Let’s be honest. Much of owning and operating a private jet can be time-consuming, tedious and, at times, stressful. With the convenience of flying privately and the resulting boost in productivity comes the responsibility of staying abreast of safety regulations, tracking and justifying costs, and overseeing myriad other complex details.
Still, it’s not all work and no play. One of the more pleasurable — and trendy — aspects of owning a private jet is outfitting the interior cabin to reflect the passengers’ tastes and the plane’s intended use.
Case in point: Steve Jobs. When Apple awarded him a private plane in 2000, the innovative CEO took a personal approach and spent more than a year customizing the aircraft’s interior, right down to the brushed nickel buttons.
Perhaps you’ll find your own inspiration from some of the most recent design trends:
- The explosive growth of the Asian aviation market has made onboard Feng Shui the latest rage. Designers install rotating furniture that converts into square or round shapes — functional for meetings or mahjong match-ups. For even more in-flight entertainment, add a karaoke machine.
- Beige and boring is out. Rounded corners, enhancement of natural light, and art deco fixtures are adorning the latest jet interiors.
- A design mock-up provided to BAE Systems for its Avro jets resembles something out of The Jetsons. A cargo door opens onto a patio area with a bar for relaxing and entertaining — on the ground, of course.
- Live ferns planted into an interior wall provide a natural, allergy-free wall covering. The plants are fed by a unique irrigation system, and natural light is directed from outside the cabin to keep them healthy.
Even if the design inspiration for your plane’s interior comes from more understated examples than these, take time to think through the look and feel of your plane’s cabin. After all, you’ll spend a fair amount of time inside your jet; you’ll want to enjoy it while you’re there.
If your company is showing strong revenue performance in 2012, and you’ve felt a little lightheaded after tallying up executive travel expenses, perhaps you’re wondering if private jet ownership is the right option for your business. Here are a few key questions that will help guide your decision-making process.
1. How many flight hours does your company log each year?
Experts suggest that just 25 to 33 flight hours per month may be significant enough to justify plane ownership. When doing the math, be sure to factor in commuting time from homes and offices and the amount of unproductive time spent waiting for flights at commercial terminals.
Also, consider the number of employees who will use the aircraft and the distances they fly. If overseas flights are common, flying privately may be more cost-effective and more practical than going on a commercial flight.
2. How much does your company spend annually on commercial air travel?
In addition to tracking current travel expenditures, look back at missed revenue opportunities. Were there new business opportunities that might have been captured if a VP had visited multiple client locations? Did an important customer cancel a contract because he felt he needed more face time with the CEO?
However, don’t underestimate the ongoing costs associated with private jet ownership, either. There are insurance premiums, fuel costs, catering, plane maintenance and pilot salaries — and that’s just for starters. For budgeting, a good rule of thumb is somewhere between $100,000 and $200,000 a year for operational expenses.
3. Is a new aircraft purchase the only option?
Not in this market. There’s plenty of inventory available for firms looking to score a great deal on a pre-owned aircraft. Choosing fractional ownership or even leasing may be a way for your business to test the waters before deciding to purchase a jet outright.
4. Now what?
If you’ve done some preliminary budgeting and still think private jet ownership bears a closer look, then you’ll need to reach out to a broker with the experience and resources to help you navigate the next steps. A relationship-minded broker will help address budget and usage concerns and can offer advice, insight and recommendations that will simplify the decision-making process.
Time is money, and no one knows that better than the executives of a company with a private jet.
But it’s not just about how fast a jet can transport staff to and from an appointment; it’s also about what they can accomplish en route. From meetings to research to developing client relationships, these airborne offices help executives make the most of their time.
Although saving time is a major focus of a private jet purchase, many companies and individuals waste time when they attempt to shop for and purchase a private jet on their own — or with the help of someone who doesn’t have the knowledge and experience of a jet broker.
Jet brokers:
- Understand clients’ requirements. A jet broker will ask crucial questions that determine the type of aircraft and approach to ownership that will best meet each client’s needs.
- Provide valuable insight. A good jet broker will not push clients into a sale, but will instead provide information that allows clients to determine which aircraft is the most economical and effective choice.
- Provide multiple options. Jet brokers use the breadth of their contacts and expertise to find the right aircraft for each client’s budget and use. They have access to planes that are not on the open market, so even if clients don’t see exactly what they are looking for on a website, they may still be able to procure the make and model they want.
- Give all the details. Jet brokers can provide seating charts, layouts and options for different makes and models of jets they are suggesting, evaluate the potential for renovation or augmentation, and engage purchasers in the buying process.
- Get all the ducks in a row. A jet broker ensures the new jet owner possesses all of the correct paperwork and has the latest maintenance and safety records for the aircraft.
- Extend their service. The best jet brokers have an extensive network of professional service providers to perform maintenance checks on the aircraft chosen, appraise the craft for the lender or insurance agents, and work to ensure that the purchase returns value for the investment. A broker can also connect buyers to professionals who can make changes and upgrades to the aircraft after the purchase.
When purchasing a jet aircraft, find a jet broker who can help you save time long before you make the investment in a plane.
Industry analysts project $40 billion of private aircraft sales coming from the Asian market over the next 10 years. So what does this increased demand mean for both new and pre-owned aircraft industry?
It’s important to note that the current status of the global private aircraft market is not necessarily an indicator of where it’s headed. In terms of inventory, North America currently rules the air, maintaining 40 percent of the world’s private jet fleet, while Asia holds only 5 percent.
There are a number of reasons why Asia has lagged behind in private aircraft adoption. Private jet ownership was outlawed in China as recently as 2003. Plus, the West has already overcome many of the hurdles that Asian countries currently face like steep airport taxes and insufficient airport infrastructure. However, there’s evidence to suggest that Asian governments are working hard to correct these issues, paving the way for increased sales over the next two decades.
A shift in demand
Burgeoning economies in countries like China, Indonesia, Singapore and Malaysia were comparatively unaffected by recent economic recession from which Europe is still reeling. In addition, many U.S. companies are still hesitant to splurge on private aircraft until their balance sheets show further improvement.
Demand from Asia is helping to offset some of the negative news found elsewhere in the world, contributing to an overall positive industry outlook in the months ahead. Most analysts agree that the next 10 years of private aviation sales will be dominated by the surge in demand from Asia.
A new plane today is a great deal tomorrow
Buyers from Asian countries overwhelmingly prefer new aircraft. Peering ahead a few years, those jets will become available for sale in the pre-owned space, creating plenty of aircraft inventory with attractive pricing options for savvy buyers.
In a previous blog, we reported that in January 2012, a number of key measurements including available inventory, price, days to sale, and number of transactions indicated the shift to a seller’s market.
With the first quarter of 2012 just drawing to a close, it may be too soon to start high-fiving just yet. However, with the Asian demand for aircraft showing no sign of slowing, there are a number of positive indicators to suggest that a seller’s market is upon us.
Any serious discussion about the future of private aviation has to factor in the explosive growth of Asia’s economic wealth. Asia is expected to contribute $40 billion in private aircraft sales over the next 10 years.
China takes center stage
China is driving much of the demand for private aircraft. In 2011, the number of Chinese billionaires grew by 66 percent (compared with the rest of Asia, where the number grew by 32 percent). Analysts predict China’s current fleet of just over 150 aircraft will grow to a staggering 2,470 by 2030.
China has not been immune to the economic uncertainty of the past four years, but the country is still considered a growth market and has the second largest economy in the world, behind the U.S. In addition, the country’s significant land mass supports continued economic and population expansion.
Unfortunately, some Chinese government regulations and restrictions continue to hinder private jet adoption. High aircraft import taxes, significant user fees and an underdeveloped airport infrastructure have had a dampening effect on sales from the region, but industry insiders believe the situation will improve over time.
Indonesia and Asia Pacific showing strong demand
Indonesia is also a key player in the Asian market, with a growing class of high net worth individuals (HNI) supported by a strong economy. Also, Indonesia’s geography of more than 17,000 islands spread out over 3,000 miles makes flying by private aircraft the most practical option for the business traveler. The government is now taking a proactive approach to expanding airport facilities in this mostly rural country and is also implementing routine safety inspections of its private aircraft fleet.
The number of billionaires found in Asia Pacific now exceeds all of Europe, so it wasn’t a surprise when Gulfstream Aerospace recently reported that almost half of their 2011 third quarter orders came from the region. Of course, economic enthusiasm is diminished somewhat by Japan’s ongoing efforts to recover and rebuild from last year’s devastating earthquake and resulting tsunami and nuclear disaster.
Many private aviation analysts believe the global market for private jets is on the brink of a modest rebound in 2012. It looks as if Asia’s continued economic expansion is the fuel for that recovery.
Charles Lindbergh relied on the credit of several St. Louis businessmen to raise the capital for his dream plane, The Spirit of St. Louis, back in 1927.The numbers are much higher now, and most individuals and businesses still finance their aircraft purchases.
A few weeks ago, we reported in Corporate Jet Insider about the potential for an improving private aircraft market. Some positive signs in the pre-owned market in January 2012 indicated a turnaround. Inventories are lower, jets are spending fewer days on the market, prices are increasing, and the number of transactions is higher.
This is all great news for sellers, but buyers still have time to snatch up a great deal. And finding financing is the next step. This aspect of potential aircraft ownership is a necessary hurdle for most buyers. Here are some trends in the aircraft financing world right now.
- Lenders demand a relationship with you, not simply a one-loan-stand.
- 20 rule: Loan term and age of aircraft should add up to less than 20.
Thus, you’re going to have better luck financing your aircraft if it was manufactured in the past five years and if you already have a relationship with a financier.
As with any major purchase, you’ll want to take your time making a decision and seek out the help and advice of professionals. There are many steps to purchasing a jet, everything from financing to pre-purchase inspection to simply finding the right aircraft for your needs. The experts at L & L International can help you every step of the way.
Have you been holding on to your private jet since 2008, waiting to see prices rise again? If so, it may be time to get that beauty in shape for potential buyers.
Finally, indicators point to the beginning of a seller’s market in the pre-owned private jet industry.
JetNet reports these trends for business jet sales, comparing January 2012 to January 2011.
- Increase in prices: +14.3%
- Decrease in inventory: -0.9%
- Reduction in average days on market : 126
- Transactions increased: 3.7%
Of course, these improvements are for only one month, but it looks like the trend may continue. One factor is the strong Asian market. The Asian buyers tend to prefer brand new aircraft, but some may purchase pre-owned jets to avoid waiting until 2014 for a new Bombardier.
What do you think — will prices continue to improve for 2012?
You took your time, shopped around and found the perfect aircraft. It’s a sweet little Cessna, with soft leather interior and custom cabinetry. You locked in a great interest rate, and the seller is motivated. Nothing but blue skies ahead, right?
Not so fast. One of the most critical — and complicated — steps in the buying cycle is the pre-purchase inspection. If the inspection is mismanaged or rushed, you could end up on the hook for expensive repairs and/or Federal Aviation Administration fines for some time to come.
The inspection process revealed
The pre-purchase inspection should be conducted by a qualified third-party repair center and not by the repair center where the aircraft is maintained. Inspectors will examine maintenance records and logs to ensure the aircraft received routine and proper care over its lifetime. They will also verify that parts and components were replaced on schedule. Incomplete, missing or shoddy records can indicate a neglectful repair history.
The inspection also requires review of compliance with Aircraft Directives (AD), an extensive set of instructions from the FAA to guide repairs and part and component replacement. ADs are numerous and unique to each plane’s model and serial number. There are additional ADs with special instructions for any modifications made to the aircraft components.
AD review can be a time-consuming, frustrating process, but your broker has the experience to spot red flags or suspicious gaps in record-keeping.
Your broker — more than just a pretty face
During the pre-purchase inspection process, brokers play two pivotal roles. The first is to ensure that the inspection is exhaustive, thorough and conducted by an independent service center.
The second role of the broker is to help you understand and assess the severity of any repair problems that are discovered. Inspection of a pre-owned jet is bound to reveal at least a few hitches, but your broker will advise you when these issues are cause for undue concern.
Repairs: The small, the significant and the show-stoppers
Many issues that pop up during inspection are cosmetic or relatively minor. The repair of scratched or cracked fixtures, burned-out panel lights and similar problems are not unusual or unexpected. Your broker, however, will make recommendations when the total repair costs of these secondary issues exceed what is considered acceptable or reasonable.
Of course, major problems that affect the airworthiness and safety of the airplane need to be addressed by the seller. Your broker can guide you through the next negotiation steps. The seller may be asked to handle and show proof of repairs, or your broker may request a reduction in the asking price of the plane. In extreme cases, your broker will know when walking away from the deal is your best option.
Don’t let pre-purchase inspection headaches kill the thrill of jet ownership. Rely on your broker to wrangle with the details. You can spend that time planning where your newly purchased plane will take you.
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 877-453-8276 or visit our website.
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:
You can read more details about considering the range of an aircraft in the most recent newsletter from our friends at Conklin and deDecker.
In 2008, the economic downturn created a perfect but devastating storm for the private jet industry. Corporate aircraft owners sold off their jets to free up cash while potential buyers abandoned new and pre-owned aircraft orders in droves. The result was a market saturated with unwanted aircraft inventory, very little demand and a gloomy outlook for the future.
However, as 2012 gets underway, the future of the private jet market shows signs of a modest but growing recovery. Here are a few indications that the bottom of the buyer’s market has either arrived or, at the very least, is rapidly approaching.
Prices still decreasing as inventory ticks up slightly
According to a recent study, pre-owned aircraft prices continue to fall, albeit at a much slower rate than in recent years. This deceleration in pricing along with the slight growth of available inventory creates an ideal environment for buyers to act with confidence. Once the market has fully recovered, demand will siphon off the excess inventory, driving jet prices higher.
Meanwhile, attractive financing options look solid. Interest rates continue to hover at record lows, and the Federal Reserve Board is signaling that rates should remain steady through 2012.
Corporate demand predicted to grow
The economies of the BRIC countries (Brazil, Russia, India and China) continue to grow at an exponential rate, creating a booming class of wealthy individuals with both the desire and the disposable income to purchase private aircraft. As this trend continues, the market may quickly recover from the inertia of the past few years and eventually struggle to keep up with new inventory demands.
In the U.S., 2011 was a good year overall for many companies, with earnings and profits rebounding to (almost) pre-recession levels, triggering renewed appeal for private aircraft ownership.
Economy and politics creating uncertainty
However, many economists warn that a complete economic recovery in the U.S. may still be several years away. In addition, 2012’s election cycle and the politically-charged climate in the U.S. lead many to worry about future regulatory changes and tax increases for corporations of all sizes, adding to the overall unease in the market.
While much about the global economy remains unsure and unsettled, one thing is certain. Low prices, attractive interest rates and a healthy inventory of aircraft combine to create a near perfect climate for companies or individuals looking to land a great deal on a private aircraft.
