Ex-Charter & Fractional Jets: Who Buys Them?

According to Jim Mitchell, Executive Sales Director for Elliott Jets, “We’ve never had any problem selling any fractional jet as long as it is priced appropriately”. He identifies three different types of pre-owned private jet buyer for such aircraft.

One is a fractional ownership operator looking to buy an aircraft cheaply that has “good cosmetics”, Mitchell reveals.

By ‘good cosmetics’ he means an exterior paint job in passable condition and an interior which isn’t unattractive enough to need immediate refurbishment. The fractional operator then works the cheaply purchased jet hard without having to perform much upkeep other than required maintenance to keep it serviceable.

The second typical customer for former fractional-use jets are first-time buyers who are “probably not so picky”, and so don’t focus only on low-time aircraft “because they don’t know enough to differentiate,” says Mitchell.

Tyler Bowron, a Principal of Hatt & Associates, says the third typical class of customer is special-mission operators, such as a medevac company which is looking to acquire a jet cheaply and is unconcerned about the condition of its cabin interior or its exterior livery.

In this case, the buyer intends to spend substantially on customizing the aircraft’s cabin for its new mission – a mission which may also be advertised to the world by giving the aircraft a new, highly colorful exterior livery.

Special-mission operators often aren’t concerned about the relatively high utilization associated with former charter or fractional program jets because in their new lives the aircraft won’t be flying nearly as much as they did previously, Bowron says.

As long as their maintenance status remains current, such jets can remain in useful revenue service for many more years.

Approach These Markets With ‘Adult Supervision’

At the peak of the recent market boom for business aircraft, many buyers overpaid for their aircraft, Mitchell highlights. Only now is the market beginning to show signs of returning to a longer-term, stable norm – but it hasn’t reached that stage yet.

Mitchell attributes much of the over-valuation of aircraft (and the inflated sale prices that were realized) during the market frenzy to completely inexperienced first-time private buyers who just didn’t know what they doing. In what has become a stock phrase for the Business Aviation industry, those buyers came into the marketplace “without adult supervision”, he says.

They did not hire experienced, knowledgeable representatives to inspect the aircraft on which they were bidding, and they did not have such representation at hand when it came to negotiating their purchases. In some cases, first-time buyers bought their aircraft without being given the chance by unscrupulous sellers to see the aircraft first.

Now many first-time buyers are regretting their haste and are choosing to become ex-owners of business jets. They’re putting their aircraft back on the market for resale again, but aren’t managing to sell the aircraft for as much as they paid for them.

Bowron offers three key pieces of advice to inexperienced would-be buyers of business jets, particularly if the aircraft of interest in each case was formerly flown in a fractional ownership program or by a charter company...

Tip 1: Hire expert representatives to inspect the aircraft’s condition. Hire an expert to review its logbook and maintenance records, and then report on how complete those records are (incomplete records invariably result in additional transaction costs, often substantial, because for airworthiness compliance reasons those records must be complete and up to date).

Hire an expert to help negotiate the terms, conditions and pricing of the purchase contract.

Tip 2: Perform extensive due diligence and conduct all research required to find out if the aircraft under consideration is still being flown or if it is parked. If the aircraft is currently parked, how long has it been parked and when was it last operated and/or its engines last spooled-up?

A particular concern in this case is if the aircraft is available because of its former operator ceasing operations due to bankruptcy. If that’s the case, then the aircraft’s maintenance may have seen a degree of neglect before the aircraft was parked. If the aircraft is in storage, find out where it is in storage, and if the aircraft is parked outside or in a hangar.

Tip 3: Find out if the aircraft was previously in service with an operator in another part of the world before it was put up for sale. This is important for two reasons.

One is that customs, sales tax and de-registration/re-registration requirements may be involved in importing the aircraft to the prospective new owner’s jurisdiction – as may differences in airworthiness regulations and requirements such as STCs.

The other reason is that if the aircraft was previously operated in a different part of the world, it may have been subject to different environmental conditions which could affect the aircraft’s overall condition. For instance, says Bowron, aircraft imported to the USA from Europe tend to have more corrosion than those operated in North America.

The additional corrosion results from the runway-surface treatments often used at European airports and because much of Europe, and northern Europe particularly, has a damp, cold climate for part of the year.

In Conclusion...

Although purchasing a used business jet formerly flown by a charter operator or for a fractional ownership program involves a need for extensive due diligence on the buyer’s part, if they are careful, “You can still get a very good aircraft which is a better buy than an aircraft operated under Part 91, and which can run for many, many years,” Mitchell concludes.

That is, as long as the buyer proceeds to look after the aircraft properly themselves.

More information from:
Elliott Jets: www.elliottjets.com
Hatt & Associates: www.hattaviation.com