Letters of Intent: Do They Even Matter in Aircraft Transactions?
John Farrish tackles the question every aircraft buyer and seller should be asking — does a non-binding LOI actually matter? The answer might surprise you.
There aren’t many things in life you sign that are non-binding. Signatures usually mean a binding commitment. So why do so many multi-million-dollar aircraft transactions start with a non-binding Letter of Intent (LOI) rather than jumping straight to a binding purchase/sale agreement?
Do they even matter?
Initial Screen
The main purpose of the LOI is to ensurethat a buyer and a seller can align on the big-picture items for a potential aircraft transaction. There is no sense negotiating a purchase/sale agreement that can take weeks if the parties are unable to agree on basic terms. It’s better to find out quickly whether the parties are on the same page with a 1-3 page LOI instead of a 15-40 page purchase agreement.
Basic LOI Terms
Any good LOI should contain certain basic terms that will outline the deal and ultimately streamline the negotiation of the purchase agreement. Any LOI prepared by my firm contains the proposed purchase price, deposit amount, the escrow agent who will handle the funds and file documents with the FAA, the buyer’s inspection rights including a rough scope, timeframe, and ideally the inspection facility, the required condition of the plane and what the seller has to fix, the rights and limits of a buyer to reject the plane, timeframes for acceptance and delivery, and allocation of certain costs like flight expenses. Misalignment on any of these issues could result in wasted time and expense negotiating a purchase agreement that will never get signed.
“Gentlemen’s Agreement”
Despite being non-binding, an LOI is generally considered to be a “gentlemen’s agreement.” The only thing worse than leaving a term out of an LOI is trying to change an agreed term at the purchase agreement stage. Although a party is legally entitled to renegotiate any provision of the LOI, it is a quick way to lose credibility. Absent new information or a necessary change of plans, later changing a key term is considered a faux pas and will typically result in the other side walking away from the transaction.
Straight to a Purchase Agreement
There are a few simple situations where an LOI can be skipped. For instance, a simple purchase agreement may be more efficient if there is a verbal agreement on price, the plane is “as-is,” and the buyer can kick the tires and either close or walk away. Other “quick” transactions, such as older piston aircraft, can often be completed quickly with a purchase agreement where the stakes are low, and the inspection will be light. These transactions have fewer variables to negotiate, so alignment can be hammered out in the purchase agreement.
Another time to skip an LOI is during a time crunch. In the middle of December, when the parties are trying to get a year-end transaction accomplished, the week spent on an LOI could be better spent jumping right to a binding purchase agreement. Note that an email exchange can substitute for an LOI, although an email exchange could ironically result in a binding contract since it lacks the “non-binding” disclaimers contained in an LOI.
In sum, LOIs certainly matter. A well-drafted LOI will serve as the transaction template and smooth things out the rest of the way, ultimately streamlining the purchase agreement process.
Each transaction is unique, and there is no hard-and-fast rule on when to use an LOI. Rely on the advice of your aircraft broker and attorney, who have completed hundreds or thousands of transactions, on what will work best for your aircraft acquisition or sale.
This article is not intended, nor should it be construed or relied upon, as legal advice. The comments, recommendations, and analysis expressed in this article are those of the individual author, John Farrish, and are purely informational. Each aircraft owner’s situation is unique and requires its own thorough discussion and analysis. This article does not create an attorney-client relationship between you and the author or his law firm. If specific legal information is needed, each person should retain and consult an attorney with knowledge of the subject matter.
Interesting Times: What History Tells Us About Today's Aviation Finance Market
Mike Smith connects four supply shocks, rising Treasury yields, and the Artemis II mission to make a case that uncertainty is nothing new and that opportunity still lies ahead for business aviation.
We are living in interesting times. I was reminded of this while reading a recent article by Nick Timaros in The Wall Street Journal, in which he noted that our economy has navigated four supply shocks in five years. Those being the Covid supply chain issues, the war in Ukraine, tariffs, and now Iran.
If it seems like a lot, it’s ok, because it IS a lot. It’s sort of wild to see how well our economy has withstood these shocks. In fact, in our world of business aviation, we’ve lived in a great market with seemingly endless opportunities.
Yet, as things remain tenuous in the Middle East and energy prices continue to hit our pocketbooks and complicate the Federal Reserve’s rate path, it’s a reminder that times could change on a dime, and things can look quite scary on the horizon.
A great example is what’s happening in the US Treasury markets. As of March 2, 2026, the 10-year Treasury yield was 3.95%. As of May 20, that rate had increased to 4.65%, up 0.70% and touching levels not seen since January 2025. There are a few drivers at play, which we’ll unpack in future updates as interest rate clarity presents itself. That, plus the pain we feel every time we fill our gas tank, creates an uncomfortable feeling of uncertainty about where prices are going.
Yet in reality, uncertainty is more common than we think. In April, we celebrated the successful Artemis II mission, where four astronauts flew to the moon and back. This reminded me of the Apollo 8 mission in December 1968. If we go in the wayback machine to 1968, we’d enter a country and world that were probably even more confused and scared.
At the time, there was uncertainty around an escalating war in Vietnam, and our country was wounded from the assassination of two major leaders, Martin Luther King, Jr., and Robert F. Kennedy. Things were dark, and the feeling of hope was going away.
In an effort to demonstrate how far ahead of the Russians we were in our efforts to land on the Moon, Apollo 8’s mission was devised to launch a then-untested Saturn V rocket, fly three astronauts to the moon, and return safely to Earth. As mission planning went deeper, it was decided not only to fly to the moon, but also to slow down and orbit it.
And so, on December 21, 1968, Frank Borman, Jim Lovell, and Bill Anders launched to the moon. On December 24, 1968, while orbiting the moon, Bill Anders snapped what became one of the most iconic photos in human history. “Earthrise” (as seen below, credited to NASA) showed us as we truly were, for the first time in human history. This action completely changed our perspectives on who we were and the challenges we faced, and brought in a fresh mindset as we entered 1969.
Back to Artemis II. Here we are in 2026, facing our own challenges and concerns about what the future holds. This time, four astronauts launched to the Moon, Reid Wiseman, Victor Glover, Christina Koch, and Jeremy Hansen, to demonstrate what we are still able to accomplish as a people. This time, on April 6, 2026, a new image was taken.
We now, yet again, have the chance to see ourselves as we truly are and to see the opportunity on the horizon. Will there be a lot of ups and downs in the future? Yes. Are we uncertain as to where things end up in the Middle East, where energy prices, inflation, and interest rates go? Yes. Yet, we’ll find a way to navigate it.
There is a tremendous opportunity in the future.
Mega-Mergers in Aviation Insurance: What Policyholders Need to Know
Tom Hauge breaks down the two blockbuster mergers reshaping the aviation insurance brokerage industry and what they mean for your policy, your broker, and your coverage going forward.
The Mega-Mergers Reshaping Aviation Insurance
Within the last couple of years, there have been two blockbuster - what I call mega-mergers - in the aviation insurance brokerage industry. Gallagher acquired Assured Partners, and Acrisure Aerospace was formed via the merger of Falcon Insurance and several other smaller aviation brokerage houses here in the USA. What does this mean to the consumer? Generally speaking, it should be business as usual for most policyholders working with either of those two noted firms - but now with brokerage services under the umbrella of the parent companies (Gallagher and Acrisure). As with any merger, it takes time for each company's systems and personnel to efficiently integrate into one. I would think a policy holder could reasonably expect a hiccup or two along the way as staffing and “insync” communications are rolled out between the two merging companies.
What It Means for Policyholders
One thing I think that is beneficial to most policyholders will be a broader service base via other lines of insurance outside of aviation insurance. Products such as hangar insurance, workers’ compensation coverages, and errors and omissions insurance are likely to have more market options when a smaller brokerage merges with a larger brokerage, simply due to the larger brokerage house’s bandwidth. I think, as a policyholder, you should be looking to have the same focal broker (person), but with a much stronger team behind them from the servicing side of the business, and potentially market reach.
The Longer View
Time will obviously tell how mergers and acquisitions play out in the aviation insurance brokerage world, but one thing is for sure: the industry as a whole is definitely consolidating. I think short-term, things will likely be business as usual while the smaller brokerages continue to operate under their own brand and dedicated personnel who service your policy. I think longer-term efficiencies should kick in and processes automated/simplified between the brokerage house and the policyholder. Our industry is definitely in a period of transition with the mergers occurring over the last 12-18 months – it is important now more than ever that you have a good relationship with your aviation insurance broker, as the number of brokerage companies operating in the space consolidates more and more.
Befriending Complacency
Dustin Cordier warns that record BizAv deal volume and five straight years of Q1 growth may be the biggest threat to your business and lays out exactly how to use the good times to win when they're gone.
IADA just reported Q1 2026 closed deals at 333, up from 316 a year ago, extending a five-year streak of consecutive first-quarter increases. Transactions are closing in 150 days, compared to an industry average of 212. Demand outpaces supply, values hold firm, and Honeywell’s latest Global Business Aviation Outlook projects 8,500 new jet deliveries over the next decade at $283 billion, the highest number in the report’s 34-year history.
Let the good times roll is the prevalent attitude in the market, and complacency may be creeping in. Use it to your advantage.
Andy Grove built Intel into one of the most dominant companies on the planet and still operated like the whole thing could disappear tomorrow. His line was simple: “Success breeds complacency. Complacency breeds failure. Only the paranoid survive.” Jeff Bezos ran Amazon the same way, telling his people for two decades that it was still “Day 1” because the alternative was stasis, irrelevance, and death. Both of them understood that the time to gain ground on your competition is when they’ve stopped trying to gain ground on you.
The Preparation Window
Connor Lokar is the Senior Forecaster at ITR Economics, the oldest privately held economic research firm in the country. ITR carries a 94.7% long-term forecasting accuracy rate and has been projecting a Great Depression beginning in 2030 and lasting through 2036 since it published Prosperity in the Age of Decline back in 2014. Not a mild recession, but a full depression driven by converging demographic decline, rising healthcare costs, and compounding government debt. It’s time to prepare.
Pedal Faster and Build the Playbook
A strong market is the best time to generate the cash that lets you play offense when the cycle turns. Run your revenue engine harder right now. Don’t let your sales teams get lazy. Eliminate weak prospecting, sloppy qualification, and slow follow-up. The time to install real outbound discipline and push conversion rates is while volume gives you room to absorb mistakes. The margin you capture now is the war chest you’ll deploy when the cycle turns.
At the same time, build your downturn playbook while you can still think clearly. That means getting specific about which competitors are overleveraged and could become acquisition targets, which markets or service lines you’d expand into if the cost of entry dropped, who the best people in your space are, and what it would take to bring them over, and what equipment or fleet assets you’d want to pick up at a discount. That thinking is free right now, but nearly impossible to do well once decisions have to happen fast.
Warren Buffett has said it for decades: “Be fearful when others are greedy, and greedy when others are fearful.” That advice is useless unless you’ve done the work during the greedy years to be in a position to act during the fearful ones. The companies that come out of downturns in a dominant position get there because they did the strategic work during the good times and had the cash to execute when the window opened.
The next 36 months are a positioning window. You can use that time to build the war chest and the playbook that lets you move on acquisitions, talent, and market share when your competition is trying to figure out what happened. Or you can assume the game never changes.