How to buy a Business Jet:
In this guide to buying a business jet we provide you the factors to consider before purchasing your own aircraft.
There are many business jets available on the market but not all of them will be suited to you and your needs.
Why do you want to buy?
Do you really need to buy your own jet? This is the first question to answer. Seriously, Yes you desire a business jet, but before signing up for business jet ownership consider other options to business jet access.
It may make financial sense to buy a business jet if you want to have control of an aircraft and fly more than 8 hours a week, which adds up to more than 400 hours of flying in a year. If you fly less than 400 hours a year, consider a fractional ownership program or a block hours’ card. If your requirement is limited, standard jet charters may be the right option for you. It may be simpler and more cost effective for you this way. Consider it.
But if you really want your own business jet perhaps even with a custom jet interior and bespoke exterior color scheme then the only way to do it is by purchasing your own jet.
There are options open to you if you want to gain some revenue from your aircraft should its utilization leaves it sanding on the tarmac or the in hangar for days on end; you could offer the aircraft for charter with or without your flight crew but then of course other people will be using your jet.
Which jet is right for you?
Deciding on which aircraft is for you is here most people naturally start.
The answer to his question is dependent on a number of factors which namely come down to the following:
- operational requirements;
- purchase price;
- operational support, maintenance availability and cost;
- operational cost;
- physical use and ergonomics,
- the business jets you actually like the look and feel of.
The last sentence might look a little out of place. But many of us buy things because we are attracted to them.
Price can vary dramatically from circa $5m pre-owned through to $100m USD for a new business jet, upwards for narrow and wide-body jets.
Visit our business jet guide to view the various jets and jet categories
Think about how far you usually or would need to travel by business jet and how many seats you will need; this will determine the aircraft size for both range and passenger capacity. How much luggage or cargo will also determine aircraft size.
Visit the web sites of the manufacturers; get in touch for brochures and catalogues. To view business jets in person, reach out to the manufacturers directly to arrange viewing, or visit one of the many shows globally; the famous ones include NBAA, EBACE, ABACE, MEBA, Farnborough and Paris Air Shows.
Stand up in the jet, sit down, lay down, play with the tech, have a look at the colors, fabrics and materials – see what you like, and do not like – what is for you? Then before you are ready to buy take a flight. If you have pilots insist they go along too.
Business jet categories by size
Business jets can be divided into the following categories based on size:
- A Very Light Jet has 4 – 6 seats, a range of about 1,200 miles and costs up to $5 million
- A Light Jet has 6 – 8 seats, a range of up to 2,000 miles and costs from $6 million to $12 million
- A Medium Jet can carry up to 9 passengers, has a range of up to 3,500 miles and costs up to $22 million
- A Large Jet can carry up to 19 passengers between continents and costs up to $70 million
- The largest jets available are narrow or wide-body business jets costing circa $80 million for a green jet or considerably more for a wide-body jet
Costs to consider
Most business jet owners outsource the management of their aircraft to a licensed operator. For a new medium-size jet, this would typically cost about $400,000 to $500,000 USD per year. This includes parking, hangar fees, weather forecasting, avionics, insurance, scheduled maintenance, crew, pilots and training.
You need to keep aside funds to cover any unexpected expenditure on maintenance and parts. A business jet may spend about one month every year in scheduled maintenance and emergency repairs may result in additional downtime. You may need to charter planes to travel during these periods.
The variable fees will depend on how many hours your jet flies. If it flies for 400 hours, the variable costs could add up to about $1 million, mainly for airport taxes, de-icing charges, landing fees and fuel.
You could opt to charter out your jet to third parties to generate income and offset some costs, though this would involve faster depreciation, higher maintenance costs, different insurance cover and operating regulations.
If you are thinking of buying your own business jet, it’s best to work with a team of experienced professionals who will help you to make the right decisions and avoid costly mistakes.
Managing the large investment and financing:
There is more than one way of getting the desired result for many things and the same can be said for financing new aircraft purchases:
The options to purchasers include:
Leasing: At the end of the duration you will have the choice between several options based on the selected leasing solution: purchasing the aircraft, extension of the lease contract or return of the equipment. Often with leasing agreements for business jets the terms dry and wet leasing are used. Dry leasing is where the aircraft only is supplied; whereas wet leasing includes aircrew, fuel, insurance and other flight costs.
Hire purchase: The aircraft you wish to purchase is purchased on your behalf and you can use it in exchange for a fee. In contrast to leasing, titles to the equipment passes to you at the end of the hire-purchase agreement period providing payments have been met. The advantage of this option is it allows you to capitalize the aircraft on your balance sheet to take advantage of depreciation of the asset, along with knowing what your payments are going to be allowing you to financially plan.
Charter: Other than these two purchase options you can charter aircraft, sign-up to a jet card thereby buying access to a number of hours, or purchase a business jet outright either from cash reserves or loan from a financial institution.
When it comes to purchase…
In selecting a lender take into consideration if you have any previous history with them; your business or personal income; you’re assets, where you are based, what aircraft you are buying, and what type of borrower you are; business or personal will all come into play.
Transacting through escrow is important if you are not buying directly from a manufacturer. This is a service that acts as a third party and handles regulates financial payment between two parties to enable a trusted transaction thereby reducing the risk of fraud.
Specialist aviation finance service firms and brokers will be best placed to provide advice about the best purchasing solution for a period of ownership.
Depreciation is an important consideration because a new aircraft will lose a major portion of its value within 5 years. A lower initial purchase price will slightly reduce the impact of depreciation.
Choose an experienced consultant or broker
If you have done your research, you can contact a business jet manufacturer directly. However, most people who buy aircraft work with a broker or consultant who will help them through the long and complicated process of buying a jet.
It goes without saying that buying a business jet involves a large investment, so you need to weigh the models of purchase; their costs and benefits, and consider the options so you can make an informed decision about what is right for you. It helps to be informed; but a good broker can take care of all of this for you.
New vs. pre-owned aircraft
For those open to picking up a bargain, the good news is the pre-owned business jet market is saturated and as healthy as ever for buyers; and with fuel costs currently low [2019] there has never been a better time to buy and operate a business jet.
You can buy yourself a lot of business jet off the pre-owned market and upgrade the avionics, in-flight entertainment and connectivity systems, refurbish the interior and conduct a major maintenance of the jet if required and still save yourself a lot of money over a new business jet purchase. It’s really worth considering.
A used business jet will have a lower initial cost but it may not be as fuel efficient as a new one. You may have to spend some money in addition to the purchase price on making the aircraft complaint with aviation regulations, and may have to upgrade the avionic system along with any interior modifications you wish to make; such as refurbishment of fabrics, leather, fitment of new IFE systems or galley equipment. Insist on a professional inspection of the aircraft and try to arrange a test flight. If you have your own pilots send them along too.
If you opt to buy pre-owned and refurbish the interior, consider hiring project management support to manage the jet refurbishment program. It may save a lot of headaches.
With new aircraft however you will have none of the above considerations. The avionics will be the latest technology and aviation regulatory compliant; the interior can be customized as you want it, and the IFE and technology systems will ensure productivity and relaxation are more than possible to suit your needs. Additionally the airframe, engines, gear and ancillaries will all be delivered with close to zero hours on them. But this comes at a price, and the consideration is the purchase price of a fully refurbished pre-owned aircraft versus new or charter options.
5 steps to purchase:
Determine your needs: First, consider how your company intends to use the aircraft. If you’re visiting plants in the Midwest, you need a very different plane than one used to fly to Europe. Identify your requirements first, and your aircraft choices will become obvious.
Reach out to experts: Don’t be afraid to reach out to experts. Whilst you may think that not paying experts saves you money, the reverse can actually be true. Buying a jet requires planning and knowledge on many levels. From selection to pre-purchase inspection, insurances, operation, and interior completions if you want to go custom in the cabin.
Think about reaching out to an aircraft broker and technical advisor, an aviation insurance agent and an aviation lawyer.
Assemble your family or business team: Who else is involved in the buying process? Who else will experience use of the jet? If for corporate use, your buying team should include your company’s CEO / CFO / COO, finance and accounting, and your companies operations if they will be using the jet. Consult your public relations team if you are a public company, along with security and corporate governance teams. If you are buying for private use, invite your family to be involved in the process.
Pre-purchase inspection: Its important to understand the aircraft’s condition and previous history before buying. An inspection is a crucial step and should be negotiated incorporated with a letter of intent or purchase agreement. Involve your broker and lawyer before signing any contract.
Regulation and compliance: Aircraft ownership and usage must comply with your countries aviation regulations and rules. In the USA the Federal Aviation Administration is the governing body. It must be inspected and a certificate of airworthiness provided to operate the aircraft. It makes a difference if you are going to privately operate the jet, or charter your aircraft.
Liability and Insurance: Finally, you need to consider issues of liability and insurance, and any relevant taxes. Consider how you will apply the deduction of depreciation. It becomes more involved if multiple parties plan to use the aircraft. Plan how to handle regulatory hurdles and pitfalls before buying an aircraft so that you are aware and have the knowledge upfront before committing.
Summary
There are many options to travel by business jet. New or pre-owned if ownership is your only consideration; charter, a jet-program or fractional ownership if you just want access to a jet.
Either way; you can join the many that fly by business jet and have never looked back.