Come on. You know you want one.
Sure, it’s still a little tone-deaf to be flying around on a private jet right now, even with the economy picking up.
But if you can rationalize it — and it’s a smart move for many businesspeople — we’ve put together a basic guide to buying a plane.
After all, it’s a good time to get one. The overall jet market is down between 20% to 50% from a couple of years ago, according to Barron’s. So planes are (relatively) cheap!
Two important caveats: One, your probably shouldn’t do it yourself. Aircraft management companies and buying consultants like Integral Aviation Solutions and TWC Aviation Inc. can coordinate the purchase, and keep your plane flying afterwards–for a fee, of course.
“I deal with billionaires all the time who just want to do the deal themselves” says Capt. Ivan Klugman, President of Integral Aviation Solutions. “But there’s a million and one things that can go wrong — you can’t be a jet expert overnight.”
Two, you don’t have to own. There are easy ways to charter planes for specific trips. Or, there’s fractional ownership and jet “card” clubs, where you pay for a certain amount of flight hours.
A private plane will likely cost millions, so aviation experts suggest that 350 to 400 hours of flight time per year usually justifies full ownership of a jet, according to General Aviation Services, a private aircraft seller.
Consider the hidden costs. As GAS notes, factor in necessities such as insurance, fuel, catering and pilots. Aircraft management companies will take care of these needs for about $100,000 to $200,000 per year, depending on the size and usage of the jet.
And, remember that repairs and maintenance can ground your plane; expenses can be unpredictable ($50,000 for a part); and you could lose plenty of money by buying your plane high and selling low, notes TWC Aviation Services president Andrew Richmond.
Finally, clear it with PR. If you're a corporate executive -- especially with a company bailed out by Washington -- buying or using a private jet can mean public relations trouble.
Here are some reassuring words the industry group told us: 'For well managed companies, it's safe, and it always has been,' says Mike Nichols of the National Business Aviation Association, of how private jet travel is seen today. 'If there was ever a time for companies to be aggressive about face to face meetings, it's in this economy.'
Private jets come in three sizes: small, medium, and big.
According to GAS, for size and flying range, light jets ($3 million to $8 million) can take 5 to 8 passengers roughly 2,000 miles. Midsize executive jets ($9 million to $16 million) can take up to 9 passengers from 2,000 to 3,000 miles. Large executive jets ($17 million to $45 million) can carry 12 passengers more than 4,000 miles.
New vs. used.
The down economy means more used planes on the market, and ordering a new jet can take a couple years.
Still, used jet may not be such a great deal. As GAS points out, there are federal aviation regulations to land at many U.S. airports, and converting a private jet to comply with regulations takes several hundred thousand dollars and months of repair time.
That said, new means expensive. TWC Aviation: New planes generally come with a five-year, tip-to-tail warranty. You'll still need to pay for inspections, but most other expenses are covered under warranty. Also, you will need to pay an hourly fee on top of the warranty to cover many parts that fail through normal wear and tear. To keep a lid on your costs, you can pay an hourly rate for an engine program. These programs cover the very expensive mid-life inspections and overhauls that are required years down the road.
Usually, a consultant helps with the search. As Business Jet traveller notes, 'Maybe your management rep will be directly involved in the jet-search process, or maybe he will refer you to a broker or brokers. Either way, the management company will be responsible for keeping you happy in the long term, so it is in its interest to ensure that your search puts you in the right aeroplane.'
To go it alone -- and assuming you're not buying a new Learjet or Gulfstream, hit the big aviation exchange websites, like controller.com or aerotrader.com.
If most people try out a Honda Civic, it makes sense to take a pre-sale spin in a new Gulfstream.
Capt. Klugman of IAS recommends it for his clients, especially newbies.
'Most of the buyers already have been passenger on most business jets and know which cabins they like,' notes Capt. Klugman. But, he says, 'At times a demo flights are arranged after the buyer escrows some money and agrees to pay for the flight. Manufactures will also provide demos hops around the airport area to qualified buyers.'
Before you pull the trigger on a jet, make sure it's in flying condition and worth the asking price. As Business Jet Traveller notes, 'it's much more about dollars than about safety, though good inspections can and do uncover safety-of-flight issues, especially in older and not-so-well maintained aircraft. Identifying big-ticket maintenance discrepancies before signing on the dotted line can save literally millions in surprise expenses down the road.'
According to Dave Cribbin, CEO of boutique aircraft finance firm TailWind Capital Group, standard loan terms are 3 and 5 years, with loan amortizations of 15-20 years on newer aircraft and 10-12 for early 1980's vintage models. Pre-payment penalties may also be included in the transaction and usually 1% for the first three years. And standard legal fees apply to any purchase.
For example, a 2006 King Air C90 worth $2.7 million would likely get 80-85 per cent financing, with 15-20 year amortization and rates of 6.5 per cent over 5 years of 5.5 per cent over 3 years, according to Cribbin.
There are a lot fewer folks to get financing from, thanks to the Great Recession. Cribbin says Merrill Lynch, CIT and centre Capital Corp. have all stopped providing aviation loans.
The market for sales and refinancing has slowed considerably. 'Over the past year, planes have been a lot like houses,' says Cribbin. 'Everyone's been trying to sell them for what they were worth last year, not this year.'
There are lots of tax planning and FAA compliance issues to account for as you make a purchase. You'll need legal advisors versed in aviation tax law, insurance and rules of the sky.
'It's not like buying car where you go to a dealership and pick out a model and the colour you like,' says Nichols of the National Business Aviation Association. 'It's a much more involved process.'
There are plenty of ways to make your plane jaw-dropping.
Overall, a high-end designer wide body interior runs about $85 million, not including the airframe, according to IAS. Examples from IAS's client work include a a $2.8 million medical suite and a $1 million dollar gold shower installation -- including a $120,000, 24kt gold shower handle, apprently the most expensive in the world.
Other people have put in whirlpool hot tubs, full dining-rooms and mini-movie theatres. Check out Saudi Prince Alwaleed bin Talal's $300 million Airbus A380 valued at over $300 million -- before gadgets.
If you've lost a bunch in the stock market, you can always refurbish an old plane. A major face-lift runs from about $750,000 and to $2 million and take several months, according to Business Jet traveller.
If you do -- those pesky revolutionaries always have a bone to pick -- it'll run you about $1 million, says Capt. Klugman of IAS, who has installed such anti-weapon systems. WSJ notes such systems aren't certified for civilian use, so, if necessary, try and win an election.
Once you have your own plane, the trick is getting it in the air -- and keeping it there. If you're not part of a big company with a flight team, you'll likely need a consultant to manage your investment.
A jet management company does a lot: select the crew and pilots; oversee plane maintenance; do your accounting (fuel, insurance, parts, crew pay, etc.); coordinate your flights ('Good Sir, can we leave for Paris in 20?'); and storage (usually a shared hanger at a local airport).
Management companies can even help charter the plane when you're not using it so there's a little more ROI.
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