- 14 Sep 2023
- Tom Lelyo
- Aircraft Ownership
Despite both accumulating higher times on their engines and airframes than privately owned private jets, there are key differences between pre-owned charter and fractional private jets, as Chris Kjelgaard highlights…Back to Articles
While former charter jets and former fractional ownership program aircraft will have accumulated much more flying time than comparable privately-operated aircraft of similar age, important differences usually exist between used charter and fractional ownership program jets when they come to market.
Would-be buyers should know what the key differences are, and what they could mean for the resale value and the possible condition of the aircraft.
First is that the former fractional ownership program jet is likely to have accumulated many more hours than a former charter aircraft, notes Jim Mitchell, Executive Sales Director for Elliott Jets. The entire business model of fractional ownership companies relies on them flying their fleets as much as they can during the year. Thus, even their short-haul jets can accumulate 900 flight hours or more annually.
This means that by the time fractional ownership companies retire aircraft from fleet duties and market them for resale, they have often accumulated many thousands of hours of flight time.
Mitchell says fractional ownership companies traditionally remarketed their aircraft after 8-10 years of fleet use, but in the recent past some have been hanging on to their aircraft for longer.
To any would-be buyer, one financial consequence of negotiating to buy a high-utilization former fractional ownership aircraft is that the costs of any records inspection and final pre-purchase inspection are going to be higher than they would be for an aircraft with fewer flight hours in its logs, Mitchell adds. “Over time, this is definitely a factor, but it’s not a huge factor,” he says.
However, higher-utilization aircraft present other valuation and ownership considerations. Tyler Bowron, a Principal of Hatt & Associates, says long-term previous fleet use should lead any potential buyer to understand that in several cases an aircraft has accumulated so much flight time that he/she should realize they are likely to be the last-ever owner of the aircraft. They should make their purchase with that in mind.
Although business jets are designed to have very long, and in some cases unlimited, airframe lives the market for used business aircraft does not view them that way. That may be to do with the growing costs of maintenance, particularly engine maintenance, over time and the high costs associated with cabin and cockpit refurbishment.
If the new owner accumulates yet more flight time with the former fractional-use aircraft and subsequently tries to market it for resale several years later, in normal market conditions they may find there is little, or no market interest in the aircraft.
Aircraft previously operated exclusively by reputable charter operators, by comparison, can provide extremely good value in the resale market, Bowron, reckons. Such companies maintain their aircraft to “a rigid standard” and often they will refurbish their aircraft with new interiors and new paint jobs approximately every five years, to keep them attractive to charter customers.
Upon resale, such aircraft come to the pre-owned jet market having had “one owner, and been maintained to top standard,” he highlights.
Another potentially major differentiating factor between higher-time fractional-use jets and former charter aircraft is that the fractionally owned aircraft have often been much more exposed to the external environment than the latter.
Because jets belonging to a fractional ownership fleet usually see much more intensive utilization than charter aircraft, in many cases they very rarely see the insides of hangars and between flights are parked outside all the time, Mitchell says.
“So fractional jets often have more damage to the exterior of the aircraft than charter aircraft,” he highlights. “Charter aircraft are usually in a hangar if they’re not flying.” Fractional ownership fleet operators usually specify stock, standardized interiors when ordering their fleets of new aircraft, Mitchell adds.
This can either add to or subtract from the resale value of such aircraft, depending on what any given customer wants from the aircraft when negotiating its purchase. A business jet’s cabin and flight deck connectivity set-up can also influence its resale value – but in some cases the aircraft’s connectivity system might not be a price factor at all.
On one hand, Mitchell notes that in many shorter-haul charter or fractionally-owned aircraft, the passengers who are paying for the aircraft’s flight time are merely interested “in checking their e-mails” in-flight.
They don’t care if the aircraft doesn’t have the latest-model satcom system with video- streaming options if it has (for example) a Gogo air-to-ground cellular comms system allowing them to stay in touch with their offices while in the air.
On the other hand, says Bowron, “Regardless of whether the aircraft was formerly fractional-use, charter or anything else, some of the more popular [in-flight] internet equipment is becoming obsolete. That is equipment that’s not going to be supported [beyond] the very near term.
“But that’s across the board – it’s not just charter or fractional aircraft,” he reiterates.
As a result whoever purchases an aircraft with older equipment may need to replace the aircraft’s connectivity system with a new one, at substantial cost, soon after they purchase the aircraft, and will want to ensure their offer reflects that fact.
In the end, the most important consideration for any purchaser looking to buy either an aircraft previously operated by a fractional ownership company or one flown by a charter operator – whether the aircraft itself was entirely dedicated to charter or was used part of the time by a private owner for personal travel – is just who the operator was.
If the previous operator was a company like NetJets there may well be more ‘pros’ than ‘cons’ for the prospective purchaser, Bowron reckons. “The aircraft’s books are all there, the records are all perfect, any damage to the aircraft was fixed correctly, and all of its paperwork is accessible and easy to read.”
A common misunderstanding on the part of the inexperienced buyer is that “a lot of people think that [buying a former fractional use business jet] is like buying a rental car,” Bowron highlights. “That’s not the case.”
Unlike rental cars, which can be driven by just about anyone coming in off the street, the likelihood is that the used fractionally-owned aircraft “has been very well maintained professionally, flown professionally, and very well looked-after”.
Even though the aircraft nominally may have been owned by as many as 32 or even 64 different owners, its care, maintenance and operation is directly handled and supervised by a professional company whose staff members are experts in aircraft operations, management, crewing and maintenance.
Usually the buyer shouldn’t have much to worry about regarding the aircraft’s condition and airworthiness, “as long as you understand where you are regarding the engine time,” Bowron adds.
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