Leasing A Corporate Jet

Which Older Large-Cabin Jets Offer a Good Value?

Demand for preowned business jets in the heavyweight class has increased in the past year. Although a much-sought-after used Gulfstream G650 might be out of reach, lower-priced options make ultra-long-range aircraft available to buyers shopping at a lower price point.

In the ultra-long-range jet category, Gulfstream stands out among its competitors. Older models, such as the Gulfstream GV and Gulfstream GIV, are moderately priced options. The advantages of these planes include large cabins that seat 14 to 16 for the GV and 14 for the GIV, fast travel speeds of up to 488 knots for the GV and 476 knots for the GIV, and long-range capability of 6,500 nautical miles for the GV and 4,200 for the GIV.

Gulfstream GIV and GV

There are specific advantages to each model. The GIV comes in at a relatively low price of $4 million to $5.5 million and offers the flexibility to land at smaller airports. As for the GV, at $14 million to $19 million, Aviatrade calls it “the best deal around for a long-range aircraft.” With fuel-efficient engines and reasonable operating costs, the GV is considered an especially good value.

However, there are downsides to buying an older aircraft. The main drawback is age. A savvy shopper must do research to establish an aircraft’s maintenance and operational history. The disadvantages of the GIV include its age, as it was introduced in 1987; its weight, which translates to high fuel requirements; and the likely need for refurbishment. Although refurbishing costs need to be factored into the purchase price, they can also be viewed as a value-add opportunity. Although the GV is not quite as old as the GIV (the GV was introduced in 1997), it might still require refurbishing.

Buy smart

The bottom line is that older, well-maintained Gulfstream models can be a good buy; historically, heavy ultra-long-range jets retain a high value. Before you delve into a purchase, consider factors such as the aircraft’s age, maintenance records, refurbishment history, whether the avionics have been updated, and whether the aircraft has been on an engine program. A reputable private-jet broker can assist you in finding the right preowned aircraft for your requirements — or locate the right buyer for your aircraft, as the case may be.

Contact L & L International if you need assistance in purchasing or selling a private jet.You can reach our sales specialists today at sales@L-Lint.com, call us any time at+1.305.754.3313, or visit us online.

Jets: Learn About Leasing

If you’re not quite ready to take the plunge into aircraft ownership, leasing may be an option that works better for your needs.

In an aircraft leasing arrangement, the owner — or lessor — retains legal title to the aircraft but transfers possession of the aircraft to the lessee. Because of the broad range of options available, not all aircraft leases will meet the above definition.

A variety of leasing options, each with their advantages and disadvantages, is available.

Leasing benefits

The benefits to a lease structure rather than purchasing a private jet include:

  • The lessor takes tax depreciation — a benefit passed along to a lessee through low payments and lower implicit interest rates.
  • In most states, sales tax is paid over time through the stream of the low monthly payments instead of up-front, yielding a much lower sales tax liability.
  • Custom leasing provides flexibility for upgrade or early buyout options.
  • True operating leases qualify for off-balance-sheet accounting treatment, providing shareholder sensitivity benefits.
  • Leases provide 100-percent financing in most cases.

Some kinds of leases, such as synthetic or capital leases, have considerably different features from the true operating lease described above, so please confer with your accounting or finance advisor to fully understand each lease product.

Lease financing

When leasing an aircraft, a typical loan term is five to seven years. However, the payments will typically amortize over a much longer schedule, such as 10 to 20 years. This loan structure is created on a mortgage-style note with an end-of-term balloon payment yielding a comfortable payment amortization.

A typical lease term is seven to 10 years. A sophisticated corporate aircraft lessor will be able to customize upgrade or early buyout provisions consistent with your thoughts, preferences and aircraft upgrade plans.

Both floating and fixed interest rates are available if you are considering leasing a private jet. In addition, at times hybrid rate structures are also available. Examples of alternative rate structures include:

  • floating with changes in LIBOR every 30, 60 or 90 days
  • floating with changes in the prime rate or commercial paper
  • fixed annually
  • fixed for a predetermined time (e.g., five years) and then re-set

The best interest rate structure for you depends on the rate climate at the time of your closing as well as the length of time you plan to lease the aircraft. Your aviation lender can offer insight on the interest rate structure best suited to your specific transaction.

Early lease termination

If you decide to end your lease early, the early termination process must involve the cooperation of your lessor to determine:

  • whether the lease offers a specific early termination option at that point in time
  • Fair Market Value (FMV) of the aircraft relative to the Termination Value (TV) of the lease at that point
  • whether an aircraft upgrade or replacement is fostering the early lease termination (which is often the case)

If the FMV is less than the lease TV when the lessee returns the aircraft, the lessee will likely have to make up the difference to the lessor with a lump-sum cash payment.

There’s also another option: Instead of returning the aircraft, the lessee may seek permission from the lessor to market the aircraft. In this case, the lessor agrees to facilitate the sale documentation and closing process. This process is typically used when the lessee is upgrading aircraft with the same lessor.

Key questions to ask

When leasing an aircraft, it is important to select a lessor who can demonstrate a successful history of assisting clients with creative early lease termination solutions. Lessors who have successfully managed corporate aviation assets over the last five to 10 years and are not burdened with multiple nonperforming corporate jets are the most creative, aggressive and helpful lessors.

If you are a first-time aircraft lessee, you should ask these questions about financing to make sure your approach to leasing a private jet is well-planned and strategic:

  • Do you desire to structure aircraft ownership in the name of an operating corporation, a corporate subsidiary, an individual’s name or a special purpose LLC?
  • What individual or company will provide the financial strength for this transaction?
  • Will the aircraft operate according to FAR Part 91 (corporate) or 135 (charter)?
  • How many hours of annual use do you expect?
  • Will you use an internal flight department or an aircraft management company?
  • Will you lease or charter the aircraft to related and/or unrelated parties?

For more information about leasing and financing options, visit www.l-lint.com.

Private Jets Still Good Choice for Companies

A recent outcry about Xcel Energy, a leading utility company that operates in eight states, reminded the American public of the day back in November 2008 when the executives of the Big 3 auto companies flew private jets to Washington, D.C., to request an immense taxpayer bailout.

Xcel Energy just asked for a $142 million rate increase from its Colorado customers. Of that, $1.1 million is to pay for the leased corporate jets (two Bombardier Learjet 45s). Xcel Energy services 1.4 million electric customers in Colorado. While $1.1 million for private jet expenditures sounds like a lot of money, when it is divided by the 1.4 million electric customers, each one would pay $0.78, or $0.07 per month.

People don’t usually get this worked up about $0.78. You can’t even buy something from a vending machine for that price. But private jet travel tends to cause a knee-jerk reaction from many individuals — assuming unbridled greed and luxury on the part of corporate executives. Nearly every news outlet in Colorado is covering the story. (You could argue that the only bigger story is whether Peyton Manning will be wearing a Broncos jersey next year!)

Certainly Xcel Energy has figured out that leasing two private jets is an economical choice for its travel needs. The  problem here is that the public utility hasn’t explained the use of the jets in a way that makes sense to people. The only explanation that the news media give is that executives must commute between Denver and Minneapolis, and that seems ridiculous to most readers. After all, most workers don’t get paid for commuting time or compensated for fuel.

Surely Xcel Energy’s public relations department can do a better job of explaining the use of the jets. Private jets save time, and time is money. This public perception that private jets are extravagant luxuries hurts the entire private jet market, from pre-owned jet sales to orders for new ones. Many companies feel they shouldn’t have to justify their private jet use, but crafting a message that improves the common perception benefits everyone.

Know Your Private Jet’s Range

Remember that Jerry Seinfeld joke years ago about “making up time” on an airplane? The captain apologizes for the late start, but he is sure they will make up time en route and land on time. Jerry wonders why jets don’t go as fast as possible all of the time. (This isn’t that clip, but it’s pretty funny!)

There are a lot of factors that affect jet travel speed and range.  If you’re thinking of purchasing a jet, make sure you know the range that will work best for your frequent, routine trips. Then, keep in mind that the range given for an aircraft is a general estimate that can change depending on many external factors.

Basically, the range depends on the aircraft’s fuel economy — fuel is often the limiting factor on trips. Be aware of these factors that affect fuel economy:

  • Winds
  • Payload
  • Circuitous routes
  • Temperature
  • Long trips over water

You can read more details about considering the range of an aircraft in the most recent newsletter from our friends at Conklin and deDecker.

Full or Fractional Jet Ownership?

If the need for a private jet in the day-to-day operations of your business is obvious, the next step is determining whether you should buy one outright or invest in fractional ownership.

Your course of action ought to depend upon how frequently you would use the aircraft, your corporate budget and the available aircraft.

Full jet ownership

Many think that full jet ownership is the only possibility when it comes to using and depending on private air travel. Obviously, if you or your company has full jet ownership, then it is yours, much like a car or house. Full responsibility for all aspects of the jet is yours, but you also enjoy having a private jet at your disposal anytime.

Fractional jet ownership

A condominium time-share agreement is fairly similar to fractional jet ownership. With this system, an individual or company pays a set amount and is then guaranteed a certain number of hours of use over a year or five years. In order to use the jet, fractional owners must confer with the other owners to be sure it is available.

Unlike owning a jet, having access to a private plane through fractional ownership doesn’t mean you can go anywhere in the world; not all programs offer international service beyond the Caribbean and Mexico. And if they do, some programs are so cost prohibitive that travelers often opt to fly overseas commercially in first class and then work with a charter if they want to fly to their final destinations.

Despite these limitations, the National Business Aviation Association reports that nation’s fractional aircraft market has made a turn toward what appears to be a period of sustained growth.

Several factors contribute to the increased interest in fractional ownership:

  • Commercial airlines are offering fewer flights to smaller markets.
  • Businesspeople consider the time savings of a private jet a great value.
  • Companies that offer fractional ownership are sweetening the deal with perks like rollover hours.
  • Creative membership programs increase availability to new parties.

Professional guide

A jet broker can walk you through the advantages and disadvantages of full or partial ownership of a private jet. Experienced private jet brokers can provide you with information regarding all of your options, as well as provide information about available aircraft, specifications and maintenance costs to help you make the best decision for your lifestyle or company.

Average jet prices are down and planes are on the market for shorter periods, so it may be a difficult time to find the right plane and the best price. A broker is in constant contact with the market and will be able to get the deal you need.

Corporate Jets of the NBA

After talking about the NBA lockout and private jets I did some follow up research and found some interesting news related to the NBA and corporate jets.  I have actually met and talked with Mark Cuban in Las Vegas in 2007 and he had flown into Vegas on one of his own private jets to speak at an event and conference where I was speaking.  I didn’t get a chance to see his aircraft then but it was of note that he has not one but three private jets. Cuban of course is the owner of the world champion Dallas Mavericks.

Cuban’s Gulfstream G-550 was a $40Million purchase he actually made online.  The interesting fact there is that he purchased the Gulfstream online making it the largest online transaction ever made by anyone.  Cuban also is the owner of a Boeing 757 that is the team’s method of travel.  The 757 includes a weight room and over sized seats for the tall team members, as well as meeting and coaching areas that includes the ability to view video of games and other resources. Cuban obviously understands what it is like to have a private corporate jet.  He stated in an interview of his aircraft that it allows him the freedom and privacy he needs and has gone as far as to say he cannot live without his corporate jets.  Cuban also owns a Boeing 767 that he has for charter.

The other NBA player and part owner of the Charlotte Bobcats is the very well known Michael Jordan.  Jordan’s Gulfstream IV is listed as having an N-Number of N236MJ meaning his number of his jersey as 23 and the 6 representing the number of championships he won as a player in the NBA.  The other notable information in the picture that was put out by Yardbarker is that Michael Jordan has put his logo on the tail and the color of the plane is the Carolina Blue of UNC where Jordan attended college and played.  I also understand that when the plane is seen from underneath you can also see the number 23 and the Carolina Blue colors.  Jordan may not be able to compete with the big markets in the NBA but he is tops in our book with his Gulfstream IV.

Occupy Wall Street and Business Aviation

I have been following closely the “Occupy Wall Street” protests going on around the country to see if their protests have reached us here in the area of business aviation.  To date, I have yet to see any specific attacks on the industry in spite of the fact that private and corporate jets and a major industry that is used by the 1% that is under scrutiny.  It is true that the 1% that is being held up as part of the elite that is the target of the people that are protesting are a major contributor to the business aviation industry by way of purchasing and leasing private jets.  It is also important to understand that the world of business aviation is a major contributor to well paying jobs and contributes to manufacturing and jobs that President Obama is trying desperately to bring back and make a part of his jobs bill.

In a letter and statement to President Obama, the National Business Aviation Association expressed their displeasure in what has been an underlying attack on the industry by statements made by the President, and in part I thought I would restate what the NBAA stated that may be pertinent:

Business aviation represents one of the great American industries. It generates highly skilled and well-paying jobs, including the kind of manufacturing jobs you have said are a priority for your administration. It brings economic development to thousands of communities with little or no scheduled airline service. It helps U.S. companies be efficient and flexible – important traits for businesses trying to compete in a global marketplace. And, business aviation helps our country care for its most vulnerable, whether responding to earthquakes and floods, transporting organs for patients, or taking cancer victims to treatment.

To date, the protests have not targeted our industry as an elite only industry, but I assume as they get better organized they will begin to hold out companies that cater to the 1%.  I hope that the NBAA is working on a strategy to combat those claims and that they look at the overall industry instead of making disparaging remarks or making it appear that the industry is to blame for the current economic crisis.

For a copy of the NBAA June 30, 2011 advocacy letter to President Obama, it can be downloaded from their site.

Private Jets At The Ready For NBA Lockout?

With the NBA lockout now well past the 100 day mark and no real agreement being seen on the horizon, it makes me wonder about private jets of athletes, owners and others.  As talks begin the heat up in the NBA lockout a private jet would be used as a way to get from meeting to meeting with the highest amount of privacy.  Owners that need to meet with other owners and NBA officials may not want to fly a commercial flight and conduct discussions on the flight with other passengers present.  They would need to be able to speak freely of contract negotiations and lockout details without the fear of others hearing the details of those negotiations.

Players involved with the NBA lockout are now finding other forms of employment.  They are playing in other leagues around the world in other countries or are taking extended vacations during the lockout.  As negotiations heat up for players to return to the NBA ad as they need to return quickly to be able to return to practice and ready for the new season, they will need to travel quickly.  They also will need to speak to agents and negotiate deals and endorsements and would want to have a heightened amount of privacy.  Private jets and corporate jets are the perfect vehicle for this type of travel.

For now it does not appear that the NBA lockout is reaching a stage that will allow much of the above to happen.  I am hoping that it does end soon and not because I am staring at a blank television screen waiting for the games to begin, but because I am hoping all the pilots and crews of the private and corporate jets are all put back to work soon flying athletes and owners around the world and across the country.

VistaJet Offers Good News At EBACE

We continue to get good news from the industry and this is a trend at the EBACE event in Geneva, Switzerland. The latest in good news comes from VistaJet a Swiss business jet operator. The company announced today at the event that they have an order for 18 Bombardier business jets, which will bring its fleet to more than 50 aircraft.

It is reported that the order, valued at $383 million, includes 12 Globals and Challengers and six Learjet 60 XRs. Deliveries of the order should begin in 2012. The founder, owner and the chairman of VistaJet, Thomas Flohr, in a statement said his company’s current order backlog is valued at $1.3 billion. It is also reported that the company has on order currently, 10 Global 6000s, six Challenger 605s, 11 Learjet 85s and six Learjet 60 XRs. VistaJet operates a Bombardier-only fleet. Flohr stated out that 75% of the operator’s flights now originate from or go to “fast-growth markets,” such as Brazil, Russia, India, Nigeria, China and the Middle East. This shows in increase of 50% over this period four years previous.

Flohr stats that 2011 is “off to a good start,” he reported that 20101 saw a 25% increase in revenues over the previous year. Flohr revealed that approximately 20,000 passengers traveled aboard VistaJet aircraft last year. Flohr stated the company is “centered on [the passengers] actual requirements, rather than a perceived desire for abstract ownership.”