VanAllen Insights

Aircraft Delivery Delays

<2 mins min

After months of evaluation and negotiations, your acquisition team finally signed the aircraft purchase agreement.  Perhaps it’s been a year or more since that fateful and exciting day.  In that time, your operational team has been preparing; training, tooling, staffing, maybe even building a new hangar.  Trips are on the books.  Yet, there is a feeling of uneasiness and uncertainty in your delivery timeline.  You read the industry news and compare notes with your colleagues. 

VanAllen’s most recent poll showed that over 80% of respondents experienced a delay in their most recent new aircraft delivery. Many of those were in flux right up until the final delivery time. So while you may have negotiated the aircraft deal that made financial sense, did you properly consider the risks associated with delivery timing? Most new aircraft purchase agreements include excusable and non-excusable delay provisions that afford the manufacturer a large delivery window without penalty. Delays can create significant costs and frustrations to the buyer. 

This poll was live on LinkedIn and captures our followers responses.

Ultimately, when it pertains to aircraft delivery delays, your protections and recourse are spelled out in the aircraft purchase agreement. Here is an overview of the key delivery provisions and important considerations.

Scheduled Delivery Date

The delivery date is loosely defined in the aircraft purchase agreement so we start the entire process with a degree of ambiguity.  At the time of this writing, manufacturer delivery lead times are out approximately 24 months from the time of contract execution.  Due to this prolonged backlog, a common practice within the purchase agreement is to define a delivery quarter or even half year window.  A specific date, week, or month is nearly impossible to define when the purchase agreement is signed 2 years prior to delivery.  There may also be other milestones defined in the purchase agreement which will help drive the target delivery date.  Things like your final selection of optional equipment, interior configuration, interior materials, and exterior paint.  It is important for your team to be very aware of these dates and comply with them.

Notice of Inspection and Delivery

The OEMs vary slightly in this step but, in essence, the OEM will provide you with a notification of an inspection date.  The notification will define the date where the OEM will tender the aircraft for your inspection and acceptance.  At that point, the purchase agreement will have defined procedures and timeline to confirm that the aircraft meets all the delivery conditions.  The timing of this notice can vary but the earlier you can have your OEM commit, the better for your overall planning.

Excusable Delay

Things happen.  Sometimes things happen out of our control.  In the case of the OEM manufacturing your aircraft, a variety of outside factors can impact their ability to perform on-time.  These events are commonly called “force majeure” events and can include things like acts of war, supply chain interruption, extreme weather, pandemics, and governmental certification.  This is where a vast majority of delays occur.  Within the purchase agreement, you want to negotiate what constitutes an excusable delay, how long an excusable delay can last, and what happens if it goes beyond this deadline. 

Non-Excusable Delay/Default

Outside of an excusable delay event, the OEM must perform to deliver the aircraft within the window of time defined within the purchase agreement.  If the OEM does not perform within a specified number days after the scheduled delivery date, they are in default.  Thankfully, this is a very rare instance but it needs to be considered in your purchase agreement.  Consider the scenarios and whether your organization would intend to ride it out and contemplate termination of the purchase agreement. 

I am delayed.  What are my options?

The delivery provisions outlined above are important to know about if you are preparing to buy an aircraft.  But what if you have already signed the purchase agreement and you are delayed?

  • Start with the purchase agreement.  Huddle up with your acquisition team.  Review the clauses outlined above to determine your rights.
  • Ask lots of questions.  Does this delay pertain only to your aircraft or numerous aircraft?  What is the root cause?  What is the corrective action?  What is the confidence in the corrective action?  Do you have a voice in the corrective action?
  • Consider the impact to your organization.  Does the delay have a direct cost to you?  Does the nature of the delay shake your confidence in the aircraft or the OEM?  Could this hinder your future resale of the aircraft?

In the end, your acquisition team will be back at the table negotiating with the OEM to determine a best solution.  The OEM has a reputation (and future sales) to maintain.  You have an aircraft need.  Finding a win/win will take careful review of all the considerations.

Need help negotiating an aircraft purchase agreement on these topics and more?  Or want to learn about your options after a delay notification?  Contact VanAllen to learn more about our Aircraft Acquisition services.

If you’re looking to learn more about Buying Aircraft, you can also watch our YouTube video by clicking here.