Is it easy to put a flat cost on private jet ownership? How does the cost compare to the value of owning a private jet? Industry expert Jet Tolbert highlights the basics, while offering the perspective of the many benefits that come from owning an aircraft…
For years people in the private jet industry have considered the scheduled airlines to be their largest advertiser. Flying a private jet enables travelers to avoid long, arduous arrivals and departures procedures, ticket queues and security checks, and allows them to run to their own schedule, rather than that of the airline.
Private jet flights are coordinated to meet the owner’s schedule, and delays are minimal. The difference is so profound that many corporate executives opt to fly privately. Even the most frugal of executives find the value far outweighs the cost of flying a business jet.
When Warren Buffett bought his first private jet, he named it ‘the Indefensible’ due to the negative criticism towards private jet owners at the time. Later he not only renamed it ‘the Indispensable’, but he found the benefits so valuable he moved forward with the purchase of a company offering shared private jet ownership solutions (Fractional Ownership).
Clearly, there’s far more to consider when answering a question such as how much a private jet costs…
What’s the Purchase and Hourly Operating Cost of a Private Jet?
The price range for a brand-new business jet could range anywhere from under $3m to over $70m, depending on the desired size and performance of the jet. Moreover, the costs per hour to operate a jet ranges substantially depending on the size and age of the jet and could cost anywhere from $900 per hour up to $4,500 per hour.
From my experience, a typical corporate user could have an average annual budget anywhere from to $400k to $2.5m. While these are certainly big numbers, nearly all operators of private jets that I’ve met have entered aircraft ownership as a result of the economic benefits.
Not everybody owns their own jet, however. Some find charter and jet card options to be an economically viable way of accessing Business Aviation, and others purchase a fractional share in an aircraft if their annual utilization is too low to justify outright ownership.
Who Owns a Private Jet?
The current worldwide fleet comprises approximately 22,000 private jets and 15,000 turboprops, of which around 65-70% are located in the US. And within the US, 3% of corporate aircraft owners are S&P 500 companies, meaning that the remaining 97% of private jet aircraft are operated by individuals, organizations and businesses – whether large, medium or small.
In fact, 85% of US Companies that utilize corporate aircraft are small to mid-size businesses with 50-500 employees.
What are the Corporate Benefits of Private Jets?
According to a 2017 NEXA study, companies utilizing Business Aviation outperform their competitors in several metrics. Indeed, companies using Business Aviation outperformed non-users by 70% in terms of Enterprise Value based on their statistics from the five-year period 2012-2017.
The same study cited 10 areas where many top-rated companies were Business Aviation users. Here are some of the metrics (and percentages) of companies that utilize Business Aviation to achieve this accolade:
- 92% of America’s 50 most-innovative companies (Forbes Global List 2017)
- 95% of the 100 best places to work (Fortune 2017)
- 97% of the 50 ‘Best Customer Services’ (24/7 Wall St. 2016)
- 92% of the 50 best brands (Interbrand 2016)
- 98% of the world’s 50 most-admired companies (Fortune 2017)
- 95% of the 50 top-performing US companies (Forbes Global 2017)
- 100% of the most trustworthy companies in America (Forbes 2017)
- 86% of the S&P 50 top performing stocks (16-Q117)
- 95% of the ‘Change the World’ top 20 (Fortune 2016)
- 92% of the 100 ‘Best Corporate Citizens’ (The CRO 2017)
The Broader Economic Benefits to Private Jets
We’ll summarize with a few more economic benefits that should illustrate that when discussing the cost of a private jet, those costs must be weighed against the benefits the jet brings to an organization.
According to the same 2017 NEXA study, the FAA estimates that Business Aviation contributes approximately $64bn to the US economy annually.
PricewaterhouseCoopers’ Study concluded that Business Aviation helps support more than one million jobs and over $200bn in economic activity nationwide, and that a single aircraft can bring $2.5m in economic benefit to a local community surrounding a General Aviation airport from direct, indirect and induced economic contribution.
This contribution to local economies and taxes makes Business Aviation users good corporate citizens and increases shareholder value. That’s got to be a cost worth expending…
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