Corporate Jet ownership, any experience?

Owning the plane instead of chartering it has balance sheet and P&L implications. The most impactful is the ability to write off the asset value over a 7 year period. This delivers a non cash expense to the P&L. Depending on how important your profitability is in terms of analyst and market perceptions this may be significant.
In a private setting this is a huge benefit.

If you already use the plane 400 hours per year it would make sense to buy it and then give it to a charter operator to manage. You will be able, through the operator, to get a steady contract from Sentient or Netjets to cover the time you are not using the plane and to essentially turn it into a cash flowing asset

 

Actually, depending on how the company structures the ownership and if there is any charter operation (Part 135), you would be able to depreciate the asset over 5 years instead of 7. This can have a huge positive impact for the company.

At 400 hours per year, ownership is usually your best route. One option you may be able to use is structuring the term as a lease - this will allow the asset to be off the books per se.

 

If you don't want to own it for optics and balance sheet, why not structure a lease?

 

we have a 2009 hawker 900xp. we figure it to be about $3800/hr to operate.

 

Find a good aviation attorney, and tell them what you want to accomplish in the end. That's what I would do.

As for the details of actually operating the airplane, you would be best served by hiring a reputable management company.

 

The cost of owning and using a corporate jet has many different costs.

There are fixed costs such as the storage and periodic maintenance, as well as the flight crew salaries and benefits. Obviously the less the plane flies the more it will cost per hour to amortize these costs in any given month.
Added to that are the directly proportional costs related to use, such as fuel, maintenance and FBO expenses

If your company uses the jet solely for internal use the cost per hour will depend on the usage over time, and if you are projecting usage rising from 300 to 400 hours obviously these fixed costs will represent a lower cost per hour.

The best solution is to let a charter company manage the plane and to offer it for 3rd party use when available. This defrays a portion of the fixed costs and may in certain cases return positive cash flow to the company. We operated a Lear45 XL for many years and it had a 60 hour per month contract with Sentient which essentially covered all of the plane's expenses.

As you are using the plane for about 30 hours it would be fairly simple to allow its use by Sentient or Netjets for another 30 or so hours, or more if the timing works. It will also look good from the public company POV in maximizing the productivity of the company's assets and minimizing expenses.

The good news is that if it is in the hands of the Charter operator and is in use when the company needs it, the charter operator will find you a similar plane at very short notice, at exactly the same cost as your own plane

 

If you are at 300 hours already that is considered the cross over point to be cheaper to operate versus fractional and charter.

Operating costs. There are so many ways that different people use to determine their "claimed" cost that I prefer to look at annual numbers versus hourly. Crew, hangar, insurance, maintenance, maintenance program fees, insurance, flight crew road expenses, catering, crew recurrent training, etc.

With 300 to 400 hours per year being a Part 91 without doing charter may even be a reasonable answer. Do you plan for a lot of road trips where the aircraft stays on the road for extended periods but may not be accumulating flight hours? Do a lot of your trips pop up with short notice and/or a lot of schedule and destination changes. These could limit the ability to make the aircraft available for chartering problematic. You may not want to share your aircraft with others and/or keep it well hidden.

Leasing is one way to hide the aircraft from the pubic books. You can own but bury it under a shell company with an obscure meaningless name and with an incorporation somewhere else. One individual in the past I had used an out of state trust structure with the only pubic address an attorney's office as the trustee.

Do be careful of management companies. They have lots of ways they can make extra profit at your expense that are al under the table. These are in addition to what you expect to be paying them as their legitimate fees. It may be preferable to have your own crew that are solely loyal to your company and maximizing the company's value.

Jeff

 

Wells Fargo does a lot of the "Trustee" business... it's amazing how many airplane are registered to "Wells Fargo Trustee."

https://www.wellsfargo.com/com/corporate-trust/lease

Charter can be good, if you are with a reputable operator. However, it will add additional expenses, and if you are already using the airplane 30+ hours per month, it may not be available enough to make it work. Furthermore, there is additional liability there which many public companies would not want to take on-- both monetary and image liability.

The key to understanding if charter will work for you is not so much the number of hours you fly as the number of days per month the airplane is in use, and the advance notice you have in your schedule. If you only fly 2 hours a day but the airplane is in use 20 days/month, that doesn't leave much for charter. On the other hand, if you do a couple of 6-10 hour transcon trips and that's it, there might be plenty of opportunity for charter.

 

Flight management companies can also provide Part 91 or be Part 135 but not offer charter. As Don said availability of the aircraft for charter offering is a key factor if there will success. The point is also if your schedules are fairly well set then charter available windows can be offered but if you are prone to create trips with little notice then that will work against having charter opportunities. The management company will not want to be offering the aircraft when there is high probability of the aircraft not be available when expected.

Part of your internal process of establishing the operation will be notice time and who get access to schedule the aircraft. Some companies have an aircraft so that they can make short notice flights. One operator had their entire operation on a 2 hour notice. That was insane but others can be day before of 4 to 6 hours. With multiple people having access then there needs to be someone internally at the company that is the clearing house for scheduling.

Flight Management Companies - There are good ones, OK ones and crooks. Each of these may appear to be fine upstanding, safe and successful operators but what they do as financial shenanigans should be embarrassing. I have nothing against them making a fair profit it is about what they do that is contrary to what they are telling the owner or the added charges that are unnecessary so they can get another mark-up. Since they work on adding mark-up to all the charges they o not necessarily have an incentive to hold the expenditures down. If they detect that no one is watching then it can get ugly.

Fuel kick backs
FBO selection
Maintenance kick backs
Use of fight planning services when the pilots can it themselves

Whether as a in-house fight department or using the management company you have a choice as to what level of operation. Go to Teterboro and one will find a whole bunch of Gold and even Platinum plated flight departments.

Jeff

 

A Challenger 300 is gonna cost a lot more to operate than $2500 per hour.

 

over the years the best way to have a corporate aircraft is for the operating company NOT own the aircraft directly / physically... the finances are only a portion of ownership, it is the regulations that drive an operating company nuts to justify the aircraft ownership and operation ... it is the record keeping...who are the passengers, how are they related to the purpose of the trip, etc etc... best to create a separate entity to own and operate the aircraft, its' sole purpose is to own and operate the aircraft... no personnel (passsenger logs ), no justifications of any kind, just track expenses and collect invoices... The operating company shows invoice for aircraft use as business expense. Third party ownership is what is happening, it is how the trusts are being used, move the aircraft out from under the operating company umbrella allowing for expanded use / perks to access the plane

 

+1......I would like to see the data supporting $2500 an hour for a CL300. I think you can count on the real number being higher.

 

Why do threads like this even start? What happened to the OP?

 

I also find these drive-by postings annoying, especially given that the OP has been posting all over the rest of the site.

 

PM Sent.

 

Christian,

You original post was very interesting and detailed so much of what really can be happening behind the scenes away from view by the aircraft owner. You did leave out a few of the other "under the table" ways that the management company can make additional profit at the expense of the owner.

Were you operating the G-IV out of VNY? Which one?

Jeff

 

Jeff hahahaha! I deleted the post and sent it via PM instead, but I guess you saw it. That was quick.

Yes Im in So cal but I prefer to keep the 'whos' and 'wheres' on the down low. Aviation is a small community.

Bottom line is that if the OP is projecting 400 hours a year, they do not need the charter. My belief is that the wear and tear from added charter will surpass cost projections if they just kept it 91. Hire a management company to do the billing, manuals and paperwork but give the pilots the freedom to get work done wherever it most cost effective.

I havent meet a 300 pilot that doesnt have anything but praise for the 300.

Jeff, PM me the 'other ways'. Im curious what I left out.

 

I am in agreement with your assessment of charter generating adequate revenue to totally cover the increased wear and tear... charter market is very competitive, reasonable rates that cover all expenses and all reserves become NON comptetive in most charter situations... the pitfall is that most charter revenue is sold against covering current operating expenses only... I have seen countless cases where the aircraft is used up and the accounting does not adequately cover the extra use...

 

my company hawker 900 xp shares a hanger w/ a challenger and I must say the challenger is a handsome jet...and dwarfs ours.

denny Hamlin bought a challenger a couple of years back and his is the prettiest I have ever seen.. the fuselage is royal blue with all leading edges being mirror polished. a real beauty!

 

Some aircraft models do charter for a premium. High end with only a handful, if any, of same type available for charter. Too many aircraft of the same type means that someone is willing to get into a bidding war to get the revenue. Availability is also a function of which market one is in. For a while there were only 2 G-IVs available in G registration. One went to Africa and the other went up for sale - don't know what happened to it. In the middle east there are a lot of Boeing and Airbus charters that are not really legal so the prices are depressed.

Rarely will charter revenue equal profit. Defraying the annual expenses though is in many cases a reasonable endeavor. What is stupid it t create a spectacular but fragile interior then subject it to high charter use. There is a reason why NetJets interiors are darker and more robust selections.

Jeff

 

You talking of a Challenger 600 series (600 - 605) or the Globals? The 600 series is rather short for its cross section. When they lengthened it to become the Global Express/Global 5000/XRS they got the proportions better.

Jeff

 

good question. based on that, the clallenger that sits beside us seems it may be the 600. based on your description, I suspect denny's is the global...but not positive.

 

Denny Hamlin Racing Canadair CL-600-2B16 Challenger 604 N400DH | Flickr - Photo Sharing!

here is a link for some info on denny's...appears you were correct jeff.