Internet browsing may be your initial step when you begin exploring the possibility of buying a private jet. The Web can provide a wealth of information, and you’ll find out what other aircraft owners have to say about certain models of aircraft.
But when you’re ready to start a serious search for the aircraft that meets your needs, you wouldn’t want to buy one you found on the Internet — or anywhere — without enlisting the help of a professional jet broker.
And doing so will save you time, headaches and, ultimately, money.
Detailed knowledge
Aircraft brokers have the best advice about the process of buying a used aircraft that suits your style and your pocketbook. A client may not have a great deal of background knowledge or in-depth technical knowledge about private aircraft. But aircraft brokers know the advantages and disadvantages of each type of jet available and are able to advise you accordingly.
For example, a professional broker might advise you not to shell out millions of dollars for a new aircraft when a plane that meets your requirements is available on the pre-owned market. With the help of a broker, you’ll make your purchase based on fact — not whim or fancy.
When you’re ready to inspect an aircraft you’re considering buying, you’ll want to have a professional who has a good understanding of airplanes look it over thoroughly for an unbiased and informed opinion. The broker can also help you locate a suitable, unbiased provider to perform a detailed pre-sale inspection of the aircraft.
A broker also considers details such as whether the current owner of the jet has paid the taxes on the aircraft, and knows that if the asking price appears too good to be true, it probably is — and not a wise purchase.
A professional broker will do a due-diligence check, ensuring that you are buying a plane that will serve your ongoing needs so you don’t have to upgrade in a short time or pay extra for space, fuel and salaries when you don’t need to.
Quality and value
Jet brokers such as L & L International are experts in the investment opportunities of used airplanes for sale. They understand the needs of specific buyers and the qualities of each of the used airplanes on the market. The first thing that a jet broker will do is perform a full cost analysis. The breakdown of your needs will factor highly in this. For example, if you are looking for a small airplane to transport people around the country, then you won’t need to spend more money than necessary on one of the ultra-long-range jets that are capable of intercontinental travel.
L & L International understands what qualities the buyers of used jets are searching for and the qualities of specific aircraft that may be especially suitable to the particular needs of those clients.
So, whether you are looking to upgrade or purchase your first aircraft, relying on a broker is the most efficient way to maximize your chances of finding the aircraft that’s the right fit for you.
Everybody’s talking about the record-breaking year for preowned business jets. They should; JetNet released compelling numbers:
- 2,240 preowned business jets sold in 2012 (new record!)
- Full sale transactions of used business jets were up 7.2%
- Average Days on Market decreased by 10 for business jets
- Percentage of fleet for sale decreased to 13.4%
What does this mean for buyers?
Because the for-sale inventory is higher than 10%, it’s still considered a buyer’s market. So if you’re interested in acquiring a preowned jet, now is the time. The improvement in the private jet market is expected to increase, so we will likely see a continuing decrease in the number of preowned jets for sale. That means now is the time to buy.
What does this mean for sellers?
Fewer days on the market and the record number of transactions are good news for sellers! Things are loosening up, and some of the more risk-averse buyers and financers are gaining confidence in the economy again.
Also, depending on your aircraft, you may have a hot commodity! Business Jet Traveler’s annual report shows the top jets for sale in the preowned market. For example, the Gulfstream G200 averages only 259 days on the market, well below the industry-wide average of 370. Aircraft built after 1999 are the most sought after, and only 7% are for sale, creating a pretty tight market.
These numbers released last week are an encouraging step toward a once-again thriving business jet market. It looks like 2013 is the time to get in on the action!
Now is a good time to review next year’s strategic plan. Is an aircraft part of that vision? Companies don’t purchase jets every day; this transaction takes time and planning. Make sure you have a plan in place to get the process rolling.
A good starting place is the development of a “mission profile.” This helps you determine and define how your company will use an aircraft, which in turn will help you invest in the right aircraft for your needs. You and your buying team should clearly and objectively answer several specific questions:
- How will your company use the aircraft?
- How many passengers per trip?
- How often will the aircraft be used?
You can then use your answers to create your company’s aircraft mission profile.
With this profile in hand, and with the help of an experienced aircraft professional, you can begin to assess the features of the different aircraft on the market. Narrow your shopping list of potential aircraft by matching manufacturer offerings with the performance characteristics outlined in your mission profile. Then, you can focus on the available makes and models that meet your business needs. Honing in on the best aircraft for your company dovetails into budgeting.
To build a realistic budget, you need to factor in considerations such as acquisition, operational, and residual values. When budgeting for an aircraft purchase, we recommend at least a five-year projection. As your budget develops, keep in mind the tax consequences and financing of your purchase.
Aircraft acquisition can be a complex process. The best way to ensure your company makes the right purchase is to have a clear mission profile and to build a good team that knows your needs and budget. Before you buy, consult your tax and financing people, as well as a knowledgeable and experienced aircraft professional. This way, your transaction will be smooth and successful, and your company will be hitting the skies in no time!
[This article was originally published in 2010, but the basic idea that businesses with private jets are productive and more successful than those that don’t still rings true.]
While the private jet industry — like the rest of the economy — has experienced its share of turbulence in recent years, now is the time to take advantage of the value in the market, both in price and in benefits that a private jet adds to your business.
According to the Wichita Eagle, reporting on a presentation by Michael Scheering, Signature Flight Support president, the business jet market has begun to recover, although that recovery has been muted.
Scheering says that Fortune 200 companies are flying as much today as they did in 2008, but small-business owners are hesitant to use business aviation as much as they did in previous years. That hesitance is due, in part, to uncertainty about the tax structure for small businesses and their future income, which leads to a lack of confidence and less use of private jets, he says.
However, not only is it possible to get a good value on a jet in today’s market, but owning one can add value to your company, according to Jeffery Reich, principal of Elevon Consulting LLC, writing for Forbes.
Studies of the S&P 500 show that the use of business aviation contributes to the financial success of companies, Reich says.
He argues that using a business jet can help a company make more money faster, pointing to a NEXA Advisors report that shows businesses that use private aircraft grew their top line six percent more than those not using business aircraft. A 2009 study showed that:
- earnings growth on an annual average was 434 percent higher for users of business aircraft than for non-users
- total stock and dividend growth was 252 percent higher for users
- total share price growth was 156 percent higher
- market capitalization growth measured by market value growth was 496 percent higher
And, because these figures are from the period in which auto makers’ use of corporate jets was challenged by politicians in late 2008, growth figures may be even higher now, Reich writes.
The key to turning the purchase or ownership of a private jet into a business advantage lies in optimizing its use, he says: “taking the time to determine what value air travel can provide your particular business strategies.” Considering business aircraft from a cost-focused approach will only determine that it’s “expensive,” and you will compromise safety and potential value.
Reich recommends that businesses use the same processes in determining whether and how to use private jets. Start with a strategic alignment, taking an unbiased approach and people who can speak to both the business and aviation sides of the table. Eventually, aviation will become just another seat at the table, and another tool in the arsenal of sustainable ways to generate revenue, he says.
The hangar – that underappreciated but so necessary aircraft accessory. But it’s more than just a storage facility. Aircraft owners and personnel spend a lot of time here, sprucing up the plane or making repairs. Might as well make it comfy, right?
Or perhaps you’d like to get more mileage out of your hangar. Looking for a fun new venue for a holiday party? Or perhaps a fundraiser? Family reunion? Anytime you need a large space to accommodate a big group of people, an airplane hangar just might be the ticket. People host all sort of events in hangars, from wine festivals to weddings.
Every year, the Marine Corps Air Station Miramar hosts a Top Gun party in a hangar. The active airbase is the ‘real’ Top Gun flight school. Check out the transformation of the hangar into party venue!
Perhaps attending a party or event in a hangar isn’t enough for you. You can join the growing ranks of people that have either renovated a hangar into a home, like Ivo Zdarsky did in a remote part of Utah or Robert Severance, Jr., in Florida. And then there’s the neighborhood with 75 feet wide streets and a hangar on every lot.
Sometimes general aviation airports need more hangar space or owners decide they need a new hangar. AOPA offers a great resource that explains how to get started planning your hangar.
by David J. Wyndham, Vice President and Co-Owner, Conklin & deDecker
Do you own a car, home, boat or plane? Then you are an asset manager.
Most of us think asset management deals with financial assets such as stocks, bonds and mutual funds. But it should also include physical assets. Asset management of a physical asset includes the entire life cycle, starting with its acquisition, continuing during its use and to its retirement or sale.
As an aircraft operator, you are responsible, in whole or in part, for the value of the aircraft. How you operate, care for and maintain the aircraft will have a significant impact on its value.
Regarding an aircraft, anyone who touches it has a part in maintaining its value. When dealing with the asset management of an aircraft, you will make many decisions as illustrated by the following questions:
- When is it appropriate to repair, overhaul or replace parts?
- Which optional service bulletins should you implement?
- When is it time to refurbish the interior and paint?
- When should you sell your aircraft?
Regardless of the many decisions, it is important to recognize that aircraft asset management has four main components:
- Operational — What is needed to keep the aircraft reliable and safe?
- Regulatory — Is the aircraft compliant with applicable airworthiness regulations?
- Financial — What is the market value of the aircraft?
- Ownership — What is the return on the investment and what is the quality of the experience?
Following are some of the more common and important areas in the asset management process to consider that can affect the value of your aircraft.
Proper maintenance is essential. This involves more than just meeting the regulations to have a safe, airworthy aircraft. Regulations set only the minimum standards. To maintain its value, the aircraft must be kept in top operating condition for both the routine care and the major maintenance of the aircraft. Anyone who has gone through a pre-buy can tell you that the aircraft in impeccable condition goes through the process smoothly. Find something amiss in the pre-buy and you keep looking. An aircraft that is well maintained and looks well maintained will command the higher value. Also, who does the maintenance is just as important as what was done. Maintenance is not the place for dealing with the lowest bidder.
Proper maintenance records are required. In addition to the regulations, what would be the value of an aircraft if it were missing all of its maintenance records? Again, the regulations specify what records must be kept and in some cases, for how long. This regulation meets the spirit and letter of the law, but does not sufficiently maintain the aircraft’s value. The more complete and thorough the maintenance record, the more secure the value of the aircraft. Uncertainty causes a loss of value. Proper maintenance records detail the entire maintenance history of the aircraft and what is on paper should accurately reflect what is in the hangar.
If there is damage history, how was it documented and corrected? Was the damage repaired or replaced with new? Has the aircraft been returned to service in the same or perhaps better condition? Damage history, if fully documented and accounted for, need not be the kiss of death for an aircraft’s value. Properly documented damage repair that shows a return to the manufacturer’s specification can negate or reduce the loss of value of known damage history.
Proper record keeping also means proper security of the records. You should have some sort of backup of aircraft records stored off-site. With many operators maintaining their records on computers, this should be easy. Paper records should be scanned, indexed and stored off-site. When the aircraft and records go to an off-site maintenance facility, keep a backup copy locally. Although it’s rare, aircraft do leave the maintenance facility missing some of their records. If that happens, you can get into some expensive arguments about who was responsible and how much the lost records are worth. How much can lost or incomplete maintenance records cost? The answer lies in another question. How much is that aircraft worth if you cannot prove its airworthiness?
Proper upgrades and enhancements can add value. What is the service bulletin status of your aircraft? Beyond the mandatory service bulletins lie a number of optional service bulletins. Which ones add value to your aircraft (i.e., are popular for your model)? Have you added or upgraded the avionics? If so, is the aircraft a unique design or is it brought up to newer standards? In dealing with art, a one-of-a-kind piece is essential to its value. With aircraft, it is not. Non-standard modifications do not add value. They may be essential to the mission, but uniqueness in an aircraft is not a selling point.
Proper record keeping is a common theme here. Impeccable records are important not only in knowing the aircraft is well maintained, but in proving the value of the aircraft. The aircraft itself must be well cared for and match the documentation exactly.
Asset management should be part of the aircraft planning process from the start. All too often, asset management is only considered when it’s time to sell the aircraft. Rather, it is an essential part of the entire life cycle of an aircraft and if properly implemented, it can pay off by enhancing the aircraft’s value.
*This article originally appeared in our newsletter October 2010.
Financing a private jet purchase is only the start of the transaction. Once a company or individual purchases an aircraft, sorting through tax issues and regulatory compliance requires a significant amount of time. You can save time and ensure you get the right answers by contacting a qualified aircraft consultant.
Aviation-information provider Conklin & de Decker offers consultation for complex issues such as taxes, finances and government regulations related to jet ownership.
Financial planning
Conklin & de Decker’s financial analysis starts with a thorough understanding of each client’s aviation needs. Then, the team reviews clients’ current aircraft operating costs and predicts future costs by using life-cycle costing. This detailed analysis lets the company make recommendations that ensure clients get the best value for their aircraft purchases. Conklin & de Decker’s team works with small and large fleet operators, individuals, corporations, government agencies and commercial operators.
Tax consulting
Conklin & de Decker’s tax expertise covers commercial and private aircraft operations. The team ensures clients understand tax impact of aircraft ownership and helps determine how to minimize federal excise tax exposure and state taxes.
Compliance planning
Conklin & de Decker also offers consultation with federal civil aviation agencies to help them perform periodic ownership analyses. The team helps clients ensure they are in compliance with all requirements.
When you need answers to complex aviation questions, Conklin & de Decker can provide expertise and objective information. Contact the team at (508) 255-5975 or email contactma@conklindd.com.
Your business is finally starting to pick up, joining in the gradual economic recovery.
You’re needed in five places at once to keep momentum going but find yourself stuck in line, pondering which of the TSA scans (X-ray or pat-down) will be quicker and less humiliating.
Yes, you can easily see the value of owning a private jet. But what do you need to know to get the ball rolling?
Buying a jet is more than adding another vehicle to your company fleet. It’s adding a self-contained “travel division” to your company, introducing essential personnel from an entirely different industry and becoming deeply involved in unfamiliar infrastructure (airports and the airway system).
And unless you’re a pilot, you may not be aware of all of the questions you should ask a seller before the purchase. As with all major investments, consultants can help you along the way: Skip Google and ask friends and colleagues who operate jets to find a trusted consultant or management team to help you find and buy a pre-owned jet. Then audition several of these referrals to find a good fit.
Consider these four points:
- How do you match your business requirements with the right plane? Do you need your jet to transport a handful of people relatively shorter distances, or will it carry more passengers longer distances? Getting carried away with impressive speed or range statistics could lead you astray, as well.
- For what and how often will you use your aircraft? Most buyers will use their jets to fly 80 percent of their missions and charter a plane for the remainder. A broker can help you determine whether you need a jet that flies long or shorter distances, and seats many passengers or just a few.
- To operate your jet, what personnel will you need and how do you find them? Regardless of whether the aircraft is new or pre-owned, you’ll need to arrange for your jet’s care, operation, and storage, as well as the handling of financial, insurance, legal, and other paperwork, to establish a safe, legal, and fiscally prudent flying operation. Most prospective owners can handle a couple of these duties but not all, and that’s another area in which a consultant comes in handy.
- Buy new or pre-owned? You are likely to have a reasonable budget and want to achieve the best value for your money. Buying a pre-owned jet can help achieve that but can be tricky — especially if you do not have an in-depth understanding of the world of aviation or of the many different requirements and possibilities that various types of private jets have to offer.
Jet brokers will help you determine whether you will use your jet enough to justify buying an entire aircraft, or if fractional ownership or using a charter service is more appropriate. Then they simplify and de-stress the process of purchasing an aircraft, personally managing all aspects of the arrangement for you. They can ensure you choose the right private jet for your budget and your personal or corporate needs.
Private jet brokers will entreat you to provide a list of requirements and desires in your potential future jet. They will then take this list and apply it to the planes they are brokering and return with your aircraft options. If none of the options fits the bill, they will search from their contact lists for companies or individuals who might be willing to lease or sell their aircraft. They will also work to secure financing and insurance on your jet, and find capable inspectors who will give the craft their seal of approval.
A good jet broker will not push you into a sale, but provide you with the information to decide whether to purchase the aircraft to begin with, and then be available to answer questions, refer you to resources to help operate and maintain your jet and more.
In an industry with complex rules and regulations, it’s critical to have access to industry organizations like the Aircraft Owners and Pilots Association (AOPA). Established in 1939, AOPA is the world’s largest and most active aviation organization supporting pilots, aircraft owners, students, and enthusiasts.
A rich history
In its infancy, the AOPA contributed to the education of pilots who served in World War II. In the aftermath of Pearl Harbor, the AOPA fought against government efforts to ban civilian flying, helping to launch a more reasonable pilot identification program instead.
After the war, the aviation industry expanded rapidly, and today the AOPA acts as legislative advocate for more than 400,000 members. Its central mission is to “preserve the freedom to fly” while emphasizing accessibility and safety for the general public. The organization also supports and promotes initiatives that ensure a secure and stable future for the aviation industry.
Online tools
The AOPA website hosts an extensive set of training and how-to resources for anyone interested in aviation:
- Tips for buying and selling aircraft
- Finding a flight instructor
Annual membership fees of just $45 provide a wide range of benefits including aircraft and life insurance plans, special rates for legal services, and emergency medical coverage. Members also enjoy exclusive access to programs that assist with aircraft financing, title services, and more.
For more information about the association and the many benefits of AOPA membership, visit www.aopa.org.
Do you have clear title to your aircraft? If not, you may not be able to sell it, and you may not want to buy one without clear title.
According to Greg Cirillo and Gary I. Horowitz of Wiley Rein LLP, in writing for The Metropolitan Corporate Counsel, clear title is the “single most important element in an aircraft transaction. It is the one objective that cannot be compromised and the one condition to closing that, if unsatisfied, will end a transaction.”
A clear title has gained even more prominence in a time in which repossession, voluntary surrender and distressed aircraft sales are more common, and buyers should use heightened caution, they write.
Cirillo and Horowitz define a clear title as “an expression reflecting that ownership of the aircraft is transferred free and clear of all mortgages, liens, leases or encumbrances, and that there are no legal questions or ambiguities as to the aircraft’s ownership.”
For the buyer, this means that he or she owns the aircraft completely and exclusively, without risk of a third party claiming ownership or a lien interest, according to Cirillo and Horowitz. For the seller, the clear title is “the essence” of what he or she is selling for the agreed upon amount. But even after selling the aircraft despite title problems, he or she may still be responsible to defend the buyer’s title to the aircraft at his or her own expense.
For a buyer to obtain a clear title, the seller must have originally acquired a clear title, resolved any existing impairments on the title and lawfully conveyed the clear title, Horowitz and Cirillo say.
Buyers must be aware that although titles and liens are filed with the Federal Aviation Administration(FAA), national and international registries do not create or prove clear title. Rather, they merely provide a place to register title and liens and find notice of filings affecting title, Cirillo and Horowitz report.
That means the parties of an aircraft transaction must rely on local law to determine whether a title was properly conveyed. The FAA is ineffective in cases of defective title transfer, defective lien creation, or termination and liens created without filing, they write.
To avoid the quagmire that post-closing title ambiguity and lien claims create, buyers and sellers alike should perform due diligence to ensure that the transaction involves a clear title.
Doing so is part of the “pre-buy” evaluation, and it is best to involve a professional broker such as L & L International, who can help not only with confirming that an aircraft will come with a clear title but will also scrutinize the jet with a trained eye. A broker will confirm the aircraft is right for the buyer, its physical condition, that it has a clean history and its papers are in order, and if it has been well maintained.
