Buying an Aircraft

Buying an Aircraft

Making the case for business aviation by equipping your firm with a jet will take careful consideration of several important factors. Some of those include managed aircraft decisions, financing, tax issues and aircraft acquisition strategies.

Some questions to ask and answer are:

• How will ownership be structured?

• What will the total cost outlay be against the perceived gain of having aircraft?

• Should the aircraft be new or pre-owned?

• What type of aircraft are you looking at-a Gulfstream jet?

• How do you go about acquiring an aircraft management firm including freelance pilots and crew?

• Should you lease or buy?

Speaking of the last point, you might want to use TMV (the time value of money) to help decide. This is the assumed return on investment plus the inflation effect over a period of time on dollars not used to pay for an asset immediately. This may make leasing a more attractive option.

Owning an Aircraft

Acquiring total ownership in an aircraft has some advantages. You will always have its retained value and be able to use it whenever you want to. Accelerated depreciation may also offer some significant tax advantages.

The upfront capital investment can be a disadvantage. The ongoing cost commitment which includes a crew, insurance, maintenance, housing of the aircraft and other responsibilities can also be seen as a disadvantage. You will also have to bear the cost of professional aircraft management either in-house or through a professional aircraft management company.

Financing is available. However, there is no 100% financing anymore. Nor is there much, if any, money out there for an aircraft that is more than 15 years old. In fact, the age of the aircraft affects loan-to value percentages. For example, financing a "young" small Gulfstream business jet or a six-to-fifteen year old middle age aircraft may require 20% down with 80% financing.

There are deals to be had. For the first 10 months of 2011 jet sales transactions increased by 10.3%. That might be because asking prices for aircraft fell 15.8% during that same timeframe while the average time on the market increased by 9 to 367 days.

A competent jet broker is needed to navigate aircraft buyers through the purchase of an aircraft. S/he will make sure the seller has provided full disclosure and will help arrange for a pre-buy inspection. The buyer will also be able to tap into financing, legal and accounting advice from the broker.