China Gulfstream G650ER Sale…Casebook Study

Aviatrade has previously written about a suggested bizjet resale solution that could be utilized by the owners of China-based bizjets. Following on from this, Aviatrade, in partnership with Beijing-based EOS Aviation, has recently and successfully completed the sale of a China-based Gulfstream G650ER, utilizing the prior guidance offered by Aviatrade.

There is no doubt that the bizjet market in China has evolved over very recent years and we now appear to be at the point where, instead of these assets (when surplus to requirements) languishing on airport ramps in mainland China, many China owners have decided to sell their Gulfstream, Falconjet, Bombardier Global and other assorted bizjets.

THE PROBLEM

These sellers have unfortunately encountered a number of hurdles while attempting to dispose of their (not so old) bizjets;

  1. Most of these bizjets were acquired directly from a manufacturer (OEM) and it is no secret that prices for such acquisitions generally had the “China premium” attached…mostly by way of numerous upgrade options available from the OEM’s. Upon resale, this scenario creates a value gap that is only recognized by a seller when the resale value is being assessed from outside China.
  2. Caretaking (in-service maintenance / storage maintenance) has not quite evolved to the same standards as in the west and this factor can present unwelcome surprises when an experienced and qualified manufacturer service facility (OEM) performs either scheduled calendar maintenance or a prepurchase inspection (PPI…also termed by Gulfstream, an “ARCS”… Aircraft Records and Condition Survey).
  3. In today’s current pandemic-related business environment, local registration (B-registration, China) renders a sale from China practically impossible unless an owner/seller is prepared to accept a low price for the aircraft. This “lowball” price would acknowledge the perceived buyers’ risk of buying an aircraft without an in-depth review and inspection.
  4. At the time of going to press, resale market malaise appears to have been at least partially mitigated by the uptick in demand for bizjets. Somewhat perversely, travelers that otherwise would be satisfied to fly “airline” have been obliged to protect their health and security by opting for bizjet travel. Obviously this option is only open to a fortunate few.
  5. Condition perception is also a factor when non-China buyers are considering the purchase of an aircraft from China. Concerns over the aircraft’s exposure to the elements and inactivity are quite real and valid. This is especially true of aircraft that are no longer covered by OEM or vendor (engine/APU) warranty coverage.
  6. Logistics…prior to Covid-19 induced travel restrictions, buyers would prefer to shop for bizjet acquisitions closer to home turf. Therefore most transactions were occurring in the west and the US/Europe were seeing the bulk of the bizjet sales activity.
  7. In the new Covid-19 environment we have witnessed a marked reluctance to engage with China sellers in China and this is especially the case since China has invoked additional measures to protect its citizens from overseas contagion.

THE SOLUTION

Aviatrade was recently able to convince the owner of a China-based Gulfstream G650ER to complete the sale of his G650ER, from within the US. EOS Aviation, (Aviatrade’s strategic partner in China) was instrumental in successfully completing this sale, communicating between Aviatrade and the seller in fluent Mandarin/English.

This strategy involved repositioning the G650ER to the Gulfstream Aerospace factory headquarters in Savannah, GA., for a major calendar inspection visit, coupled with a sales/marketing campaign timed to coincide with the G650ER’s arrival in the US.

In various roles, Aviatrade has enjoyed a more than thirty-year working relationship with the Gulfstream factory and this familiarity with Gulfstream and its protocols benefits both sellers and buyers of Gulfstream’s renowned and sophisticated ultra-long range aircraft.

Fortunately this G650ER was US registered and therefore the only (minor) impediment to the move to the US was the requirement for customs excise import to the US. The excise import is mostly a document-related event and should ideally be completed at the first stop in the US enroute to the final US inspection facility destination. A customs broker, appointed by Aviatrade, completed the import while the aircraft was undergoing its calendar inspections in Savannah. The logistics of the short-notice trip from Tianjin to Savannah precluded execution of the excise import during a brief stop in Seattle

This “excise” importation should not be confused with the more complicated country of registration importation. Any such change of country of registration involves an aircraft inspection, records review, possible equipment changes and a legal entity to act as trustee on behalf of the beneficial owner. This entire process can also be arranged and supervised by Aviatrade.

The G650ER calendar inspections were initially scheduled for completion at an Asia-based facility and this initial facility selection would have been perfectly acceptable. However, this G650ER was also earmarked for sale and the advantages of a US inspection process leading to a possible sale were explained in detail to the owner.

Prior to the G650ER’s positioning in the US at Gulfstream’s headquarters facility in Savannah, GA., Aviatrade initiated a direct marketing campaign thereby alerting potential buyers of a G650ER or G650, that this particular client’s G650ER was to become available for sale immediately upon completion of the extensive calendar inspections.

This approach presented a qualified/confirmed buyer with the opportunity to monitor the ongoing inspections and prepare for whatever level of ARCS might be appropriate, prior to accepting the G650ER. EOS Aviation provided timely updates to the seller’s chairman and personal assistant, thereby assuring seller of a consistent flow of information during the transaction.

In fact, Aviatrade was able to closely cooperate with the Gulfstream facility technicians in order to overlap the ARCS inspection with the initially slated calendar inspections. The proposed number of inspection items (commonly knows as CMP codes) was reduced when duplicate codes were removed from the ARCS inspection. The overall inspection timeframe was shortened and the risk/cost were significantly reduced for seller and buyer.

This approach received the mutual consent of seller and buyer, with Aviatrade’s appointed technical inspector supervising the progress on behalf of both seller and buyer. The technical inspector, (in our case, the retired chief inspector for Gulfstream Aerospace), played a vital role in monitoring the results of the numerous complex inspection procedures, the repair / rectification and parts replacement, thereby ensuring the integrity of the aircraft.  Clearly this was a win-win situation for both seller and buyer.

Additionally; there were discussions during the initial ARCS discovery process that also benefitted both seller and buyer. For example, it was decided (after expert evaluation) that some of the detailed ARCS inspection could be omitted without risk to either seller or buyer. This cooperation resulted in a closing occurring approximately four weeks earlier than scheduled.

This overall strategy worked perfectly. The prospective buyer flew from the west coast of the US to Savannah (east coast) to view the G650ER. This important step would not have been possible if the G650ER had remained in Asia for the inspection and sale process. More importantly this buyer signed an LOI, accompanied by a significant deposit, all within just five days of the G650ER’s arrival in the US.

The G650ER seller was particularly pleased with the financial outcome of this transaction…a premium sale price that was confirmed as being approximately three million dollars higher than a sale price that would have been possible had the G650ER remained in China during the sale. This is assuming that a sale could even have occurred in China in our current and somewhat unfortunate restricted business environment.

There are plenty of similar opportunities for China bizjet owners and the resale market outside of China is clearly the premier sales environment for these valuable bizjets.


Contact Aviatrade Inc., Philip Rushton, president for additional information and bizjet sale opportunities.

philiprushton@aviatrade.aero.
+1 908 578 8080

EOS Aviation contact;
Sammi Jiang
s.jiang@eos-aviation.com

+86 13910322625


 

Philip Rushton
Philip Rushton

Philip Rushton is our publisher, he has spent over forty years in various capacities in the world of aviation. In addition to his publisher duties for BJA, Philip oversees a successful US-based consultancy company, Aviatrade Inc., with offices in the USA, Europe, and China.

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