As many individuals and families achieve financial success, one of the things they often consider is whether or not to dive into private aviation and purchase a jet. Who wouldn’t want to fly private? The ease and luxury of flying when and where you want without having to wait in endless lines or deal with increasing flight delays is extremely attractive. It’s certainly a topic we are asked about more and more often by our clients. They are not alone. Interest in private aviation has increased significantly since the onset of the COVID-19 pandemic, with current private aviation activity 20% above pre-COVID levels.[1]
Although buying your own jet can certainly seem enticing, it can also be a major expense, and a commitment that can be fraught with potential headaches. Fortunately, there are a variety of other options available for those interested in experiencing private aviation, each with varying levels of costs and benefits. Trying these alternatives can be helpful in getting a “taste” of the private aviation experience, which can help a family determine how much of a financial commitment they want to make and which solution makes the most sense for their specific situation. Below are four options to consider:
Charter a plane:
This is no different than calling an Uber, in essence. When chartering, you simply select the airplane, the destination, the time, and you’re done. No further commitment. The experience is very customizable and is specific to that flight. You pay the pre-arranged fee, and once you land, you’re off the hook. Although chartering a plane is certainly more expensive than flying commercial, compared with the other solutions offered in this article, it is the cheapest option due to the lack of a long-term commitment. Think of chartering as a “test drive” of private aviation. It allows one to get a feel for the whole private aviation experience before committing to a longer-term solution. There are numerous providers of charter aviation services, many of which are specific to local geographies. Simply Google what is available near you to identify potential providers.
Explore a jet card:
This is the next step up in private aviation. Typically, you commit to a private aviation company and a specific class/size of plane when purchasing a jet card. Think of it as a type of “debit card,” where you purchase a certain number of flight hours, typically in 25-hour increments, and once those are exhausted, you must purchase more hours to keep flying. Some of the biggest players in the jet card space are Flexjet, VistaJet, Sentient and NetJets, to name a few. Jet cards usually require a significant initial capital outlay, so be aware that it can be a significant upfront cost, but those flying hours are available to you until they are exhausted. That said, on a per-hour basis, jet cards should result in a cost savings over chartering a plane.
Investigate fractional ownership:
This starts to make sense once you plan to fly at least 50 hours per year via private aviation. With fractional ownership, you purchase a stake in a plane, and receive a set number of flying hours or available days based on your ownership interest. For example, for an $8 million jet, if you pay $1 million for your factional ownership, that will provide you with 1/8 of the flying access available for that plane. Fractional ownership contracts typically extend 3-5 years. After that time, you may choose to renew your fractional contract, the provider may choose to sell the jet and return the fair market value of your shares, or they will sell your interest if you choose not to renew and return the current value of your investment. As you can see, with this option you can recover some of your initial investment at the end of your contract.
Buy your own jet:
Once you’ve explored and potentially tried the other private aviation options available to you, and assuming you anticipate enough flying hours to justify the expense, it may be time to consider purchasing your own jet. Some things to consider: Do you want to buy new or used? The used jet market is much different than a used car. You can buy a 15- to 20-year-old airplane, and it could fly for another 15 to 20 years if properly maintained. If you decide to buy new, be prepared to wait. There is still a significant post-COVID backlog of orders for new jets. It could take two or three years for a new aircraft to be delivered. Buying your own jet is the most expensive option discussed. As the owner, you are responsible for hiring and managing pilots, paying for and coordinating the maintenance of the aircraft, as well as regulatory fees and compliance, among other expenses. A management company can take care of all of that for you, but that is of course an additional cost. Expect to spend at least $3 million for a business jet, with an additional outlay of several hundred thousand dollars per year for staffing, maintenance and other costs. If you do go down the path of owning your own aircraft, there can be a number of benefits, such as the option to customize the plane as you wish, chartering out the aircraft to recover some of the costs of ownership, and tax benefits, too.
No matter how you choose to fly, private aviation can be a delightful experience for successful families. The key is to take off with your eyes wide open, thoroughly exploring the best options for you and your family.
To further explore which private aviation options may make the most financial sense for you and your family please contact Christian Seybert.