Aircraft Brokers – How to Find Your Perfect MatchOctober 25, 2019
Aircraft brokers play an important role in the aviation industry. In this article, we’ll discuss the job of a jet broker. We’ll include airplane broker specialties like private jet broker, commercial jet broker, helicopter broker and aviation consultant. Then we’ll explore the signs of an excellent aircraft broker and why you need an aircraft broker. Next, we’ll review aircraft broker fees and commissions, and how Assets America® can help. Finally, we’ll conclude by answering some frequently asked questions.
What is an Aircraft Broker?
The job of an aircraft broker is to bring together aircraft buyers and sellers. In addition to facilitating sales, an aircraft broker provides industry guidance, improves pricing, and offer speace of mind. Frankly, we must acknowledge that the aircraft sales industry is complete unregulated. Indeed, the industry:
- Is not subject to any federal aviation regulations.
- Has no internationally recognized standards.
- Has virtually no barriers to entry.
- Does not require brokers to have much aeronautical knowledge, formal training, or college degree.
- Provides for voluntary certification programs, such as dealer accreditation by the International Aircraft Dealers Association.
Clearly, aircraft brokers must be good at one thing — to close deals. This creates some tension for sellers because the broker only makes money if the aircraft sells. In other words, you must ask whether you can trust the broker. Truthfully, the answer can be affirmative if you work with a respected brokerage.
The aircraft brokerage industry encompasses a few specialties:
- Private Jet Brokers
- Commercial Jet Brokers
- Helicopter Brokers
Each one offers brokerage services to a slice of the aviation industry. Other than confining themselves to a class or type of aircraft, specialized brokers share the same basic job description.
Video: Inside the world’s most popular business jet | CNBC International
Airplane Broker vs Aviation Consultant
The seller pays an airplane broker when the broker closes the sale. Obviously, this resembles the real estate brokerage industry. Truthfully. there is nothing wrong with the broker representing the seller in a transaction. But the buyer should be aware of this relationship. Problems can develop if a naïve buyer thinks that the broker is looking out for the buyer’s best interests. At best, one should insist that the broker be honest and fair.
Aviation acquisition consultants accept payment from buyesr. Specifically, their job is to facilitate the aircraft acquisition process while protecting the interests of the buyer. Crucially, this means advising the buyer to walk away from an unfair or unjustified deal. Typically, the aviation acquisition consultant helps the buyer find the right aircraft for the buyer’s needs and budget. Often, buyers are completely new to the aviation market. Furthermore, it’s likely that buyers utilize aircraft chartering or own a fractional share of an aircraft. Moreover, some buyers may own a jet card, which is prevalent in private aviation. To clarify, a jet card holder can use different jets and other aircraft at fixed hourly rates.
Six Signs of an Excellent Aircraft Broker
As we have established, aircraft brokers work for sellers. If buyers want brokerage services, they may turn to aircraft acquisition consultants. Naturally, if you are going to use an aircraft broker, you might as well use an excellent one.
The Six Signs
But how do you recognize an excellent broker? Here are the signs:
- Professional Presence: Seek out brokers who appear in business directories, have professional websites, and are active on social media.
- Rich Experience: Excellent brokers have many years of experience and either own or work for a respected company.
- Positive Recommendations: Speak to friends and colleagues who have sold aircraft for their recommendations regarding brokers. If you have identified a potential broker, ask for a list of references. Then, speak with past clients to find out if they had any problems or frustrations dealing with the broker.
- Responsiveness: Reach out to several recommended brokers to see how well they respond to you questions. You might then eliminate brokers who are unresponsive without first signing a representation contract.
- Accreditation: Top aircraft brokers receive accreditation from the International Aircraft Dealers Association.
- Fee Structure: Understand how the broker will charge for services. Confirm that the broker receives payments only from the seller and will represent the seller’s interests, not the buyer’s.
Why You Need an Aircraft Broker
An aircraft broker helps you sell your aircraft. But a broker also must clarify the conditions of the sale, including:
- Who pays for the cost of moving an aircraft to the site of the pre-buy inspection?
- What is the scope of the pre-buy inspection?
- What are the problems the seller must fix before closing the deal?
- What is the time frame for closing the deal?
Naturally, in all situations, the aircraft broker represents the seller’s point of view. Buyers can hire an aircraft acquisition consultant if they want someone to represent their best interests.
Benefits of Using an Aircraft Broker
In today’s internet environment, services like JetNet and Amstat provide basic information about aircraft for sale. Theoretically, the online marketplaces and technical information threatened the need for an aircraft broker. But the brokerage industry did not disappear, because it provides important benefits. Indeed, sellers benefit from using an aircraft broker in several ways:
- Tame information overload by distilling massive data down to the important points required to make the sale.
- Elaborate on the features that make the seller’s aircraft desirable.
- Explain the finance options available to the buyer.
- Answer the buyer’s questions, both technical and financial.
- Alert the seller to any regulatory changes that could affect the sale of the aircraft. Guide the seller to respond to regulatory changes.
Aircraft Broker Fees and Commissions
Aircraft brokers receive payment from aircraft sellers. While each broker is free to set aircraft broker fees as they choose, here is a typical fee schedule:
- Minimum Commission: $3,000
- Commission for Price up to $300,000: 10%
- Commission for Price from $300,001 to $600,000: 7%
- Commission for Price between $600,001 and $1 million: 6%
- Commission for Price above $1 million: 5%
- Additional Fee: 1% for aircraft with damage history.
- Aircraft History Research fees: Negotiated
- Expenses: Reimbursed
Here’s what you can expect for the money:
- Broker’s travel to seller’s location.
- Visual inspection of seller’s aircraft.
- Review documentation and logs.
- Research aircraft history.
- Digital photos.
- Review repairs paperwork.
- Review modifications documentation and completion.
- Value modifications on aircraft.
- Review possible documentation corrections.
- Package deliverables.
- Facilitate aircraft export if required.
- Provide a NAAA appraisal for agricultural aircraft.
Aircraft Broker Agreements
Normally, an aircraft broker requires clients and others to sign specific agreements:
- Exclusive Mandate Agreement: This is an agreement that grants the broker to represent the client for the sales transaction. The exclusive agreement means that the broker represents only one side of the transaction. A different form, the Non-Exclusive Mandate Agreement, allow one broker to represent both sides of the sale transaction. Obviously, this can lead to conflicts of interest.
- Non-Circumvent Non-Disclosure Agreement (NCND): This agreement has two purposes. The first is to assure that certain data will remain strictly confidential. The data includes pricing, asset data, and negotiation information. The NCND also has both the buyer and seller agree to avoid direct contact with each other. Furthermore, the buyer and seller must not work around the brokers and other intermediaries.
- Proof of Funds: A bank verification that the buyer has the deposited funds required to close the deal. The buyer will not release this form until the Mandate Agreement and Proof of Funds are in place.
- Air Operator’s Certificate (AOC): The AOC allows a pilot to use an aircraft for commercial purposes. The operator must have sufficient assets, personnel, and systems installed and working to ensure safe operation.
How Assets America® Can Help
Sellers need buyers, and Assets America® helps buyers finance their aircraft purchases. We are happy to work with all sorts of aircraft brokers:
- Jet broker
- Private jet brokerage
- Commercial jet broker
- Helicopter broker
- Airplane broker
- Aviation consultant
We can arrange financing for aircraft costing $5 million or more. Please contact us for a confidential consultation today.
Aircraft Broker FAQs
What makes a private jet broker cost efficient?
When you use a private jet brokerage, you might be better able to realize your asking price or higher. When you compare the price advantage to the cost, you can easily come out ahead with a private jet brokerage.
What are the obligations of an aircraft broker?
An aircraft broker must vigorously pursue the interests of the seller. The broker must facilitate the sale, providing support services that ensure the smooth closing of the deal. Buyers can get similar support from an aviation consultant.
How much does a private jet broker charge?
A typical private jet broker usually charges a sliding-scale percentage based on the sale price. The percentage commission can run from 4% for expensive aircraft to 10% for less costly craft. Brokers may charge extra research fees and expense reimbursements.
What is a flight broker?
A flight broker, or charter broker, arranges charter flights for customers. A flight broker finds aircraft options for a customer, usually tied to the customer’s budget or preferences. Typically, a flight broker works with a network of charter operators to find available aircraft.