Private jets have taken centre stage in recent months as the best way for ultra-high net-worth (UHNW) travellers to get around. While jet-charter bookings are booming, so are the number of enquiries into aircraft purchases. Navigating jet ownership is a complex process in today’s environment and few people know the ins and outs of buying and selling jets better than Jahid Fazal-Karim, Owner and Chairman of the Board at Jetcraft – a global leader in aircraft sales, marketing and ownership strategies.
What are the primary benefits of buying a private jet?
Private aviation’s value amongst UHNWIs is undoubtedly increasing as the COVID-19 global pandemic evolves. The consistency, personalisation and control that comes with flying in your own jet, and the ability to be anywhere at a moment’s notice while avoiding large crowds and restrictive flight timetables, are all enticing and valuable commodities.
First, the consistency. By owning an aircraft, you can enjoy the comfort and efficiency of a personalised experience every time you fly. From cabin layout to onboard amenities, you know the ins and outs of the plane and can take full advantage of its features. As an owner, you can also choose to hire a consistent crew you know and trust, and who know your preferences.
Then, personalisation. Just like owning a home, owning an aircraft allows you to configure it exactly to your personal taste and needs. It also offers the ability to tailor the flight experience to meet the specific trip requirements.
Finally, you have complete control. The only way to be in full control of your travel experience is to acquire your own aircraft. Owners have the freedom to make changes or extensions to a trip at the last minute. Ownership also provides you the autonomy over your aircraft maintenance and crew training, ensuring everything meets your level of specification.
The key to all of these factors is that flying privately allows travellers the ability to limit their exposure to germs and viruses. Those who have the means and choose to fly private will undoubtedly come in contact with fewer people and surfaces throughout their trip, and they have the ability to further control the cleaning and sanitation measures to their preferred specifications. In fact, Jetcraft is the first dealer to treat our inventory aircraft with Microshield 360, which protects against the virus that causes covid-19 and other pathogens that may otherwise live on cabin surfaces for 12+ months.
Should I consider an aircraft purchase now? Do you have any tips for first-time buyers?
If you’re in a position to do so, absolutely. While these are challenging times, we encourage those who can to take a long-term view and consider aircraft purchases or upgrades to meet their needs. With good quality inventory available as well as the advantage of low interest rates, net operating loss and bonus depreciation for those in the US, there are good deals worth seizing.
We are well-versed on how to leverage the current market to negotiate the best deal for first time buyers and we are one of few companies with the ability to take in trades for those who already own an aircraft. This prevents customers from holding a second aircraft on their books when upgrading to a new model, avoiding a risky crossover period. We are also the only dealer to offer an exclusive post-purchase unscheduled maintenance program, in partnership with Jet Support Services Inc., protecting buyers from unexpected maintenance issues and the associated costs for 6 months after their aircraft purchase.
For many interested buyers, quarantine measures have limited the ability to travel. To assist in the viewing process, we’ve adapted our operation to facilitate live virtual aircraft viewings for prospective buyers, including a Challenger 604 last month, and an Embraer Phenom 100 most recently. We are also investing in bringing aircraft to buyers, unique to this pandemic. It’s important to conduct an in-person viewing when making such a significant investment, especially if you’re a first-time buyer.
Should you purchase new or pre-owned?
Yes, it’s definitely worth considering this option. Pre-owned in most other industries carries negative connotations but that does not apply to private aviation. Many aircraft are meticulously looked after by their owners and, as high-quality refurbishment has become more accessible and cost effective, even out-of-production aircraft can feel brand new. We’re seeing that previous buyers of new aircraft are now more willing to consider pre-owned.
What about depreciation and running costs?
The average period of ownership is five to 10 years, and typical depreciation in aircraft value drops about 10-15 percent in the first year with a further 10 percent each subsequent year. Our latest Market Forecast, the first of its kind to predict both the new and pre-owned business aviation markets, notes the average retirement age of a business aircraft is 32 years old based on historical calculations.
Operating costs will depend on the size of the aircraft and are divided into fixed and variable figures. As an example, the estimated annual operating cost for a Bombardier Challenger 605 aircraft is $2.5 million — including fixed costs like parking, storage, pilots and maintenance and variable costs, notably fuel – assuming the aircraft is flying 400 hours/year.
Are they a sound investment?
Our clients – including CEOs and UNHWIs – are generally all after the same things; convenience, flexibility, privacy, comfort, efficiency and, now more than ever, safety and security. In terms of investment, for the frequent flyer airborne for at least 150-200 hours a year, buying a jet can be a smart decision. If it’s the right plane and properly managed, it can make more sense than chartering or part ownership.
What are the key trends you’re seeing?
One of the key trends we’re seeing is the tremendous growth in pre-owned aircraft over the past decade. Our recent Market Forecast was the first to assign an accurate value and scale to the pre-owned market, digging down into the new economic reality in private aviation. It reveals that pre-owned aircraft transactions will outpace new deliveries by 4 to 1 over the next five years representing a total value of $61bn. It also highlights that the pre-owned value proposition is growing, and buyers of a new smaller jet can now buy a pre-owned midsize jet for an equal price or less, due to the increased accessibility and affordability of maintenance and refurbishment options.
Recently, we’re seeing more enquiries from first-time buyers who may have had the means to fly private but have chosen to fly commercial until now. We have a lot of confidence in the market and industry right now, and we expect this trend to continue for the foreseeable future.