loading Loading please wait....
Login

If you are a registered, please log in. If not, please click here to register.

Buying the Right Business Jet
Pulling the process together: A case study
Highlighting his preceding three-part series examining different aspects executives need to consider when selecting the right business aircraft to buy- Jay Mesinger offers the following case study- in which one client used the tools laid out in this series to guide them in their decision-making process.

Our company was recently engaged to conduct a transition analysis for a corporation to determine if conditions were right to wholly-own a business jet- rather than continue its current practice of chartering. Until recently there had never been a time when this corporation saw the need to question its decision to purchase blocks of charter time- due to the acquisition costs that ownership entailed.

Given today’s market conditions- however- the greatly reduced prices of certain aircraft were creating scenarios in Boardrooms across the globe where directors were prompted to explore the value proposition of whole aircraft ownership. The following are the steps that the client’s Board took to establish all the necessary criteria for transitioning from charter to whole ownership:

1. MISSION PROFILING
First- all of the participants in the company who have access to business travel weighed in on their city pairs- as outlined in the second article about Mission Profiling.

Three individuals responded with seven cities that they frequented from their home base- and the annual frequency they traveled to these seven city pairs. As a part of this exercise they also supplied us with cabin size- amenities and other aircraft priorities. This set of data essentially isolated four large-cabin aircraft to assess their city pairs against - the Challenger 604- Gulfstream IV- Falcon 900B and Challenger 601/3A.

Except for price- all four aircraft traveled at approximately the same speed- and had nearly the same fuel burn. Having built the flight plans for each aircraft against each city pair- we were able to determine the annual hours flown and annual fuel usage. Annual usage was approximately 150 hours- and fuel consumption approximately 46-000 gallons.

These costs matched almost perfectly with the block charter hours purchased annually for the past several years by the client.

2. VALUE PROPOSITION
The next step was to focus on which aircraft category to choose. Our four candidate aircraft were initially chosen due to range- size and cabin amenities. We eliminated the Gulfstream IV because it offered more cabin capacity and range than the client’s needs dictated- and would have cost twice the price of the ultimate solution. We eliminated the Falcon 900B as it- too- would have been double the cost.

Next- the two Challenger options were compared- which provided little differentiation with similarities in manufacture and size. The 604’s extra range compared to the 601/3A was not a positive factor given the corporation’s trip profile- and its higher price tag did not lend to it being the best option.

Therefore- we were able to determine the 601/3A was the best choice since it gave the range- cabin size- amenities and price needed to satisfy the client’s criteria. Further- even though the 601/3A was an older aircraft- it still continued to enjoy the entire airframe manufacturer’s- and engine manufacturer’s support at half the price of the 604.

3. CHOICE OF AIRCRAFT
We then considered the annual utilization and built the budget for comparisons to the current lift solution. Knowing the city where the aircraft would be based as well as the destination cities- applicable costs for our model were determined. A hangar was secured; fuel- personnel salary ranges and all other city-specific costs were identified. Regarding fuel- we looked not only at home base rates but also to build a blended fuel rate predicated on destination cities and frequency.

Once the variable and fixed costs were in place- we looked at the market for available 601s and decided on three contenders- based on pedigree- log and record status- and damage history data. Having that information as a foundation- the aircraft were considered on the basis of proximity to major engine and airframe maintenance events. Armed with the collective data we could put cost assessments on these events and load them accordingly into the appropriate year in our five-year budget analysis.

Now the Board could take all of this work and compare it against the current charter solution. The decision was made to acquire!

IN CLOSING
The Board was able to approve the purchase- based on a new solution that provided the same travel opportunity as the block charter but included missing elements that had always been a problem for the Board.

They could now be assured of the flight crew status since they would be employees of the corporation. They also knew that the equipment would be maintained to a set of standards they could easily measure- and that total familiarity with the flight operation could be accomplished.

Chartering would still be part of the overall picture- but would be used to provide supplemental lift rather than as a primary lift solution- thereby supplying a 100% trip reliability factor. Ultimately- this three-step exercise offered a new win-win solution for everyone.

Email feedback to
editorial@avbuyer.com


Related Articles