LOI For An International Business Aircraft Transaction

May 2023

The Basics

An LOI, or Letter of Intent, outlines the basic terms and conditions of a proposed business aircraft transaction. It is used in the early stages of the negotiation process before a formal purchase agreement is drafted.

The LOI identifies the major players (buyer, seller, and their representatives), the aircraft make, model, registration, and serial number, and spells out the details of the purchase price and payment terms, including any requirements for deposit payments and escrow arrangements.

The general terms, conditions, and timeframe for the visual inspection, pre-purchase inspection, acceptance of the aircraft post-pre-purchase inspection, and delivery are all expressed in the LOI.

International transaction LOI

Importing an aircraft into the U.S. for purchase is a complicated process. An LOI for an international transaction requires additional essential factors.

1. Airworthiness status: The most direct route to knowing if the aircraft you are considering is FAA-compliant is to work with a DAR (Designated Airworthiness Representative). They inspect the aircraft and research the maintenance records to determine if the aircraft is deemed airworthy by the FAA and post-closing issue a Certificate of Airworthiness.
2. Delivery location: The LOI includes details of where and when the aircraft will be delivered, as well as who will be responsible for arranging transportation, customs clearance, and any other logistics related to the delivery.
3. Documentation and Registration: The LOI specifies the documentation required to complete the transaction, such as the certificate of airworthiness, maintenance records, and bills of sale.
4. Closing details: The buyer and seller mutually agree upon the timing of the closing process instructed on the LOI which is to be further detailed and defined in the Aircraft Purchase and Sale Agreement:
   • How and when the aircraft is deregistered from the original country.
   • When the buyer places full payment in escrow.
   • When ownership transfers to the buyer.
   • When the purchase price is paid to the seller.

Don’t Do It Alone

LOIs are NOT form letters. You can’t use the same language for all transactions, especially when importing an aircraft. There are always unknowns and irregularities that need to be identified and addressed, and if not considered and written in at the LOI stage can be costly to the purchaser after closing, or at times not allow the parties to be able to negotiate an Aircraft Purchase Agreement and consummate the transaction.

It all comes down to knowing how to structure the agreements properly. And that comes with years of experience with importing/exporting aircraft.