Whether the transaction involves acquiring an aircraft for commercial operations, purchasing a private jet for personal or business use, or leasing an aircraft, the sums of money involved are often extremely high. Additionally, one or more parties, or the country of registration or the location of the aircraft manufacturer, may be situated in a jurisdiction with less regulatory oversight or less transparent corporate ownership structures.
All of these factors can lead to a shortage of trust or a requirement for increased due diligence and assurance when it comes to the transaction.
These trust issues can arise at every stage of an aircraft's life cycle—from its initial manufacture and commissioning to its sale, purchase, or lease operations. Throughout maintenance, refurbishment, and regulatory inspections, various parties engage in high-stakes, high-value transactions that can benefit from the support of an independent escrow agent.
In many jurisdictions and with many manufacturers, commissioning owners will require a refund guarantee in return for stage payments during the build process. Often, buyers will be asked to pay at least 40% of the cost before the aircraft is delivered, with the balance due upon completion and delivery.
Conversely, sometimes the aircraft manufacturer will require a guarantee from the purchaser—this might be if the buyer is a special purpose vehicle (SPV) incorporated specifically to finance the aircraft (possibly with few other assets), or if the buyer is from a jurisdiction where the enforcement of an arbitration award or court order might be difficult.
During a transfer of ownership, a seller will usually expect the purchaser to pay a deposit to demonstrate their intention to complete the acquisition and to cover any of the seller's fees in the event the buyer withdraws.
Similarly, a buyer may require a seller to provide certain post-completion documents, certificates, results from inspections or maintenance records, releases of security interests, or other documents that cannot, for whatever reason, be provided at or before completion. The buyer may wish to withhold a portion of the purchase price pending their delivery.
Before an owner agrees to take an aircraft off the leasing market for a particular period, they may insist on the lessee paying a deposit to secure that period, with the balance of the lease payment to be made at or during the time of the lease. During the course of a lease, the owner may require a further deposit to protect them in the case of damage caused by the lessee.
Conversely, a lessee may feel uncomfortable about paying over a deposit to an owner with an opaque ownership structure, a poor reputation, or who is incorporated in a jurisdiction where the enforcement of an arbitral award or court order might prove troublesome.
Where an aircraft lease is being facilitated by a broker or operator, the lessee may be requested to provide a prepayment to allow the aircraft to be prepared and provisioned for their use—often calculated as a percentage of the lease fee. This amount is generally held by the aircraft manager or broker and accounted for during and after the lease.
The lessee, for their part, might be reluctant to pay sums over to a broker who is less established, does not have segregation/safeguarding arrangements in place, or is not otherwise authorised to carry out payment services on their behalf.
Where a broker or operator wishes to reward loyalty in its clients by offering either fixed-price or discounted flight hours in return for upfront purchase of those hours, a would-be jet card purchaser might be concerned that the broker or operator may not be sufficiently creditworthy to be able to provide all of the promised flight hours; may not have appropriate arrangements in place to segregate or safeguard the funds; or may not have regulatory approval to carry out payment transactions on their behalf.
Escrow agents help to bridge these trust gaps by offering a reliable, independent, objective third party to handle the exchange of money and documents in accordance with the parties' wishes and the terms of the escrow agreement, without having to rely solely on trust to ensure the security and success of the transaction.
We offer escrow solutions to address all of the above trust issues and would be delighted to provide you with a quote for your specific requirements. You can also check out our detailed service pages listed above.
Some of the trust issues outlined above can be addressed through the purchase of a contract of insurance or a bond. These typically involve the payment of a fee (a "premium"), and in the event of default, the beneficiary under the policy must make a claim from the insurer or bondsman for their loss.
This approach comes with four primary drawbacks:
Cash-backed escrow, by contrast, addresses all of these issues. It is generally cheaper to administer than the cost of a premium; in most cases, there is no credit risk because the funds are segregated and safeguarded by the escrow agent; payouts generally happen within a few days; and there will not be any circumstances in which a payout is excluded—the terms of the escrow agreement will make it very clear what circumstances need to exist to trigger a payment, rather than necessarily the reasons behind those circumstances.
dospay is a trading name of DOS & Co. Ltd, a company registered in England and Wales with company number 08294966.
DOS & Co. Ltd. is registered with the Financial Conduct Authority under the Payment Services Regulations 2017 (FRN: 833374) for the provision of payment services.
All of our escrow and third-party managed accounts are segregated and safeguarded at the Bank of England.
