How to Tell if Aircraft Ownership is Right

In the months following the initial Covid-19 lockdown, a number of people ‘discovered’ private air transportation. This initially materialized through an uptick in new charter customers, but, as we entered the latter part of 2020, it led to a growing number of first-time buyers of business aircraft.

This first-time buyer surge has led to some warnings about buyer’s remorse, and – anecdotally – some of the enthusiastic buyers of 2020 are indeed questioning their purchases. Some have already placed their jets for sale on the pre-owned market.

Is Whole Aircraft Ownership Right for You?

The first thing a prospective new aircraft owner needs to understand is the full nature of the operating costs. According to several brokers, the main reason a first-time buyer suffers remorse after the purchase is due to the economics of the aircraft.

The buyer may have received incomplete guidance, or fail to understand the costs beyond the purchase price. The buyer may not have understood that supplemental charter revenue cannot eliminate much of the cost of owning and operating an aircraft. It comes down to poorly understood economics, and poorly communicated information.

The purchase price of a business aircraft is just the beginning. If you’re planning to purchase a pre-owned aircraft, there are future maintenance items that must be budgeted. The new owner may elect to upgrade the airborne Wi-Fi, refresh the paint, or improve the interior.

There are variable operating costs, such as fuel and maintenance to consider, too. And then, there are the fixed costs (such as management fees, hangar rental, insurance, training, and, yes, fixed maintenance).

To get the full picture of the economics, a life cycle cost analysis should be done, accounting for the initial acquisition, the fixed and variable costs, and an estimate of the future value of the aircraft. 

Prospective buyers must know what the ‘all-in’ costs of owning a business aircraft are before any charter revenue is raised to offset those costs, and before any taxes. If you need the tax deduction, or the charter revenue to make the aircraft affordable, you would be well advised to either look to traditional charter, via a jet card, or to consider fractional or shared ownership as opposed to whole aircraft ownership.

Charter Offsetting the Costs

Chartering your aircraft when you are not using it can be a good way to offset the operating costs. As a rough guideline, if you’re flying 150 annual hours or fewer annually, additional charter revenue can help offset the costs of ownership – but it won’t absorb all of the costs.

Last summer I talked with someone who had a home on the US West Coast, and a business and second home on the East Coast. He had chartered for many years, but wanted to explore aircraft ownership.

In addition to discussing the full costs of operating an aircraft suitable for his travel needs, I also showed him that the potential charter revenues, starting at about 250 charter hours per year, could make the costs to operate extremely competitive with ad hoc charter or the typical jet card rate.

Other Benefits of Ownership

Affordability may get you to consider whole aircraft ownership, but what are some reasons to own?

Freedom: With whole aircraft ownership your company has the freedom to select the best aircraft to satisfy its needs. You are not restricted to the offerings of the local commercial operator or other third-party providers.

Control: In the US, Federal Aviation Regulations (FARs) allow the most flexibility and opportunity for control of not-for-hire operations flown on behalf of the aircraft owner. The sole owner of a business aircraft has greater influence over operations than either a charter customer or a fractional owner.

Factors influencing safety, and also security, are within the operator’s control, and responsibility. You can hire the crew members that you prefer; your aircraft is based at an appropriate airport convenient to your location; it is ready when you need it to be; and it will wait for you to return when your business meeting is running late.

Security and Cleanliness: Your aircraft is only used by the people you authorize to fly on it. Thus, you have the highest levels of privacy and security. The aircraft is cleaned and can be disinfected to the highest standards that you require.

Service Levels: Your aviation department personnel are your employees: Not only are you able to shape their training and manage their competence, you affect how they interface personally with passengers. Those employees get to know your requirements.

While fractional and charter providers strive for high service levels, they cannot exceed what your own employees can deliver.

In Summary

The responsibility of aircraft ownership can be both a plus and a minus. With the high degree of control comes an equally high level of responsibility.

While the FARs state that the pilot in command is the ultimate person responsible for the safe operation of your aircraft, you are responsible for the hiring and training of that pilot. You have liability for the actions of your employees, and this responsibility extends to the aircraft operation, too.

Whole aircraft ownership, when entered into with an understanding of the costs and responsibilities, can represent the ultimate in freedom, control and security in your air travel needs. Nothing else compares. You just need to do your homework to ensure it’s right for you…