installed equipment and spurious claims that engines are enrolled in a maintenance program. I recently saw a specification for a two-engine aircraft that gave serial numbers and times for the “center” engine.

Many broker specifications also attach a calendar year to the aircraft, as in “2008 Gulfstream G450.” One would assume the intent is to show the model year, but model year is an elusive concept with business jets, and there are several dates to consider regarding the birth of the aircraft.

The first is the date of manufacture, which is often assumed to be the date the aircraft receives an airworthiness certificate. In the old days (which in business aviation is never long ago), you could often purchase the “green” business jet, so called because of its exterior color prior to final painting, not its lack of experience. Then you’d contract with an independent completion center for the outfitting. The green aircraft was flyable and thus had an airworthiness certificate, the date of which was often considered its date of manufacture. Airframe manufacturers eventually figured out that they could make more money handling completion projects themselves, so few business jets (other than bizliners like the BBJ and the A319) are still outfitted by independent centers. The date the aircraft is completed is therefore months, or even years, after it is manufactured.

The date of completion, however, is also—as philosopher W.V.O. Quine used to say—a creature of darkness. When is an aircraft “completed”? Purchase agreements for factory-new airplanes generally identify a “scheduled delivery date,” which may or may not turn out to be an accurate estimate, and delivering a business jet is actually a process involving several steps: due diligence by the manufacturer; the “turn of the aircraft to the customer” (in Bombardier’s parlance) so the buyer can perform its due diligence; the correction of the inevitable discrepancies; and a final closing date (with or without yet-to-be-corrected glitches). Only the closing date, when the aircraft is actually delivered and accepted, is almost always crystal clear, and even that can be affected by unusual circumstances.

The closing date is also generally when maintenance and warranty clocks start running. However, it isn’t necessarily when the buyer begins to use the aircraft or use it for a specific purpose. For tax purposes, what the IRS calls the date the aircraft is “placed in service” in the buyer’s trade or business is key. So if you purchase a jet in December but don’t take your first business flight (and thus “place it in service”) until January, you can’t start taking tax depreciation until January. That can be painful if you were counting on 50 percent bonus depreciation for the prior year. 

To make this more complicated, aircraft manufacturers have different procedures for obtaining airworthiness certificates, assigning a model year, and the like. The FAA requires that the date of manufacture for engines be shown on the engine data plate, but airframe data plates aren’t required to include the same information, though some manufacturers show it anyway. You can find the aircraft’s “MFR year” on the website of the FAA registry, which (according to the website) is “based on information on the Application for Airworthiness Certificate.” The FAA notes dryly that “this is not necessarily the model year.”

SO WHAT IS A BUSINESS JET'S model year? Is it the date of manufacture or the date the aircraft was deemed completed? Is it the date it receives an airworthiness certificate? Is it the date of delivery to a customer? Or is it some other date? A jet could easily receive its airworthiness certificate and have a date of manufacture in March 2016, be deemed “completed” and turned to the customer for inspection in December, and be delivered to that customer in a January 2017 closing.

Why should anyone care? Perhaps the most important sources for “model year” information are Aircraft Bluebook and Vref, both of which group airplanes by “year,” a word that seems to beg the ultimate question. A glance at either of these publications, however, shows why anyone should care about that “year.” Take the Falcon 2000LXS. According to the current Vref, the “retail” value for a “year 2015” Falcon 2000LXS is $3 million more than for a 2014. No wonder Vref suggests readers “use extreme caution when trying to determine serial number/model year effectively…there is no industry standard.”

Bluebook and Vref obtain their information on the “year” directly from the airframe manufacturers, which base their decisions on the delivery date—the date of closing. Like automakers, business jet manufacturers generally charge more for a “2018 model” than a “2017 model,” which would seem to give them an incentive to have the model years on the aircraft they are selling be later rather than sooner. But manufacturers can’t charge more for an aircraft simply by pushing the delivery into a subsequent calendar year since the price will have already been determined when the purchase agreement was signed. 

One can imagine the reaction of customers who are informed not only that the delivery of their new jets will be delayed but that they will cost more as a result. In any case, the manufacturers also have a powerful incentive to bring in cash in the current year rather than the next, which generally outweighs the benefit of any price increase they might realize by monkeying with the model year.

Moreover, while car manufacturers often introduce changes with a new model year that may justify price increases, business jet improvements are usually cut in at a specific serial number. This is generally a function of certifications and production practicalities, not the aircraft’s model year. 

What to do when buying a jet? When an aircraft is marketed as a 2008 model, it pays to inquire closely as to what this means, and as Vref suggests, use extreme caution. Try to understand all of the dates, keeping in mind that the argument you make to the seller that a 2008 model is really a 2007 is an argument you may hear again someday when you go to sell the aircraft.

Flytenow Update  

Flytenow created a website where pilots planning a trip could link up with people wanting to ride along and were willing to share expenses. [See “A Flight-Sharing Scheme Collides with Federal Regulations”] Though FAA regulations permit private pilots to let passengers share expenses, the agency concluded that pilots posting flights on Flytenow’s website were engaged in common carriage and commercial transportation. Flytenow sued the FAA in federal court and lost, and on Jan. 9, 2017, the U.S. Supreme Court declined to hear the company’s appeal. As a result, barring a change of heart at the FAA, Flytenow’s only remaining recourse would be an act of Congress authorizing internet-based cost-sharing schemes like the one it introduced.