Questions to Ask Buying a Business Jet

by Walter F. Scott

The questions below merely scratch the surface of what a prospective buyer needs to know when buying a business jet. But it's a beginning, however, that a buyer can relate to a business jet broker/acquisition consultant to determine what jet is best for him.

1. What distance is typical of your business trips?

Buying a jet with a range of more than 3,000 miles makes no sense if 90 percent of your flights will be within the continental United States. Europe, for instance, would still be accessible nonstop from the East Coast, and accessible with refueling from the West Coast.

When more that 10 percent of your flights are beyond 3,000 miles, a jet capable of 6,000 to 8,000 miles nonstop may be advisable. This is particularly true when trips are trans-Pacific, trips that make refueling problematic. Remember also that distance is time. Owning a jet saves time that might be used to expand your geographical market 3,000 miles beyond your home base.

2. Who will be the jet’s typical passengers?

A big issue is how much passenger room will be enough. Room for a sales team of four is enough until it must also accommodate potential or real customers. A CEO who is 6-foot-two will soon weary of flights in a cabin five feet high. Another issue is décor. How many tastes should it appeal to? For instance, a design should not be too personalized if the jet’s owner expects to charter it.

3. How long do you visit a typical destination?

Costs mount the longer you remain at your destinations. The cost of a hangar at home is not offset by the cost of a destination’s hangar. And if your stay exceeds a few days, it is cheaper to fly commercially your crew home and back again than it is to pay for it to remain with you.

4. How much can an owner offset costs by making his jet available for chartering?  

Chartering is a way to reduce costs, but not one likely to eliminate them. Chartering essentially puts you in the commercial airline business, a business today challenged to turn a profit. Moreover, more than airlines, chartering is a cyclical business; some years demand is high, others not so much. Finally, with increased use of an airplane comes accelerated depreciation. 

On the other hand, chartering your aircraft makes financial sense if, as is the average, you fly the plane less than 150 hours a week, observes Bud Ackerman, a private jet broker and acquisition consultant. Jet ownership comes with several fixed costs—insurance, calendar inspections, management fees, etc.—that will remain constant regardless of how frequently a jet is flown, he said. He adds that a plane underused can require more maintenance than one periodically used.

5. Why travel by private jet instead of traveling first class?

First class passengers pay for a seat. Private jet passengers pay for a plane. Flying first class one-way between Los Angeles to New York is far cheaper with one passenger (e.g. $1,600 one way), not so much for ten (e.g., $16,000 one way). On the other hand, the size of a private jet needed to fly non-stop across the Pacific makes flying first class aboard a 600+ passenger commercial airliner an economic no-brainer.

Time and convenience are the private jet’s big advantages. Flying privately eliminates airport lines, puts the owner in charge of flight times, accommodates luggage that commercial airliners will not, and allows for cuisine and other amenities that commercial airliners do not. Also, smaller private jets can land in airports that commercial airliners cannot, a big plus for time-conscious business executives.      

6. What are the advantages and disadvantages of owning versus chartering a jet aircraft?

Chartering involves renting an airplane, so understandably the cost of flying per passenger is usually more for a charterer than an owner.  Chartering costs an average $2,800 an hour for a light jet, $3,900 an hour for mid-size, and $4,500 or more an hour for large jets. However, for the charterer, costs end there. For owners, costs related to operating and maintaining a jet range from $700,000 to $4 million, according to the National Business Aviation Association. Chartering offers flexibility in the number of passengers who can be accommodated and the non-stop range of the aircraft. Ownership, on the other hand, buys prestige, instant availability and control (owners need not worry about their flights being canceled).

7. Should I buy a new jet or a used one?

The main issue with buying new is that the market for jet aircraft is cyclical. For instance, demand for new private jets was considerable just before the Great Recession, which then caused resale values to plummet. Clouding the future of resale values should be the introduction by Aerion and Airbus of the first supersonic private jet, AS2, which will be capable of mach 1.5 or 990 mph. (Currently the Cessna Citation X, capable of mach 0.935 or 617 mph, is the world’s fastest private jet.)

The alternative is a used jet market that is unregulated. Once a purchase is finalized, the buyer becomes responsible for all maintenance thereafter. A buyer is therefore wise to hire a technical consultant to oversee a thorough inspection of a craft.

8. What is fractional ownership?

Here the buyer purchases a fraction of a jet or type of jet rather than an entire aircraft. Annual flying time is commensurate with the percentage of ownership. For instance, an eighth ownership buys 100 hours of flying time, an eighth 50 hours, etc.

But unlike full ownership, fractional ownership contractually requires advance notice before flying. This can amount to as much as three days. Other issues include arrangements when all annual hours are not used, the cost for hours that exceed the hourly allotment and the cost when a flight is less than an hour. There are also restrictions on selling fractional ownerships. Often a sale is forbidden for specified years and, when permitted, it must be to the operator for a valuation the operator deems reasonable.