How to justify aircraft ownership at 150 hours a year…
Last month Jet Tolbert asserted that 150 hours of use could create the basis to justify whole aircraft ownership, as opposed to using charter or fractional ownership. This month, he highlights how he calculated this number…
The calculation for 150 hours as the basis for aircraft ownership is reached based on the premise that charter hours and fractional ownership provide a premium service at a premium price. In addition, when you share an aircraft there will be certain dates when the operator will be unable to accommodate your schedule, and certain times or locations that will require a higher than usual premium, making budgeting difficult.
While there is no one-size-fits-all answer, when the costs and inconveniences accrue a would-be business jet owner must start to wonder, “When does it really begin to make sense to own my own jet?”
To properly assess the cost and benefit of purchasing a whole aircraft, one should consider the mission profile and expected frequency of flights, not only for the short-term but for the medium term, too. Whole aircraft ownership is not inexpensive, but nothing compares to the freedom of owning an aircraft that facilitates your specific travel needs.
An acquisition agent with deep-rooted connections in the industry and inside market knowledge will be able to assist with planning and drawing comparisons between your historical Business Aviation usage trends and available purchase options for your current and future travel needs.
In addition, they’ll help avoid any unseen ‘landmines’ as they guide you to the right aircraft for the need, at the right price.
Different Strokes for Different Folks
There are different structures to consider when looking at the total cost of aircraft ownership, so we will take a look at a few below and compare the different strategies to enter into whole aircraft ownership.
For example, if you anticipate an entry-level 150 hours usage annually, there will be a lot of opportunity to bring a partner into the equation.
With a Partner: If your plans show you having need to fly approximately 150 hours annually, there is certainly room to bring a partner into the purchase and operation of your aircraft. Proceed with caution, however. Ill-planned partnerships can end in tears for all involved. A well-connected acquisition agent will help advise you on which partners are better suited for success.
If possible, the strongest partner should purchase the aircraft and lease it to a private party under the terms allowable for an FAR Part 91 lease, or lease it to a charter partner under a Part 135 arrangement. Under the lease partnership, the owner will retain the ultimate say with what happens to the aircraft when it comes time to maintain, make improvements or sell/trade.
Without a Partner: If you plan to go at it alone, without a partner there are multiple factors to consider. On the one hand an older aircraft (while having higher operating costs) would have a lower acquisition cost and lower exposure to market conditions when you decide to re-sell.
On the other hand, the acquisition of a newer aircraft will have lower maintenance costs, lower costs to operate, and a higher depreciable basis that may come together into a similar cost as for an older jet. The newer equipment’s higher initial value will carry a potentially higher exposure to market fluctuations and depreciation when you decide to re-sell, however.
With that said, choosing the right aircraft type at the right time in the market cycle could equate to a limited erosion of value (if any), while the wrong pick in the wrong market may bring greater exposure to volatility and loss of value.
There are pros and cons to Business Aviation ownership, irrespective of whether you’re considering charter, fractional ownership, or whole aircraft ownership. But if your travel plans justify it, ultimately it’s difficult to compare anything else to the freedom of owning your own jet.