“The first time is the hardest.” That was Joseph Carfagna, Jr.’s verdict on conducting Leading Edge Aviation Solutions’ 871st aircraft transaction – its first during the Covid-19 pandemic.

“After a few weeks of turning every direction and wondering how we were going to do this, we charged ahead and got it done. Like anything else, that is a challenge,” Carfagna told Corporate Jet Investor.

Aside from its timing and process, there was nothing remarkable about the transaction. Leading Edge Aviation Solutions represented the seller of a late model Gulfstream, which was placed on the market in February 2020. “This was a very well-equipped aircraft with great pedigree and excellent cosmetics,” according to Carfagna’s blog post. “It seemed quite straightforward to determine its value and how long it might take to sell.”

A prospective buyer arranged to look at the aircraft and a typical showing took place in the first few days of March. “The buyer came to look at the aircraft on a normal day, in normal fashion,” wrote Carfagna, who is President of the company. “There were no big headlines about pandemics, politicising of wearing masks, in fact nobody was wearing them we were just hearing about this strange outbreak in Wuhan  – I had to look up where Wuhan was.”

And then the world changed, as Covid-19 began to take hold. “Once Gulfstream closed its doors to outsiders due to Covid -19, it was a surprise,” Carfagna explained to Corporate Jet Investor. “We were concerned that things might become unmanageable, as we are very hands on when representing clients during the sale of an aircraft.”

‘A very frank discussion’

In late March, the buyer responded with an offer. Carfagna admits to “a very frank discussion” with his client about what they thought the future held. “A price was put on the table from a credible buyer, who we knew had the ability to perform, and who was professionally represented by an IADA- [International Accredited Dealers Association] accredited broker, and had already seen the aircraft.”

Carfagna describes the price as “a big pill to swallow”, but he knew the company had a real buyer. Not being able to check out the Aircraft Sales Manual – for the chapter on What to do in a Pandemic – Carfagna and the team just had to get on with it.

“After plenty of best guess discussions with our client and placing a real value on certainty in a deep sea full of uncertainty, the buyer and our client came to an agreement,” he says. An aircraft purchase agreement was negotiated with each parties’ respective counsel in the normal way. A slot was reserved at the service facility. But then the rules changed.

Representatives from neither party were be allowed to enter the inspection facility. The seller’s team were required to drop the aircraft off at the service facility and be escorted off the premises to the airline terminal. So, there was no unloading the log books. The test flight was flown by Gulfstream test pilots with no one allowed on board. The induction meeting was conducted via conference calls and Zoom calls. Updates from the facility were all done daily via email.

“The pre-purchase inspection and test flight were thankfully relatively straightforward with no unusual issues,” according to Carfagna. “The communication that took place between the inspection facility, the buyer and the seller’s respective teams was key, and it was effective. Would it have been better to have our representative on site managing the process? Of course, but we couldn’t, so we relied on strong communication to take the place of being there.”

‘Did not take all that much longer’

From the parties’ respective home offices and dining room tables, the transaction was monitored through to closing the transaction, which happened in the last week of May. “Although it was not as ideal as having a representative on the shop floor, the communication was good and it did not take all that much longer than it might have otherwise.”

So, is there anything he would do differently next time? “Take our client into the deal knowing how things will proceed, as opposed to figure out how they will proceed,” he answers. “But it turned out that the seller sold at a price that we were able to see, many weeks later, as representative of the market and the seller purchased a very good aircraft.”

Carfagna detects the emergence of a new normal developing for aircraft transactions. A realistic understanding of the shifts in market values needs to apply, he says. While the market has not collapsed, prices have adjusted and that adjustment varies according to aircraft category and type. “Seasoned experts are the ingredients that should be added to aircraft transactions when the circumstances that a pandemic creates are in effect. If so, it will provide the best odds for success.”

His summary of the experience was upbeat: “It is comforting to know that life in this industry can go on, will go on, and in my view will enjoy growth going forward, as it is likely that more people than ever before will seek to fly privately in the months ahead.”

Meanwhile, read the full blog post here.