What Do I Want the Seller to Fix see more
NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, shares what a buyer should negotiate that the seller fix before the purchase.
The pre-purchase inspection report will drive the negotiation. It will determine what must be fixed; what should be fixed; and what could be fixed later at some other point. What “must be fixed” are all airworthiness items and Airworthiness Directives. What “should be fixed” relates to operational integrity items. All else falls under “what could be fixed later.” Generally, the buyer wants the seller to cover the cost of all AD issues.
Of course, there are exceptions to consider. Let’s say the seller’s estimate to fix all the AD-related squawks is $100,000. Let’s say s/he knows of an A&P with whom they have a good relationship. The A&P says the work can be done for $80,000. In that case, it may be more attractive for that buyer to negotiate a price reduction of $100,000 instead of having the seller fix those items. The buyer could realize a 20% savings. But in this scenario, the logistics involved in obtaining a ferry permit and flying the aircraft to a mechanic’s base must also be factored in. If those additional costs approach the $20,000 the buyer hoped to save, it might be better to put the onus back on the seller.
“What should be fixed” can be considered those items that may have an operational or usage impact but don’t otherwise jeopardize the airworthiness of the aircraft. For example, a spot of corrosion the size of a baseball on the rudder should be fixed. But if the buyer’s intention is to repaint the aircraft anyway, it might be better to negotiate a price reduction than to make the seller eliminate the corrosion pre-sale.
An intermittent HSI or DGI are examples of “what could be fixed later.” If the buyer’s intention is to upgrade the panel post-acquisition, it’s better to lower the price accordingly and then take care of the failing device during the entire avionics upgrade.
Determining what the seller should fix is also influenced by the buyer’s general attitude toward an aircraft purchase. Some folks don’t want to deal with any aircraft issues. They just want the plane delivered squawk free. Others have a higher tolerance for addressing issues.
These are some of the guiding questions an AOPA Aviation Finance advisor might ask you to help assess your personal tolerance for handling pre-purchase inspection squawks: How important is it to you to have it fixed vs. receiving credit? How long can you stand to go without fixing the item? How urgent is it that you get it replaced or fixed? What kind of relationship do you have with a qualified mechanic? How much effort are you willing to expend in finding a qualified mechanic to save some money? How does this plane’s overall condition stack up against others in the marketplace? In other words, is there enough supply vs. demand in the marketplace to give you any negotiating leverage?
For example, we’ve seen a recent surge in the popularity of the Cessna 182. To buyers in that market, we would advise they come prepared with a flexible negotiation mindset. You can have a particular mindset, but if you have to compare your mindset to the realities of the market, you may have to adjust it. After all, there might be ten other potential buyers lined up behind you who are willing to deal with that leaky door seal post-purchase instead of demanding “it simply must be repaired before closing at seller’s expense.”
Our experience and advice apply as much to the seller as it does to the buyer. A recent client wanted to sell his Piper Warrior for a price he thought fair. We advised him that an aircraft like his that fits in the flight training usage profile would likely sell for better than what he imagined he could get. We recommended a higher asking price. He took our advice and received bids even above that amount.
Our advisors have deep knowledge of both the market and demand. AOPA Aviation Finance has an extensively researched database and can provide guidance on the relative market strengths and weaknesses of most aircraft, from the common to the esoteric.
This article was originally published by AOPA Finance on November 18, 2019.
The Aircraft Buyer’s Guide to Private Jet Financing see more
NAFA member, H. Lee Rohde, III, founder, President and CEO of Essex Aviation Group, Inc., shares tips on private jet financing.
Even for high-net-worth individuals, whether to purchase a private aircraft might rank as one of the most expensive — and, potentially, lifestyle-changing — decisions they’ll ever make. From upfront costs to the ongoing costs of maintenance, hangarage and direct operating costs, private aircraft ownership requires a significant capital investment but, for those who frequently fly for business or personal reasons, it provides unparalleled travel experiences.
The fact of the matter is that the comfort, convenience, luxury and freedom that private aviation offers would be compelling to just about anyone and considered well worth the cost by those who can afford it — so let’s talk about the options to best structure it through private jet financing.
Let’s Talk Costs
Before a buyer kickstarts their search for a private aviation lender, they’ll first want to thoroughly consider the costs of purchasing a private jet. Conservative estimates place the cost of a brand-new private jet between $7 million and $75 million, while the most expensive private aircraft in the world — those of commercial size but modified for private use — cost well above that range.
For those buyers hoping to minimize their capital investment in an aircraft, acquiring a pre-owned aircraft can offer many of the same benefits as a new model with a reduced capital cost. However, for the following new aircraft, current industry data included in the VREF Aircraft Value Reference Guide offers some perspective on pricing and just how expansive the private jet financing industry is.
Bombardier • Lear 75: $13.8m
• Challenger 650: $32.4m
• Global 5000: $50.4m
• Global 6000: $62.3m
• Global 7500: $72.8m
Cessna • Citation M2: $5m
• Citation CJ3+: $8.6m
• Citation CJ4: $9.6m
• Citation XLS+: $13.6m
• Citation Latitude: $17.3m
• Citation Sovereign 680+: $18.8m
Embraer • Phenom 100 EV: $4.5m
• Phenom 300: $9m
• Legacy 450: $16.6m
• Praetor 500: $17m
• Praetor 600: $21m
• Legacy 650E: $26m
• Lineage: $50m
Dassault • Falcon 2000S: $30m
• Falcon 2000LXS: $35.1m
• Falcon 900LX: $44.8m
• Falcon 7X: $53.8m
• Falcon 8X: $59.3m
Gulfstream • G500: $46.5m
• G600: $57.9m
• G650: $69.5m
Pilatus • PC-24: $9.5m
Choosing the Right Lender
The road to private aircraft ownership should begin with the decision to retain the services of an aviation consultant or a jet financing broker. It is the responsibility of an aviation consultant to understand the buyer’s needs and situation to direct them to an appropriate tax attorney and, ultimately viable lenders and financing structures. Once the consultant has completed these steps, the process of researching lenders, requesting and reviewing lender proposals and working with the client or the client’s team is fairly straightforward. A consultant’s primary contribution is to apply their knowledge and considerable network of industry connections to facilitate the financing solution that best serves the client’s unique needs and requirements.
High-net-worth individuals often partner with aviation consultants and finance brokers through their private wealth advisors or in-house finance team in order to identify the best options available. Clients in different segments of the market who might not have the same level of in-house financing staff to support their needs can also benefit from assembling a team of third-party experts within the private aviation industry. Whether they’re working with an in-house finance team, a third-party private aviation consultant or an aircraft finance broker to evaluate lenders, buyers have three private jet financing options from which to choose:
- Traditional Banks: For most buyers, utilizing their current bank can be the most efficient choice for jet financing due to their existing relationship. The bank already has a complete portfolio of the buyer’s finances, which can make the loan process that much more efficient.
- Banks With Aircraft Finance Groups: In the event that a buyer’s current bank cannot provide jet financing, it may still be able to use its industry connections to put the buyer in touch with a different bank that has a dedicated aircraft finance group. These institutions specifically have a vested interest in private jet financing and already manage a large aircraft portfolio and would therefore be more inclined to offer private jet financing to a buyer without an existing relationship.
- Private Lending Groups: This type of lender is able to provide private jet financing by raising capital within equity markets to support their portfolio growth. Though private aircraft lenders are less common than their traditional banking counterparts, they are a viable option for buyers who, for whatever reason, wish to avoid securing a loan with their primary bank or a traditional bank. Buyers who choose to pursue this private jet financing option are still advised to work with a private aviation consultant and tax attorney to confirm the lender’s position in the market and whether it’s a suitable option for the buyer in question.
Criteria for Private Jet Financing Evaluation
It is, understandably, in a lender’s best interest to be highly discerning about who it grants private jet financing to and how much it lends. Therefore, similar to home mortgage lenders, private aircraft lenders have strict criteria for evaluating potential borrowers, as well as additional portfolio parameters based on the age and models of aircraft they’re able to finance.
For buyers who want a better understanding of this criteria, look no further than the “5 Cs” of credit: character, capital, capacity, collateral and conditions.
- Character refers to the borrower’s reputation and the stability of their credit.
- Capital refers to the borrower’s net worth and the types of capital assets they currently own.
- Capacity refers to the borrower’s ability to pay on the loan, as well as their current debt-to-income ratio.
- Collateral refers to the assets that the borrower is able to pledge to secure the loan.
- And, finally, conditions refer to how the borrower intends to use the aircraft, as well as external factors such as pending legislation that could affect the loan and the current state of the economy.
Buyers should be aware that most lenders have specific loan covenants, and that their lender of choice might require periodic reviews of the aircraft’s market value and also organize third-party inspections to determine whether the aircraft is being kept in the proper condition.
Alternatives to Private Jet Ownership
For individuals who want to replicate the experience of owning their own aircraft without having to worry about securing private jet financing, there are multiple alternatives to outright ownership:
- Private Jet Lease: The individual leases an aircraft from the owner for a specified period of time and assumes full operational control — similar to direct ownership — without transferring the aircraft title. Private jet leasing offers similar operational benefits, which can make it a viable option for buyers who are not able to take advantage of the tax benefits that direct ownership can provide. In some cases, however, private jet leasing agreements preclude the lessee from using the aircraft for third-party charter (FAR Part 135).
- Fractional Aircraft Ownership: The individual invests in partial ownership by purchasing a share of a specific aircraft type and agrees to an annual amount of flight hours depending on their specific travel needs. Fractional ownership often comes with significant upfront acquisition and monthly operational costs, but fractional owners save on deadhead costs.
- Private Jet Membership: The individual agrees to a fixed cost per hour at the start of the contract and is billed after each flight. Members are also expected to pay monthly management or annual membership fees.
- Jet Card Program: The individual either agrees to a predetermined number of hours on a specific aircraft type or size category (dedicated service) or funds an established travel account and chooses the aircraft category on a trip-by-trip basis, after which the cost of trip is calculated and deducted from the account’s balance (debit card service).
- Private Jet Charter: The individual charters — that is, rents — an aircraft for each specific trip they wish to take. Private jet chartering can be well-suited for individuals with relatively low annual travel requirements, but who fly to areas that cannot be easily reached by scheduled airline service.
A Final Note
Buyers interested in purchasing a private jet should assemble a team of professionals to assist them at every step of the process. From sorting out aircraft-specific tax considerationsto hiring an aircraft management company to handle day-to-day operations and support once the purchase is complete, buyers will want to have qualified and capable industry experts on their side — starting with a private aviation consultant.
At Essex Aviation, we have a combined 70 years of aviation experience; in that time, we’ve had the opportunity to learn the ins and outs of the private aviation industry, as well as develop strong relationships with service providers and other vendors. We’re able to leverage this knowledge and our vast network of industry connections in order to ensure that our clients’ unique private aviation requirements are met with unbiased guidance and that they have a quality client experience, from start to finish.
This article was originally published by Essex Aviation Group, Inc.
Why 'Pre-Owned' Private Jets Can Be Surprisingly New see more
NAFA member, Chad Anderson, President of Jetcraft, discusses why you should buy a pre-owned aircraft and where to find them.
Pre-owned, vintage, used…from sports cars to designer clothes and beyond, these words don’t usually indicate ‘new’.
But, according to Jetcraft, the world’s leading aircraft sales specialist, pre-owned private jets don’t have to be ‘old’ – in fact, the savviest buyers are now picking up these airplanes after less than a year of use.
So how do buyers find an almost-new aircraft? And what’s bringing these jets to the market in the first place? We asked Chad Anderson, president of Jetcraft.
Why should I buy a pre-owned jet?
Pre-owned aircraft allow buyers to find the long-range or large-cabin model they need at the best possible price. Private jets are valuable but expensive assets, so it’s important you invest in an aircraft that suits your needs and will retain value. With the sophistication of upgrades and renovations available today, pre-owned planes are every bit as attractive as new ones.
Why are these almost-new aircraft available?
As many businesses ‘go global’, and more and more private jet owners fly greater distances for work or leisure, demand is growing for spacious, fast jets that can span half the world without stopping. The top jet manufacturers are responding to this need by releasing new large-cabin aircraft. This influx is driving some buyers to sell their airplane after only one or two years of ownership, so they can upgrade to an even newer model.
Indeed, this summer Jetcraft sold the world’s first pre-owned Gulfstream G500 – an aircraft that only came onto the market in 2018. The speed of this sale shows how demand for almost-new long-range models is at an unprecedented high.
How do I find a pre-owned jet to buy?
There’s a lot of competition for young, pre-owned jets. In fact, our recent market forecast anticipates four times more pre-owned transactions a year than new deliveries by 2023 and we’re seeing many aircraft that are correctly priced, marketed and positioned are sold before they even hit the market. If you’re planning to purchase a pre-owned aircraft, it’s important to work with a consultant you trust and who has a pulse on the market and the latest available inventory.
Which jet should I choose?
Today, most buyers are looking for an aircraft that can fly direct from London to cities such as Seoul and Singapore. If you’re regularly travelling long distances, you want a fast jet that allows you to be in the office or at home with your family as much as possible. Choosing between types at the very top of the market, such as the Gulfstream G500 and G600, the Bombardier Global 7500 and the Dassault Falcon 7X and 8X, can be difficult. Speaking with an experienced professional is invaluable in finding an aircraft that perfectly fits your needs.
This article was originally published in Luxury Lifestyle Magazine on September 24, 2019.
Elevate Jet Joins National Aircraft Finance Association see more
FOR IMMEDIATE RELEASE
EDGEWATER, Md. – October 18, 2019 – National Aircraft Finance Association (NAFA) is pleased to announce that Elevate Jet recently joined its professional network of aviation lenders.
“NAFA members form a network of aviation finance services who diligently and competently operate with integrity and objectivity throughout the world. We’re excited to welcome Elevate Jet to our growing organization as we head to our 50th anniversary,” said Jim Blessing, President of NAFA.
Elevate Jet, a subsidiary of Elevate Holdings, is a trusted and professional single-source set of solutions for private jet owners and flyers, offering aircraft management, corporate shuttle, consultancy, and advisory services. The company has been serving private aviation with professional services since 2003, advising private flyers concerning their aviation interests.
Elevate is a premier aircraft management company founded on the growing need for boutique style aircraft management. The company is designed to align with their clients’ mission profiles, providing highly customized services to private aircraft owners and flyers. Their experienced aviation team has a wealth of industry knowledge and intelligence that ensures exemplary levels of bespoke service in aircraft management and aircraft consultancy.
Much like NAFA, Elevate Jet places great importance on fostering knowledge, experience and trustworthiness throughout the aviation industry, providing the highest levels of professionalism in aviation asset management advisory.
“Elevate Jet takes our fiscal responsibilities to our managed aircraft owners seriously, as well as to the clients that retain us to provide aviation advisory services,” said Patti Ann Sullivan, Executive Vice President – Aircraft Management. “The NAFA forums for discussion of issues impacting the aviation and finance industry, exploration of best practices and review of risk mitigation strategies, along with continuous education benefit the industry and the aircraft owners and flyers that we are fortunate to serve. It is for these reasons Elevate Jet is pleased to be a member of the esteemed NAFA association."
For more information about Elevate Jet, visit nafa.aero/companies/elevate-jet-llc.
The National Aircraft Finance Association (NAFA) is a non-profit corporation dedicated to promoting the general welfare of individuals and organizations providing aircraft financing and loans secured by aircraft; to improving the industry's service to the public; and to providing our members with a forum for education and the sharing of information and knowledge to encourage the financing, leasing and insuring of general aviation aircraft. For more information about NAFA, visit NAFA.aero.
5 Ways Aircraft Management Saves a Private Jet Owner Money see more
NAFA member Clay Lacy Aviation, discusses ways aircraft management can save you money.
Through pooled purchasing and thoughtful decision making, an aircraft management company can save a private jet owner 25-30% in annual operating expenses over a single aircraft flight department; while also improving safety and service. Here is an overview of the five areas that aircraft owners will save when choosing to partner with a reputable aircraft management company.
Fuel is the largest variable cost that private jet owners incur; accounting for about 38% of variable expenses and 19% of annual operating expenses. A management company reduces this cost through large fleet fuel purchase programs. “The more diversified a private jet operator is, the more savings that can be passed along to an aircraft owner directly,” says Daniel Murphy, Senior Fleet Analyst at Clay Lacy Aviation. “We can pass along savings to aircraft owners by driving down purchase costs. Aircraft owners essentially save by leveraging our large fleet’s buying power,” Daniel continues.
Crew Training, Retention, & Utilization
Pilot and cabin attendant training is a necessary and recurring component to owning and operating a private jet. Pilots are required to attend training, multiple times throughout a year to remain proficient on aircraft systems and emergency procedures. “We can achieve discounts on crew training in the range of thousands of dollars for each training event,” estimates Daniel. “Over time, these savings add up and make a difference for our clients,” Daniel continues.
Crew retention is also an area that a management company helps aircraft owner’s save. Clay Lacy carefully vets pilots and cabin attendants; meticulously choosing only the best and most well suited to be part of an aircraft owner’s in-flight team.
In Clay Lacy’s fifty-year history, pilots often stay ten, twenty, and even thirty years with the company. This incredible level of retention offers a consistency, efficiency, and savings often unachievable with other private jet management companies.
When management companies have multiple air-frames of the same type within their fleet, lateral use of flight crews is also possible. For example, if a private jet management company operates three Gulfstream G550s, there is the option to rotate the flight crews between the aircraft if necessary. This helps to eliminate the need for outside contract pilots in the instances when full-time crew members are unavailable.
Considering aircraft insurance, both the opportunity for cost-savings and ‘lifestyle savings’ should be noted. When working with a large aircraft management company, aircraft owners will see significant savings being incurred on both a quantitative and qualitative basis. “The real value in a quality insurance program lies in replacement aircraft programs and other benefits,” says Daniel.
“Clay Lacy’s policies include an aircraft replacement option that allows for individuals to utilize other jets in the fleet when their aircraft is down for maintenance or experience another issue or service update,” continues Daniel. When an aircraft management company maintains a large fleet, the temporary replacement option provides clients with peace of mind and ultimate convenience. “With over one-hundred aircraft in Clay Lacy’s managed fleet, and over 50 percent large-cabin jets, it’s advantageous for aircraft owners’ to join our insurance programs,” says Daniel.
In-flight WiFi is a necessary amenity in this era of private jet travel. However, there is a significant cost to installing the equipment and sizable ongoing monthly service fees. Aircraft management companies are able to develop ongoing relationships with companies like Honeywell, Gogo Inflight or Smart Sky, and in turn, leverage the multiple jet subscription discounts to help reduce costs for each individual aircraft owner. “Once again, we see savings for a private jet owner based on an ability to individually serve one client while maximizing the benefits that a large fleet yields,” reiterates Daniel. In addition to WiFi, there are five to ten other subscription based services that aircraft owners save on, including items like aeronautical charts, flight planning services, satellite weather, parts and avionics warranties, and much more.
One of the most significant expenses that occur regularly are those related to a flight. Examples of trip expenses include ground transportation, catering, landing fees, aircraft parking, international permits, FBO services, crew hotels and crew transportation. “Aircraft management companies maintain relationships between various vendors and can achieve discounts that a one or two aircraft flight department cannot achieve,” says Daniel.
The Individualized Approach To Savings
In addition to the five areas mentioned above, an aircraft management company can significantly lower maintenance costs while continuing to maximize an owner’s use of the aircraft. “An aircraft management company that offers in-house maintenance will be able to save a jet owner over the long-term by decreasing the number of cycles imposed on an aircraft and increasing efficiency,” says Daniel.
Daniel’s role at Clay Lacy looks at both qualitative and quantitative data regarding each aircraft in the managed fleet. Subsequently, the information gathered is used to choose the best course of action for projected long-term savings, as well as operational goal achievement. “Some owner’s raise concerns over being part of a large managed fleet but at Clay Lacy, we can achieve both the cost-savings benefits of a large organization with the familiarity and comfort exhibited by a small management firm,” says Joe Barber, Director of Aircraft Management at Clay Lacy Aviation. “This ability to translate what seems to be two opposing entities is possible through the system of support we employ for each aircraft. Every aircraft owner has a professional and specialized team, available at any time; day or night. “We have the resources and relationships available to give our owner’s the ownership experience that they deserve and desire.”
Would you like to know how you can save more money as a private jet owner? Contact an aircraft manager today!
How to Know When It’s Time for a Private Jet Upgrade see more
NAFA member, Jason Zilberbrand, President of VREF Aircraft Value Reference & Appraisal Services, shares what to look for when determining if you are ready for a jet upgrade.
If you’ve got a private jet, congrats. You’re one of a very select few people who do.
Having a private jet is a unique joy. Skipping TSA security checks, avoiding cramped quarters, and traveling on your own schedule are all perks that justify any expenditure.
But what if your experience is lacking? It might be time for a private jet upgrade.
If you’re thinking it’s time to revamp your jet but aren’t sure, look no further. VREF will show you a few signs that it’s time to refurbish that baby.
The Exterior Is Looking Rough
Considering planes regularly soar through the sky for long periods of time over great distances, it’s understandable that they’d accrue a significant amount of wear and tear over the years. The most obvious form that wear takes is cosmetic.
The day you bought your jet was probably a joyous occasion. A shiny, gleaming vehicle that was prepared to literally shoot you into the clouds. Only, these days, it might not be so shiny anymore.
If you’ve found yourself less enthralled with how your jet is looking, it might be time for a new paint job. Sometimes, the only thing you need to reignite that initial love affair is a fresh look. It’s one of the simplest ways to get your jet looking brand new again, so if it’s looking worse for the wear, don’t hesitate to slap a fresh coat of paint on it.
The Interior Isn’t Looking So Hot Either
When your jet takes a beating on the outside, it doesn’t have much practical effect on your experience. It might not be as great to look at as it once was, but your trip goes as planned, you won’t be looking at the exterior of your jet during the flight.
The interior of the jet is what really counts when it comes to having a positive flying experience. A rundown or outdated interior cabin can make travel a serious downer.
It might be something as simple as cosmetics. If you just don’t like the look of your cabin anymore, revamp it. A sleek, modern update can often do wonders.
That said, it might be an issue of actual convenience. After all, a private jet isn’t much fun without all the proper amenities.
If your jet’s tech seems like it’s been lifted straight from a 60s Bond film…Well, actually, that sounds pretty cool. But you know what we mean. Your jet’s features should feel modern.
Bluray players, up to date television technology and other little details can make or break a flying experience. Don’t let your jet live in the past. If it feels dated, it probably us. Give it a much-needed overhaul.
Invest in a Private Jet Upgrade
If you think you need a private jet upgrade, you most likely do. Don’t let your experience be ruined by an aging piece of equipment when all it would take is a fresh look to bring it into the modern age.
On the other hand, you might be looking to sell your jet and get something new. If so, make sure you’re getting the job done right. Get a top quality professional appraisal right here.
This article was originally published by VREF Aircraft Value Reference & Appraisal Services on April 22, 2019.
Tips To Get The Best From Your Business Jet see more
NAFA member David Wyndham with Conklin & de Decker offers advice on three things to keep in mind that will help you get the full benefits of a business jet.
Though it’s impossible to prepare for every situation, it is possible to prepare for things to change and to learn what’s needed for adapting and managing those changes.
The business aircraft is one of the tools that enables and enhances your ability to act, manage and react to the changes within your business. To get the full benefits of a business aircraft, however, it pays to keep the following three things in mind…
1. Different Aircraft for Different Missions
Throughout my career as a consultant, the 100% solution (that is, the aircraft capable of flying all the missions you may need) is most often the costliest. Over the long run, it may also be one of the least effective solutions too.
To illustrate, I once had a client who was looking at a Mid-size jet.
- This jet had the runway performance to manage the required short trips into smaller airfields, but with a light passenger load.
- It had the seats for the handful of longer trips with six or seven people.
- With full seats, however, its range was limited.
One larger cabin business jet offered the short runway performance and the range with full seats the client wanted, but the acquisition and operating budget was beyond what the board would approve.
What proved to be a better fit for the client was a turboprop for the short-range, short-runway trips and a fractional share of a Mid-size jet for the longer-range missions. That Mid-size jet fractional share could also be upgraded to a Large jet for the two or three trips annually that required eight to ten seats.
It’s vital to remember that owning your business aircraft does not prevent you from using other options (such as charter, jet cards and fractional). These lower utilization alternatives can give you the second aircraft for the few times its needed or expand the capability when occasionally needed.
2. Re-evaluate Your Options Regularly
How does the business aircraft you use support your current strategies for managing your business and your time? You will need to regularly re-evaluate your options. Planning is necessary for your company, and that includes forward-planning with regards to the aircraft.
It may be running nicely and not costing a lot of money to operate currently, but you should not wait for a major expense to arise before evaluating your options.
- Are you looking to grow into new markets in the next five years?
- Are you in the Mergers and Acquisitions market?
- Can the current aircraft support the future company?
An aircraft replacement can take 12-18 months to plan and execute, especially if you’re acquiring an aircraft that will need to be outfitted to your specifications. It’s advisable to have a written plan for when, and how to upgrade or replace your aircraft. Review the plan and revise it as your company changes, grows or develops into new markets.
3. Numbers Don’t Tell the Whole Story
While they can help you make an informed decision, a spreadsheet alone should not make the decision for you. So, what are the other factors that need to be considered in the decision? I’ve had several clients where the optics of owning the aircraft were a concern.
One was a defense department supplier of technology. My analysis showed them that a Light jet was the most efficient for their travel in terms of cost and speed, but they chose to purchase a slower single-engine turboprop that lacked the non-stop range for about 40% of their trips.
Their decision was based upon appearances. If the Generals saw the supplier with a turboprop single, they believed it would give the impression of frugality in their business and that their technology solution would also be judged as the cost-effective choice.
Another client upgrading from a Turboprop chose a Mid-size jet over a Large-Cabin jet. The lower cost Mid-size jet would still meet 85% of their needs but also look appropriate to their shareholders.
But it’s about more than just optics. Comfort plays a role, too. Another client evaluating Large-Cabin jets preferred the slightly smaller cabin alternative as it offered more cabin width, which felt roomier.
The costs of the applicable options were similar, but in addition to having the slightly wider cabin his choice also had less range. Nevertheless, as the client was going to spend 400 hours per year on board, this was the right choice for him. Comfort was the deciding factor in this case.
Business aircraft owners and operators all have slightly different criteria that they use for evaluating subjective qualities like comfort. When evaluating different aircraft, it’s important to decide in advance what criterion are important to you.
Remember that numbers are very helpful but leave some room for the subjective.
This article was originally published on AvBuyer on August 23, 2018.