A Look at the Factors that Drive a Change of Aircraft
The average length of business aircraft ownership is between three and five years. That doesn’t mean that many owners have made wrong purchases or suffered buyers regret. They are merely responding to evolving needs. Jet Tolbert, President, American Aircraft Sales explores…
Business and personal needs change, and often the company aircraft will have to change to meet those new requirements. Whether due to business expansion, a family situation, or a home or key executive based in a new location, flight departments often find themselves expanding into new destinations that change the demands on the aircraft.
Different stage lengths and available airports can ultimately drive the need to purchase the next jet, either as additional lift or as a replacement to the aircraft that is currently being operated.
Some of the driving factors may be evident to the principal owner and C-Level executives, but there are many other less obvious factors that can shape the need to purchase a replacement or supplemental aircraft. Some of these are covered below…
Staying Ahead of Regulation
Savvy owners value having an aircraft that meets the needs of the company not only for today but also for the rest of the planned length of ownership. Often owners of older aircraft bear the burden of a costly, time-consuming process to comply with regulatory mandates (such as ADS-B or FANS-1/A).
The silver lining to this gray cloud of regulatory flux is that it’s a great time to trade-in or purchase an additional aircraft for the fleet, keeping the passengers in the air with a seamless transition from one aircraft to the next.
When buying a replacement aircraft, there will probably be a short period when the company has an excess of aircraft on the books.
This situation enables those utilizing the company jet to simply walk out of one aircraft and onto the next, and bridge financing options exist to facilitate the ownership of an additional aircraft, providing a cushion until the previous jet can be sold.
Experienced sales firms are also on hand to market the older aircraft first, helping to align the sale of the old jet as closely as possible with the purchase of the replacement aircraft.
With the looming January 1, 2020 ADS-B Out regulation and the limited number of facilities available to offer compliance to a vast fleet of aircraft, whether you plan on owning your aircraft beyond the deadline or not, it makes good sense to upgrade your aircraft now.
Being prepared for upcoming regulations means different things to different owners, but compliance is mandatory, and a compliant jet is a far more attractive jet when it comes time to sell.
At a certain point the market tends to lose interest in great aircraft. It appears that when the annual cost of owning an aircraft gets close to its resale value, the pool of interested buyers diminishes.
The biggest question to a flight department is whether it will wait to be the one left holding the bag when potential buyers disappear?
On too many occasions I have seen owners realize that the value of their aircraft has dropped so low they can’t justify selling it.
You can be sure that the value of an older aircraft certainly will continue to ebb away. When the pool of buyers has dried up or when new regulations threaten to restrict your flight operations, you will have to make a difficult decision. You may even become a ‘new buyer’ all over again, with no equity in the flight department. It may be best to plan your aircraft succession strategy that includes selling or trading when the value is still liquid.
The vision of a technologically-advanced, well-purposed office-in-the-sky is what drives most buyers to take the plunge into aircraft ownership. Couple this vision with the market experience of a detail-oriented aircraft sales firm and the result will be an ownership experience that leaves nothing to be desired.
Part of the trick, however, will be knowledgeable, decisive action from the owner regarding when to buy and sell the Flight Department’s aircraft…
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This article features in AvBuyer's 2018 Yearbook. Read the full edition here.