Finding Opportunities Where the Preowned and Air Charter Markets Meet

Bombardier’s August announcement that slumping demand will keep prices of its new business jets for sale under pressure is symptomatic of the downturn creating havoc in both the new and preowned aircraft markets. But the same socioeconomic forces helping flatten the sales curve of jet transactions are creating new business aircraft ownership opportunities in the air charter world.

The fact is, though sales of new business jets have dropped sharply, business aviation activity beyond the world of buying and selling airplanes is strong. People still want and need to use business jets, but fewer want to own them. It’s part of the “asset-less” why-buy-when-you-can-rent trend in consumer consumption. In the world of business jet access, that means chartering a business aircraft, or joining one of the growing number of membership clubs (Wheels Up, Surf Air, or JetSmarter, e.g.) that provide lift as needed, instead of owning a jet.

Air charter activity in the U.S. continues to strengthen, now almost back to 2008 levels, according to FAA data, and Global charter activity is also up according to Avinode, Eurocontrol and other sources. To meet the rising demand for lift, many charter management companies are trying to bolster their fleets with quality business jets whose owners are willing or eager to let their aircraft be used heavily for charter. To attract these owners, a growing number of air charter operators are offering charter revenue agreements, committing to generate a minimum number of charter hours per month or year for the aircraft. Though margins are small, this charter revenue can significantly offset operating and business jet ownership costs.

Meanwhile, the inventory of quality corporate aircraft on the preowned markets remains at historically high levels, while the prices of these used business jets continue to slide. A 2003 Global Express with only 3000 hours, for example, recently went to contract for $8.5 million, less than half of the $19 million it cost when new little more than a decade ago. An aircraft like this commands a premium hourly rate in the air charter market, and with the right charter revenue agreement, could present an extremely attractive opportunity to buy, use and own a business jet in a turnkey arrangement. We’re seeing more of these deals in the preowned market, and some charter management companies are now establishing financing programs to help charter clients interested in purchasing a business jet for such a charter arrangement.

Delta Private Jets (DPJ) is among those offering in-house financing along with a charter arrangement; its Ownership Assist program guarantees to provide a set percentage of operating costs to customers who bought qualified aircraft to put on DPJs charter certificate.

Charter revenue agreements combined with low aircraft asking prices can change the economics of ownership, and make owning a business jet feasible, and even logical for a growing number of charter users. It also widens the field of aircraft potential jet buyers can consider; don’t just shop the kind of jet you want or need – perhaps a nearby operator needs a model that’s a little newer, or an aircraft that’s little bigger, and can craft an agreement that gets you a better jet for less outlay.

Meanwhile, on the sell side, if you’ve been looking for a buyer for your business jet – or you’re too depressed by preowned values to put it on the market – charter demand could help you out, too. You may be able to find an operator willing to offer a charter agreement that can significantly reduce ownership costs, while maintaining use of your aircraft. Alternatively, an operator might lease your aircraft for their charter fleet, putting some money in your pocket while you retain ownership.

You may have heard many people in the industry say this is worst preowned market in history, but for buyers looking for value, I believe it’s the best. These opportunities in the charter market provide just one example.

The Private Jet Company offers private jet sales & acquisition and private aviation consulting services in major markets throughout the world. Founded in 2005 with headquarters in North Palm Beach, FL and regional offices in Paris, France and Mexico City, Mexico, TPJC has completed over $2 billion of private aviation transactions for individual and corporate jet owners. In addition to assisting clients buy and sell private aircraft, the company works with aircraft management companies to reduce the burden of private aircraft maintenance costs and create income through chartering jets. TPJC also partners with aviation attorneys and tax experts to help clients maximize depreciation, reduce tax burdens and assist in import and export Certificates of Airworthiness.

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