Letter of Intent Template for Buying a Flight School

Parties and Transaction Overview

Identifies the buyer, seller, and the legal entity through which the flight school operates. Specifies whether the transaction is structured as an asset purchase or equity purchase, which has significant implications for FAA certificate continuity, aircraft lien clearance, and assumption of pre-paid student training liabilities.

💡 Asset purchase structures are strongly preferred by most flight school buyers because they allow the buyer to step up the tax basis of aircraft and equipment and avoid assuming unknown historical liabilities. However, sellers often prefer equity sales for simplicity and capital gains treatment. If the school operates under a Part 141 certificate, the buyer must understand that the certificate is issued to the entity or individual and cannot be legally transferred — this is a critical reason many deals are structured with a seller transition period or a concurrent new certificate application. Clarify early whether the seller's certificate will remain active during transition or whether the buyer intends to operate under Part 61 while pursuing their own Part 141 approval.

Purchase Price and Consideration

States the proposed total purchase price, how it is allocated across tangible assets such as aircraft and equipment versus intangible assets such as goodwill and the FAA certificate, and the structure of consideration including cash at closing, seller financing, and any earnout component tied to post-closing performance.

💡 Flight school purchase price allocation is frequently contentious because sellers want maximum value attributed to goodwill (capital gains treatment) while buyers prefer allocation to depreciable hard assets like aircraft (bonus depreciation eligibility). Aircraft values should be validated against published aircraft valuation guides and condition-adjusted based on engine time since major overhaul (SMOH), avionics status, and any airworthiness directives (ADs) due. Always negotiate a dollar-for-dollar reduction in purchase price for any pre-paid student training balances the buyer must honor post-closing — this liability is frequently $50,000–$200,000 at active flight schools and is often overlooked in initial offers. If an earnout is proposed, tie milestones to student enrollment counts or flight hours flown rather than revenue, which is easier to verify and less susceptible to manipulation.

Due Diligence Period and Access

Defines the length of the due diligence period, the categories of records and access the buyer requires, and the seller's obligation to cooperate. For flight schools, due diligence must cover FAA records, aircraft maintenance logs, airport lease documents, student enrollment contracts, and CFI employment files.

💡 Forty-five days is the minimum recommended due diligence period for a flight school acquisition — request sixty days if the fleet has more than five aircraft or if the school operates under Part 141, which requires review of the approved training course outline (TCO) and inspection of the school's student records system. The most important due diligence item that buyers overlook is a thorough review of each aircraft's maintenance history, not just whether it has a current annual inspection. Engine time since major overhaul (SMOH) is critical — a Cessna 172 engine with 1,800 hours on a 2,000-hour TBO is effectively a capital liability that should be priced into the deal or addressed through a maintenance reserve escrow. Hire an independent A&P mechanic or aviation consultant to conduct pre-purchase inspections on each aircraft before removing the due diligence contingency.

FAA Certificate and Regulatory Continuity

Addresses the plan for maintaining FAA operating authority during and after the ownership transition, including whether operations will continue under the seller's Part 141 certificate, how the buyer will obtain their own certifications, and the seller's obligation to cooperate with FAA notifications and the buyer's application process.

💡 This section is non-negotiable in substance — it must be addressed in every flight school LOI, even if the details are worked out later in the definitive agreement. Buyers who intend to accept veterans benefits (GI Bill) or offer structured airline pathway programs must maintain Part 141 status, making the certificate transition plan operationally critical. The FSDO approval process for a new Part 141 certificate typically takes 90–180 days, which is why the transition period in the LOI should be at least six months. Some buyers choose to hire the seller's designated Chief Flight Instructor (DCFI) as an employee post-closing to maintain continuity with the FSDO relationship and avoid restarting the approval process from scratch. Address this staffing element explicitly in the LOI.

Aircraft Fleet Transfer and Airworthiness Conditions

Specifies which aircraft are included in the sale, the condition they must be in at closing, the process for pre-purchase inspections, how lienholders will be addressed, and any adjustments to purchase price based on aircraft condition findings during due diligence.

💡 Never accept a flight school LOI that does not specify the exact aircraft by N-number. Sellers sometimes substitute aircraft between LOI and closing, especially if a plane is grounded for maintenance. Require that any aircraft not meeting airworthiness standards at closing either be remediated at seller's expense or result in a dollar-for-dollar purchase price reduction — do not accept credits for future maintenance. Leaseback aircraft are a common complication: many small flight schools operate one or more aircraft they do not own, leasing them from private owners in exchange for revenue sharing. These leaseback agreements must be reviewed carefully — if key aircraft in the fleet are leaseback aircraft, the buyer needs to assess whether those owners will continue the arrangement post-sale or pull their aircraft, which would materially reduce fleet capacity and revenue. Negotiate a representation from the seller that all leaseback owners have been notified of the pending sale and have consented to assignment of their agreements.

CFI Retention and Key Employee Arrangements

Identifies key CFIs whose continued employment is material to the value of the business, establishes the seller's obligations to facilitate introductions and retention during due diligence, and outlines any employment or non-compete agreements the buyer intends to put in place at closing.

💡 CFI retention is the single biggest operational risk in a flight school acquisition and it must be addressed in the LOI, not left to the definitive agreement. The structural reality of the flight instructor labor market — where CFIs accumulate hours specifically to qualify for airline careers — means that any uncertainty created by an ownership transition is an accelerant for departures. Buyers should plan to meet key CFIs early in the due diligence period, not just before closing. Consider structuring retention bonuses for key CFIs funded from the deal proceeds, payable six months post-closing, to reduce departure risk during the transition window. Also address the seller's own role: if the seller is an active CFI who will leave the business at closing, establish a clear transition plan for redistributing their students to remaining instructors.

Airport Lease Assignment

Addresses the critical requirement of obtaining the airport authority's consent to assign the existing hangar, office, and ramp lease agreements to the buyer, including any conditions or fees the airport authority may impose, and establishes what happens to the deal if lease assignment is denied.

💡 Airport lease assignment is routinely underestimated as a deal risk and has killed multiple flight school transactions. Municipal airport authorities have broad discretion over who they allow to operate on airport property, and some FSDOs require advance coordination. Begin the lease assignment process immediately upon LOI execution — do not wait until closing is approaching. Review the existing lease for any assignment restrictions, right of first refusal provisions held by the airport, or change-of-control triggers that require landlord consent. If the lease has fewer than five years remaining with no renewal options, this is a material business risk that should be reflected in the purchase price. A flight school without a stable, long-term lease has no location certainty, which destroys enterprise value and makes SBA financing very difficult to obtain.

Exclusivity and No-Shop Period

Establishes a period during which the seller agrees not to solicit or entertain other offers for the business, giving the buyer the time needed to complete due diligence and arrange financing without competitive risk.

💡 Sixty days of exclusivity is reasonable for a flight school acquisition given the complexity of aircraft inspections, FAA certificate review, airport lease assignment, and SBA financing timelines. Sellers sometimes push back on exclusivity periods longer than thirty days, especially if they have invested significant time in marketing the business. A reasonable compromise is a forty-five-day initial exclusivity period with a fifteen-day extension available at the buyer's election if due diligence is ongoing. Some sellers request a small, refundable good faith deposit — typically $10,000–$25,000 — in exchange for granting exclusivity. This is reasonable and signals serious buyer intent. Ensure the deposit is held in escrow and is fully refundable if the buyer terminates the LOI for any reason during the due diligence period.

Financing Contingency

States the buyer's intent to finance the acquisition through SBA 7(a) lending and makes the buyer's obligations contingent on obtaining a commitment letter from an SBA-approved lender within a specified timeframe.

💡 Flight schools are SBA 7(a) eligible as operating businesses, and most lower middle market acquisitions in this space are financed using SBA lending given the capital intensity of aircraft assets. SBA lenders will require independent appraisals of each aircraft in the fleet — budget $500–$1,500 per aircraft for certified aviation appraisals. Lenders are also sensitive to the airport lease term, typically requiring at least as many years remaining on the lease as the loan term. A seller carry-back note is often required by SBA lenders as a confidence signal — typically 5–10% of the purchase price, subordinated to the SBA note and on standby for 24 months. Negotiate the seller carry terms in the LOI so there are no surprises in the definitive agreement. Some SBA lenders specialize in aviation businesses and understand aircraft as collateral — working with a lender who has prior flight school deal experience will materially accelerate underwriting.

Seller Transition and Non-Compete

Defines the seller's post-closing obligations to support a smooth operational transition, including a training and handover period, continued availability to students and staff, and geographic and temporal restrictions on competing in the flight training market.

💡 The geographic scope of a flight school non-compete must be calibrated to the actual competitive market, which is typically defined by driving distance to the nearest alternative airport. A fifty-mile radius is appropriate in most markets, but in dense urban areas with multiple airports you may need to define the non-compete by specific airport identifiers rather than mileage. Non-competes longer than three years may face enforceability challenges in some states — consult with local legal counsel. If the seller is an active CFI and the non-compete would effectively prevent them from earning a living in their profession, courts are increasingly likely to limit enforcement. Consider structuring the non-compete as 'no competing flight school ownership' rather than 'no flight instruction activity' to improve enforceability while protecting the business interest most at risk.