““Ride-sharing, in the old days, was everyone hopping in the VW bus to see [the Grateful Dead’s] Jerry [Garcia]. Now it’s about getting a seat on a King Air 350i.” Source: New York Times ”
Stepping Up to Full Ownership
Preowned aircraft prices and financing costs remain at historically low levels, and business jet manufacturers continue to offer incentives to boost sales. That’s changing the access equation for private fliers, leading some to forgo charter, jet cards or fractional shares in favor of buying an aircraft outright.
“We’ve seen a lot of people stepping up to whole ownership,” said Jeff Agur, managing director of the Van Allen Group, a business aviation consultancy in McDonough, Ga. “Their focus tends to be on economics and quantitative elements–the cost and the hours flown. But there are many qualitative elements [to full ownership] that bring a lot of advantages over charter or fractional ownership.”
Could buying an airplane pay off for you? To answer that question, ask yourself some others:
Does it make economic sense? Once you exceed a certain number of annual flight hours–generally about 150 to 250–owning a jet can be more economical than any other private aviation option.
Of course, not all buyers have to justify ownership financially–some can afford an aircraft that serves as their private vehicle, economics be damned. “It’s convenience and lifestyle,” said David Wyndham, vice president and co-owner of business aviation consultancy Conklin & de Decker in Orleans, Mass. “They like that they can customize the aircraft and interior furnishings and can leave things on the airplane.”
Who will use the aircraft and where will they fly? If your itineraries and passenger counts change frequently, you may be best served by charter companies, which can supply the right aircraft for each mission. If various people will use the airplane, their demands for lift should be compatible–or at least accounted for. One business unit may require an aircraft for frequent one-day roundtrips while another may need to take multi-day journeys that render the airplane unavailable to others.
“A lot of companies that use business aviation have a multi-prong approach” to providing lift, said Mike Nichols, vice president for operations, education and economics at the National Business Aviation Association (NBAA). For example, a firm might employ charter when the company-owned aircraft is unavailable.
Do you make many one-way flights? It’s much less efficient to own an airplane when you don’t fly roundtrip, noted George Marburger, managing director of Jeteffect, a business jet sales brokerage in Jupiter, Fla. After one-way flights, either the aircraft has to return to its base and come back later to retrieve you or else the crew has to take an airliner home and back to pick you up or incur hotel and other travel costs while waiting for you. Meanwhile, your unused aircraft racks up parking and hangar fees. If you frequently remain at your destination for several days, the best solution might be a fractional or jet-card provider, since it can offer one-way rates.
Do you need to fly on short notice? If you do, ownership might be the best solution. Charter operators can respond relatively quickly but can’t guarantee access; and while jet cards and fractional ownership do mean guaranteed access, you typically have to give 10 or more hours’ notice to fly.
Do you want total control? As an owner, you make all the decisions about your aircraft, from selection and training of the crew to operational policies and maintenance procedures. This can be a big plus–or a big minus if you don’t want the responsibility. Of course, you could turn management chores over to a flight department or an outside firm, but as the owner, you’d still have to oversee its work.
Can you afford an airplane? Keep in mind that the purchase price is just part of the cost of ownership. “There are a lot of front-end costs, legal and brokerage fees, inspection fees, parts and equipment, training, a lot of costs to get the aircraft up and running,” noted William Quinn, chairman and founder of Aircraft Management Systems (AMS), a business and commercial aviation consultancy in Portsmouth, N.H. “Not everybody understands that. It’s not like buying a car.”
If you can make a case for owning a business jet, the next step is to choose the right one. Many shoppers buy more airplane than they need, which results in unnecessary expense and underutilization.
“The 100 percent solution airplane is often the largest and most expensive,” noted Wyndham. You’re better off buying an aircraft that meets your needs for most of your flights, and using other options–such as charter or airlines–for the others. In other words, if the bulk of your flights are domestic short hops, don’t buy a large-cabin aircraft for the occasional trip you make overseas.
But buying too small an aircraft would also be a mistake. A limited-range, modest-sized jet won’t do you much good if you need to make frequent long trips or carry more than a few passengers.
If you plan to charter out your aircraft when you’re not using it, keep that in mind when you shop. For example, you might opt to buy a later model in order to attract more charter customers.
Consultants can analyze your travel patterns, evaluating frequency of flights, city pairs flown between, number of passengers typically onboard and numerous other factors. “Do you want to feed people? Do you need a flight attendant?” asked Quinn of AMS, which uses a 20-page questionnaire to evaluate travel, schedules, operational necessities and personal preferences, and determine suitable aircraft types for a prospective owner’s needs.
Those needs can be met by either a new or previously owned aircraft. Today’s preowned market has a surfeit of high-quality, late-model jets with state-of-the-art avionics and cabins, and as noted earlier, prices and financing costs are at historic lows. Alternatively, a new jet, while more expensive, can be outfitted to your exact specifications and will come with a manufacturer’s warranty, eliminating concerns about unexpected maintenance costs. These warranties can be especially important in countries where third-party support is scarce or nonexistent. And manufacturers can sweeten deals with enhancements like cabin upgrades, increased crew training and expanded warranty coverage, adding more value to the nouveau route.
Consult an attorney or accountant with experience in aviation law to ensure that you take advantage of federal and state tax breaks and comply with all Federal Aviation Regulations. According to the NBAA, numerous companies have placed their aircraft into an LLC to limit their liability. But the FAA looks upon this arrangement as an illegal charter operation, exposing the jet owner to enforcement action and significant fines.
You will also need to consider aircraft management issues. Will you create your own flight department or turn management chores over to a third party? The NBAA provides information on its website that can help you answer this question (www.nbaa.org/admin).
As noted earlier, you might want to charter out your aircraft. A business jet can provide at least 800 hours of flight time per year, far more than most owners use. You may be able to place your aircraft on the Part 135 charter certificate of a local charter/management company and generate revenue that can help offset operating costs.
On the other hand, the more accessible the aircraft is to the charter market, the less it’s available to you. And don’t expect charter to give you a free ride. “If you cannot afford to own without charter revenue, do not buy the aircraft,” said Nichols. “No matter what any aircraft management company will tell you about minimum charter revenue, nobody knows what it will be.”
A wholly owned aircraft rarely provides all the lift that business jet users need. You may decide to also carry a jet card, employ charter and occasionally even hop on an airliner. But if you’re a frequent flier, ownership can be not only an affordable solution but a great one. And if buying an airplane makes sense for you, there’s never been a better time to take the plunge.
James Wynbrandt welcomes comments and suggestions at firstname.lastname@example.org.