Next Time, Fly in Your Own Plane
from July/August 2008
by Brian O'Reilly
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Last time, you crept along the 405 freeway to Los Angeles International Airport for an hour, wedged the car into the last parking space—600 yards from the airline terminal—then stood in a long line that snaked up and down stairs for the privilege of searching for the lost dime that kept setting off the metal detector. You remembered to run back and get the laptop they sent through the X-ray machine a few extra times, and then sprinted to the gate. Oh. And the plane was delayed for two hours.
Meanwhile, 10 miles to the north at serene Santa Monica Airport, a very different scene could be unfolding. You could be sitting around having a cup of coffee poured for you in the cozy anteroom of an airplane hangar while a pair of pilots do some last-minute checks on your plane. Somebody signals, and you and four colleagues amble into the main hangar and climb into a sleek seven-seat private jet. Your favorite sandwiches and magazines are already on board, along with some last-minute reports dropped off by the corporate staff earlier in the morning. The plane is airborne 10 minutes later, bound for that board meeting near the Denver Tech Center, locally known as the DTC. So instead of flying into Denver International Airport, 24 miles away from the DTC, you’re headed to the smaller Centennial Airport, six miles from your meeting. A car meets the plane. Your luggage meets the car. You can’t even remember what the inside of the Avis bus looks like.
Did we say seven-passenger jet? Hold that reverie! Maybe you should have bought a tiny, economical four-passenger jet. Or a 12-passenger one. But what if the bigger plane won’t have enough runway to land at that little airport near your plant in Arizona on the way back? And what about cruising speed? And the mileage range without refueling?
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The comfortable interiors of super-midsize aircraft like this Hawker 4000 are 25 to 30 feet in length. The planes hold eight to 10 passengers, have a range of 3,300 to 4,000 nautical miles, and cost $23 million to $32 million new. Fixed yearly operating cost: about $600,000. Variable operating cost: about $2,600 an hour. Other brisk-selling planes in the category include the Falcon 2000EX EASy and Challenger models 300, 604, and 605. |
You are not the only person fed up with the conga line through airport security, the arrival delays at Newark, and the elbow of the portly guy sitting next to you. Deliveries of new private jets were 28% higher worldwide last year than in 2006, with more than 1,100 planes sold. The most popular models are back-ordered; their purchasers will wait 18 months to three or more years.
If you want to buy a plane, first you need to figure out whether it will be practical. A very rough rule of thumb is that if you fly fewer than 200 hours a year, you should think about chartering planes instead. Between 200 and 400 hours, consider fractional ownership with an outfit like Warren Buffett’s NetJets. Over 400 hours, you’re a strong candidate for outright ownership, says David Wyndham, an aircraft-buying consultant at Conklin & de Decker (www.conklindd.com) in Orleans, Massachusetts.
Obviously, some frequent flyers should stick to commercial planes. If you shuttle constantly between Pocatello and Salt Lake City and the commuter flights are on time and meet your needs, a private jet is hard to justify. Wyndham says, “Dollars per mile, it’s hard to beat the airlines. They have the scale to operate planes more cheaply than you do.” But if you’re a busy and well-paid corporate enchilada and your work takes you to customers, suppliers, factories, and board meetings in smaller cities where every final leg is that once-a-day puddle-jumper flight, you—and by “you” we mean your company, in most cases—might be better off with a private plane even if it’s in the air less than 400 hours a year.
The key to picking the right plane, says every expert, is defining your mission statement. That is, how is the plane going to be used? Will it be flying mostly short hops up and down the East Coast, or from New York to California, or across oceans? How many people will be flying with you? CEOs, COOs, and CFOs from large companies often travel with a few other senior execs in tow and probably need a plane big enough to hold face-to-face meetings with staff en route. But an entrepreneur or a consultant might be traveling alone much of the time. What kinds of airports will you be using? Dallas Executive Airport or New Jersey’s Teterboro, a general-aviation airport on the outskirts of Manhattan, can handle almost any private jet. But at higher altitudes and in hot weather, the air provides less lift and planes need longer runways than may be available. Taking off in July from one of those places, like sweltering Taos, New Mexico, a town at about 7,000 feet, might be impossible for some jets.
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The Citation CJ3 and other light planes like the Hawker 400 XP, the Beechcraft Premier IA, and Citation models CJ1 and CJ2 carry five to seven passengers in 11- to 17-foot cabins. They have a range of 1,200 to 1,700 nautical miles. Light planes cost between $4.6 million and $8.5 million new; fixed yearly operating cost is about $325,000, and variable operating cost is about $1,250 an hour. |
The first round of analysis should steer a buyer to one of a handful of categories of jets: very light, light, midsize, super-midsize, and global. A typical very light jet, says Wyndham, holds three to five people in a six- to nine-foot cabin, has a range of 600 to 1,200 nautical miles (that’s 690 to 1,380 statute miles), and costs between $1.6 million and $2.7 million new. That is vastly different from a big global jet like the Gulfstream G550 or the Bombardier Global Express XRS, which holds as many as 19 passengers, costs up to $49 million, and can fly more than 6,000 nautical miles.
Known as VLJs, the very light jets are the hottest new category of private plane. They barely existed two years ago, but in 2007 Eclipse Aviation delivered 98 of them to buyers, and Cessna delivered 45. Embraer, a Brazilian planemaker, is expected to have a VLJ out this year. Starting at $1.6 million for the Eclipse 500, these are the cheapest private jets ever built and cost far less than light jets such as the Citation CJ1 or the Beechcraft Premier IA, which run between $4.6 million and $6.2 million. Operating costs for a VLJ are lower too. David Wyndham at Conklin & de Decker puts the variable cost of a VLJ (fuel, maintenance, catering, parking, and so on) at $750 per hour. Fixed costs (crew salaries, training, hangar space, insurance) will run about $200,000 a year. That’s not trivial, but in comparison, an eight- to 10-passenger super-midsize jet costs about $2,600 per hour to operate, on top of $600,000 annual fixed costs.
There are tradeoffs, of course. A VLJ’s range can be a third that of a super-midsize. And if you like to practice the mambo while flying, a VLJ is not for you. They are tiny. With a cabin height of 47 inches in the Eclipse, you practically have to crawl to your seat. But once seated, says Wyndham, you’ll be okay; even the smallest planes are fairly luxurious.
After you’ve figured out what you can afford, what kinds of trips you’ll be taking, how many passengers will go with you, and which category of plane you want, many questions remain. Can the plane take off and land at an airport you’ll need to visit often? Is it too heavy for the asphalt taxiways? Too wide for the hangar doors? Does it have enough luggage space? Can the seats accommodate a very overweight flyer? Is the engine noise too loud? And what are the statistics in the glossy brochures not telling you? For example, a plane may seat eight passengers and it may have a range of 2,500 miles, but perhaps not both at the same time. A fully loaded plane may have a shorter range than you thought.
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This Eclipse 500 is in the very hot category of very light private jets. The 510 Citation Mustang is another popular model. These aircraft, holding three to five passengers in cabins that vary in length from six to nine feet, have a range of 600 to 1,200 nautical miles. They sell for $1.6 million to $2.7 million new, their fixed operating cost is approximately $200,000 a year, and their variable operating cost runs about $750 an hour. |
According to GAMA, the General Aviation Manufacturers Association, Cessna has sold more private jets than anybody—388 last year alone. Bombardier (maker of Learjets, among others), Dassault Falcon Jet Corp., Gulfstream, and Hawker Beechcraft are also big names in private jets. Virtually all the new planes they and others make are sold directly by the manufacturers, with little wiggle room on pricing. You can get an idea of what a used plane is worth from price guides like Aircraft Bluebook and Vref.
To buy a used plane, you’ll probably deal with a broker. Tom Benson, whose company owns the used-aircraft website, says, “Some brokers are great, but some are not. Anybody can hang out a shingle and call himself a plane broker. There are no regulations.” Word of mouth is the best way to find a good broker. Ask several people who have bought planes if they were satisfied.
When you’ve chosen a plane, says Benson, it pays to have it inspected by a member company of the National Aircraft Appraisers Association or the American Society of Appraisers. “You can have two identical planes, the same age and same hours. But one has just completed its mandatory inspection, and the other one needs it right away. The first plane can be worth $1 million to $2 million more.”
There are taxation and liability issues to think about too. Where and how you register your plane can determine whether you’ll get hit with 5% or higher state sales tax, warns Raymond C. Speciale, an aviation-law attorney and CPA in Frederick, Maryland, and the author of a book on aircraft ownership.
And think twice about putting the plane in an LLC special-purpose entity to limit liability, Speciale says: “If you’re using the plane on company business, your company can still be held liable for any mishaps.” On top of that, the FAA may declare that your LLC is really an airplane-charter concern and impose a complex set of rules on it. Says Speciale, “The most straightforward approach is to have your company buy the plane and treat it like any other truck or piece of equipment.” Be prepared for paperwork and the need to consult professional counsel anyway, he warns. “When the plane is flown for personal use, the IRS can declare that the passengers are getting a fringe benefit from the company, and tax them accordingly. It’s important to track and report that carefully.”
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Midsize jets like the Learjet 60XR here can seat seven or eight passengers. Cabins vary in length from 18 to 21 feet. Also in the midsize category are the Learjet 40, Hawker 900XP, and Cessna 560XLS Citation XLS. They have a range of 1,800 to 2,900 nautical miles, sell for $12 million to $17 million new, and come with a fixed yearly operating cost of $425,000 and a variable operating cost of $2,200 an hour. |
The management company you pick will probably make this critical decision about your plane: who flies it. You don’t want to hire pilots directly. You don’t have the expertise or the means to deal with problems. “When your pilot gets sick at three in the morning, you want him calling the airplane management company, not you,” says one plane owner.
“Professionally piloted private jets have a safety record greater than commercial planes,” says Robert Breiling of Robert E. Breiling Associates Inc., a Boca Raton, Florida, firm that tracks planes’ safety records. “You want a pilot with 2,500 hours of flying experience and 250 hours flying your type of plane; 65% of accidents occur when the pilot has under 250 hours flying that type.” Most private jets weigh more than 12,500 pounds, the cutoff at which the FAA requires two pilots.
Even if it’s allowed, Breiling cautions, be wary of flying with only one pilot. “A business jet with a single pilot has a 50% greater chance of having an accident than one flown by two pilots,” he says. He adds that flying your own plane can be a bad idea. “It’s the businessman who’s in a rush to get somewhere and says ‘The hell with the weather’ who has a bad safety record. A professional pilot will tell the owner to wait for the storm to pass.”
Yes, there’s a lot to consider in buying a private plane. But think about the pleasure when you hear “Sir, we’re ready to take off when you are.” The engines whine. The seat back presses you forward. Somewhere a businessman is standing in a long line for inspection. You are not.