Streamlining Year-End Aircraft Transactions for Smoother Closings
Q4 aircraft transaction activity is picking up faster than expected. Escrow Agent Jeff Snowden explains why clear communication and being proactive with title work and International Registry enrollment will ensure smoother closings.
When it comes to aircraft transactions, 2024 has been slower overall. Per last month’s article, I wasn’t sure if we’d see the usual year-end madness. Fast forward, and our title activity has clearly picked up—more than I expected.
We often discuss how election years cause a dip in activity, but that isn’t always true. According to this Corporate Jet Investor article, “During the past eight presidential elections, the total number of transactions (for both pre-owned and new deliveries) have only declined twice.”
Aircraft transactions don’t disappear—they just delay. With only six weeks left in the year, here are some helpful tips from an Escrow Agent to make year-end closings smoother.
Preparing for Year-End Aircraft Transactions
If you’re a broker or dealer with listings, work with your preferred title company now to order title work. Deals move quickly this time of year, and buyers or sellers often want to close unexpectedly fast. Ordering title work early ensures you address any potential issues before closing.
For clients financing their aircraft, complete International Registry enrollments early. The year-end activity surge means processing these applications can take longer. Some proactive clients enroll on the International Registry well before finding an aircraft. While it may seem minor, having this step done provides peace of mind once a deal progresses.
Once a plane is under contract, your Escrow Agent will prioritize based on the closing date you provide. We aim to stay proactive, but year-end timelines make this challenging. If you open a transaction without confirming a closing date, we likely won’t prioritize your deal until the date is set. Providing a clear closing date helps us ensure everything aligns.
For teams with Closing Coordinators or Transaction Managers, salespeople need to keep them updated. These coordinators are the communication link to your Escrow Agent. If they lack information, they can’t keep us informed, which slows the process.
I love the year-end rush, but it presents challenges. Unexpected deals will surface, and existing deal details may shift by the hour. Buyers or sellers can back out, and financing may fall through.
There are many factors we cannot control. However, we must focus on controlling what we can. With that mindset, I’m excited about the activity increase and hope everyone ends the year strong.
How Might the 2024 Election Impact Aircraft Taxes?
How will the 2024 election impact aircraft taxes? Angel Houck, CPA, shares how a second Trump term could benefit owners in terms of decreased IRS audits, increased bonus depreciation, lower SIFL rates, like-kind exchanges and more.
The Presidential election results are in. Now we can predict how a second Trump term will impact aircraft taxes.
Looking back at 2024, the general environment has been anti-aircraft owner. For example, earlier this year, the President released a statement to “crack down” on corporate jet loopholes and eliminate tax breaks for corporate jet users. This followed the IRS announcement of their plan to conduct focused audits on business aircraft use. A group of senators (all still in office) also wrote a letter pressuring the Treasury to reevaluate the Standard Industry Fare Level (SIFL) rates, calling them “outlandish.” Biden and Harris’s tax plans included a provision to extend the depreciable life of aircraft to 7 and 12 years.
Since February, the IRS has increased its level of audits on aircraft taxes. The SIFL issue is still out there, but the argument that the lower rate provides tax loopholes is misunderstood. It remains to be seen whether this matter will gain any traction.
In the near term, the key question people are eagerly awaiting is whether 100% bonus depreciation will return. Trump has presented several tax policy ideas. Yet there are a few things consistent across the board with 100% bonus depreciation being one of them. There’s also talk that the change may even be made retroactively, meaning 2024 purchases would qualify.
If I had to use my crystal ball, I think it’s likely that 100% bonus depreciation will return in the near future. As for other changes to aircraft taxes, I expect we’ll see a major tax package come through in 2025, but the contents are yet unknown.
My wish list this Christmas? Allowing the excess business loss limitations to expire and bringing back like-kind exchanges. Both are unlikely, but a girl can dream.
How Any Aviation Business Can Survive Change
How can aviation business owners adapt to shifting economic conditions and thrive despite uncertainty? Surviving change requires agility, foresight and a focus on enduring fundamentals, such as safety, reliability and service.
How can aviation business owners navigate shifting economic conditions and thrive in the face of uncertainty? Adapting to change requires agility, foresight and a solid understanding of market dynamics.
Take the presidential election, for example. Every four years, the aviation industry experiences some delays in major purchase decisions. Companies and individuals hold off as they brace for potential policy shifts and economic uncertainty. This "election stall" effect arises from concerns about new leadership and the impact of their policies, which could alter tax structures, interest rates and other economic factors.
As a result, such fluctuations affect disposable income and influence perceptions, shaping both business aviation demand and travel habits. Compounding the uncertainty, leadership actions don’t always align with their public promises, leading to misaligned expectations. These dynamics put pressure on the aviation industry, which is particularly sensitive to economic cycles.
To thrive amid constant change, aviation business owners must stay nimble. And they must be ready to adapt to shifting economic realities and evolving customer demands. However, amidst all these adjustments, having a guiding principle becomes essential to maintain focus and direction.
When it comes to building a lasting strategy, Jeff Bezos offers a compelling perspective that highlights the importance of focusing on stability:
"I very frequently get the question: 'What's going to change in the next 10 years?' And that is a very interesting question; it's a very common one. I almost never get the question: 'What's not going to change in the next 10 years?' And I submit to you that that second question is actually the more important of the two—because you can build a business strategy around the things that are stable in time..."
This shift in perspective—from predicting change to identifying what remains constant—provides a powerful framework for long-term planning. By grounding their strategies in enduring fundamentals, aviation businesses can create models that withstand external fluctuations and deliver consistent value.
In aviation, certain customer expectations, such as safety, reliability and efficient service, serve as strategic anchors. And these anchors remain constant regardless of political or economic shifts. By focusing on these core priorities, aviation firms can confidently invest in systems and practices that deliver long-term value.
This clarity helps entrepreneurs navigate uncertainty while staying grounded in customer-centric priorities. In a world of constant change, focusing on what endures allows aviation business owners not only to survive but to thrive.
Avoid Compromising Your Aircraft Insurance Coverage by Planning Ahead
Tom Hauge explains the importance of planning ahead for aircraft insurance to avoid rushed decisions that can lead to higher premiums or limited coverage. Giving brokers time to gather details and compare offers ensures your purchase is protected at the best price.
Each year, we see the highest volume of aircraft insurance transactions during the fourth quarter compared to any other time throughout the year. This is especially true as buyers rush to finalize transactions before December 31st.
Some buyers are motivated by tax planning strategies, while others make purchase decisions based on factors like election outcomes—yes, that really happens!
Regardless of the reason, the timing places added pressure on buyers to finalize both acquisitions and the necessary insurance policy and other ancillary services required (e.g., escrow, legal, finance and tax).
However, rushing through the process of obtaining aviation insurance coverage can lead to challenges. Binding a policy last-minute isn’t ideal, especially when it’s treated as just another item to check off an acquisition checklist.
Avoid Last-Minute Scrambling
Just as banks prefer at least 30 days' notice for processing financing, aircraft insurance brokers benefit from that same level of lead time to secure optimal coverage and pricing.
While it is possible to secure an insurance quote in under a week, rushing the process often leads to suboptimal results. This applies to both insurance policies and loan documentation. A hurried approach can leave both buyers and insurance brokers with fewer options, potentially resulting in higher premiums or less comprehensive coverage.
We generally recommend allowing at least two weeks from the time of initial contact with your insurance broker to the point of quoting and binding coverage. This window allows your broker to gather essential details, such as pilot information and applications, while fully understanding your risk profile.
The process of shopping for aircraft insurance is not instantaneous. In today’s market, it can take three to five business days for underwriters to respond with their interest in quoting a specific policy. During this time, your broker evaluates multiple offers, comparing coverage, limits and premiums to recommend the most favorable option.
Shortening this timeline may compromise your insurance coverage, as rushing the process leaves little room to explore the best market options. If some underwriters have not yet provided formal replies, there’s a risk that a more suitable policy could be overlooked simply because it wasn’t sent to the insurance broker in the shortened period of time.
The takeaway is clear: Yes, it’s possible to bind aviation insurance quickly when the purchase happens at the last minute. But that approach comes with trade-offs. By waiting too long to contact your insurance broker, you limit their ability to explore the full range of market options and secure the best policy for your needs.
Planning ahead isn’t just about convenience—it’s about ensuring your aircraft purchase is protected by the right coverage at the right price. So, if you’re considering buying an aircraft, don’t wait until the final days to get in touch with your broker. A little foresight goes a long way in setting you up for success.
What the Fed? Mike Smith Reviews Aircraft Finance Rates
Buying a jet? Now’s the time to starting the application process to secure your financing before year-end. Mike Smith shares the impact of recent Federal Reserve rate changes, noting that aircraft finance rates may remain elevated into 2025.
It’s clear the year-end push is upon us. If you’re considering financing an airplane acquisition by December 31st, I recommend starting the process—soon.
While every financial institution has a different process and timeline, it doesn’t hurt to engage early to ensure funding by year-end.
Remember, financing is a team effort between bank and borrower. Approach the application process with a collaborative mindset for the best outcome.
What the Fed: A Look at Market Conditions
On November 7, the U.S. Federal Reserve lowered its target rate by 0.25%. However, it doesn't mean that longer-term rates (e.g., aircraft finance rates) will drop. As of November 8, the 10-year treasury sits at 4.32%. That’s 0.11% higher than what was quoted in my article on October 21.
Going forward, I’ll continue to reference the 10-year treasury monthly as an indication of general rate trends. That said, aircraft finance rates don’t exactly match the 10-year treasury. It’s merely a benchmark to gauge rate movements on loans across the board.
With the continued rise in the 10-year treasury, the phrase “higher for longer” is a topic of conversation. While it’s too early to predict 2025 trends, the current rates seen today on longer-term loans may persist. This will be something to keep an eye on as you finish out the year and plan for 2025.
Aircraft Inspection 101: Don’t Let the Fox Guard the Henhouse
Attorney John Farrish dives into why choosing the right aircraft inspection team is crucial when buying your dream jet. Discover how a misstep could leave you vulnerable, especially if you let the fox guard the henhouse.
Many buyers are so excited to start flying their new dream machine that they’ll often fly right past some key aspects of the critical aircraft inspection process.
Two key requirements exist during a pre-buy process.
The first key is determining who will perform the pre-buy inspection. Sellers typically prefer their local shop, often the same team who maintained the plane during their ownership.
The challenge? What are the chances that the inspection facility will genuinely critique its own work? The more squawks they find, the more the seller might blame them for past oversights.
Instead, it’s wise to have a fresh set of eyes inspect the aircraft. Ideally, this would be the facility the buyer plans to use for future maintenance.
This gives the new facility an opportunity to familiarize itself with the plane, review logs and honestly assess the aircraft’s condition. They’ll also be motivated to perform a thorough inspection, avoiding blame down the road if something fails soon after. They’ll also have an incentive to find issues they can fix – and charge for.
Secondly, often overlooked, the purchase agreement should specify the “delivery condition,” outlining the standard for repairs. To avoid disputes and keep things positive, it’s best to agree on “delivery conditions” in advance, even if it requires extra negotiation. Consider these scenarios:
- Should all systems be functional, or just the flight-related systems?
- What if the air conditioning or lavatory isn’t working?
- Should the aircraft be current with a Part 91 annual inspection or follow all manufacturer-recommended hourly and calendar inspections?
- What if the buyer and seller disagree on necessary repairs?
Why shouldn’t a buyer let the fox guard the hen house? Because they need certainty about the plane’s true condition and agreed-upon results. Hiring an independent aircraft inspection facility provides this assurance, so they can confidently fly their dream machine upon closing.
This article is not intended, nor should it be construed or relied upon, as legal advice. The comments, recommendations, and analysis expressed in this article are those of the individual author, John Farrish, are purely informational. This article does not create an attorney-client relationship between you and the author or his law firm. If specific legal information is needed, each person should retain and consult an attorney with knowledge of the subject matter.