Toying with the idea of biz jet ownership...
 

Hopefully someone can help me out a bit on this one...

Toying with the idea of getting a small biz jet, probably one of the small to medium sized Citations but want to get a rough idea of annual costs etc. for private use from time to time.

Would likely be procured through a management company (assuming that is easiest way) and then operated for us out to their customers. What I'm wondering is does using a jet management company make financial sense compared to simple private ownership?

I'm thinking yes since our utilisation would be quite low. :confused:

How many hours will you fly?

Private ownership
 

PM sent...

jet buyer
 

visit Welcome to Xclusive Jet Charter and Management, worth a contact and its local to you

PM sent too.

And another PM :)

Thanks to all those who have posted and/or PMed me, I will respond in due course.

I think, in a nutshell, if you are going to operate a private aircraft, then there are things that need managing. You will need some sort of operations manual, someone to monitor all the legalities such as RVSM, radio licenses and so on. You will need someone to manage the continuing airworthiness and finally, a provider for all of the flight planning necessities. You can, and many people do, get your chief pilot to do this for you. But a management company offer all of this under one roof, with economies of scale and also experience! If the company have an AOC, there is also the option of offering the aircraft to charter in order to recover some of the costs, although there are additional costs associated with this!

I hope this helps!

and a hefty invoice every month.....

'Hefty' depends on the scope, size and scale of the operation! You would have to pay someone to do the work, even if it was the chief pilot!!

I've never actually seen these so called 'economies of scale' that big management companies proclaim benefit the owner. It could well be different in the large cabin market. But in the small over saturated end of it the owner doesn't seem to benefit at all. And as for the magical 'put it on our AOC and make you a profit' line. The dry rates that I've seen paid to owners over the last few years are poor. If the owner had a firm grasp on their costs and were honest with themselves(which is difficult as said management companies do their best to hide it) they would realise the rates they're getting don't even cover the hourly costs never mind the depreciation all these hours are incurring.

Private Ownership
 

Another PM sent.

Silverknapper has a point.

Yep and you need a 'chief pilot' to check what the management companies charge. There are management companies out there that I would not trust farther than I can throw them.

Lets face it: if you give an airplane into management, you give it to a company that wants to make a profit - which is fair. But the same company possesses and processes all the invoices etc. and as an owner - if you´re not familiar with aviation - there is a lot that you just can´t control and really check.

Naturally there a good ones as well but given the sums at stake I´d be very careful and I´d try to get a good 'chief pilot' (or however you want to call him/her) with expertise to check what I´m charged and what the 'managers' tell me...

If you want to go down the AOC path, then things are different, but the revenue one can generate at todays oversaturated market is IMO rather slim (see silverknappers post).... we have tried this route not long ago and the numbers we had offered by 3 different companies were so low that the airplane would have generated a loss everytime it would have been flying a charter.

I agree with a lot of the posters above, but there are some decent management outfits in existence. Try Horizon Aviation at Kemble :cool:

Making money with a small jet on an AOC is tricky. You need to fly the pants off it to make a dent in the fixed costs, but you can only do this if you have a low enough hourly rate to make it competitive, and a good charter sales team with plenty of direct customers. It's possible though. One of our Citations is doing 4 sectors / 5 hours of flying today - this summer is going to be busy :E

toying with biz jet idea
 

Sent you a PM

Private owner
 

Hello,

What would be your mission? Number of pax, range, typical destination, much baggage/cargo?

Rgds,

try it
 

So perhaps you should experience it?

I guess you drive an expensive car?

Why not let the local Taxi company run it 24/7 when you are not using it?

Think if the money it might bring in!

Sure you might get a few cigarette burns in the leather, perhaps some kid might draw on the fabric?

But still it's a great idea?

So is the Aircraft different?

I'm just working on a proposal for a client who is buying a brand new light jet, him flying 200 hours a year, topped up with 300 of charter revenue which is a conservative target for us.

The cost of him running this particular aircraft for 200 hours privately including All costs is £298K. If he puts it on charter then his costs for all his flying offset against the revenue of charter is £130k cheaper, plus any VAT advantage including a provision for the increased depreciation of a higher houred aircraft after 5 years.

Some clients may choose to spend the £130k and have it all to themselves, some would choose to reduce their cost, I've given up trying to second guess the thriftiness or otherwise of the wealthy.

Although I have no real experience of the heavy jet market, my gut feel is that this level of saving is only experienced in light / mid jets and is often more about saving the 20% VAT bill on purchase.

Contacttower - happy to share my workings if it is of interest.

Phil

Phil, those workings don't look far out. I agree, an owner will only ever achieve a contribution towards operating costs , and never actually make money by offering it for charter. It is all down to what an individual is trying to achieve in owning a private aircraft.

Booglebox

I've not heard of Horizon, do they have an AOC? on their website it just says they are just an ATO, are you talking about a Horizon Citation?

Phil

Phil, they don't have an AOC. They only do private management.

why not pop down for a facet face chat ?

sorry, not concentrating
why not pop down for a face to face chat ?

Because maybe he knows that you management sharks will cost dearly his Bizjet? Let the pilots manage it!. You will save money and have a more cared for aircraft.

Aircraft management companies only line their own pockets.

Let the Pilots manage it? - pilots with no AOC (which was the original question). Pilots tend to sub out the flight planning etc anyway - might as well pay a management company and have access to a pool of crew and proper Ops staff - in my opinion a false economy.

CJ
 

I am in no way connected or have an interest in Phil Brockwell's company but if you are thinking about getting a CJ, you will be remiss not to sit down and talk to him about it, they are the best in the business in the CJ market, both operating and Charter.

Some lazy ones do, the proper ones don´t.

phil doesn't like pilots. As soon as Cessna produce a pilotless CJ he will rule the world.

I like doing a spot of flight planning. At least I know what the RAD is..

Dealt with many freelance pilots. All do their own planning.

Dudeness,

Looking around at the trade shows there are literally hundreds of trip support companies looking after your lazy pilots, I have 13 on my books in the UK alone not including the big boys like UAS, Universal, Jepps etc, they must be getting their work from somewhere, makes sense to me. We even use a third party for flight planning, if you have someone you trust and does a good job cheaper than I could do it then its good business.

Phil

Exactly: why pay a management fee to an operator who is just going to turn around and subcontract the flight planning and permissions to a support company?

The operator will of course slap a fee on top of those services, then pocket for himself any bulk discount he gets on fuel or services. Waste of money.

For a privately owned small or medium jet, you are better off hiring an experienced crew and let them buy in the required services. There are excellent specialists for CAMO, planning, overflights, and fuel, and a good group of pilots should be able to shop around for them.

What's more, if you are not bound to a "management" company, it's astonishing how much you can talk down broker fees when you need to buy/sell a plane.

As has been stated on this thread already, jet owners never make money from chartering out their plane, only operators/brokers ever do. Stay private, trust a small and competent team and the price for owning a jet will only be moderatly outrageous. Go with an operator and it's either not going to generate revenue, or it will basically be the broker's plane to play with, you being allowed to pay for it and watch it depreciate rapidly.

FlyMD

A lot of assumptions there old boy, most of which are completely misinformed and urban myth. As previously demonstrated - a light jet (this thread is about a light jet) does make revenue if it is with the right management company (see previous thread).

As for management companies pocketing the discount on fuel etc that's just not true.

It is horses for courses, there is no right fix for every owner, and there are good and bad (and dangerous) on both sides of the fence -

You all seem to be focusing on a bit of flight planning and getting a pilot to fly it. That's the easy bit. It's the maintenance planning and asset management part that is critical.....and then of course it's about the safe operation of the aircraft. That goes well beyond the ability to match the amount take offs to landings. If you have the operating pilot doing all the ops as well, such as flight planning, slots, handling, onward surface transport etc...the safety is compromised. The incident in Egelsbach in the Citation X is testament to that.

Financially, operationally and safety wise there is a much bigger picture to deal with in order for the aircraft to be operated efficiently. It requires expertise and experience that no single person has, but many organisations do. If the aircraft goes on an AOC, you can tap into that expertise. (or reputable management companies of course). It's up to the owner to ensure he picks the right partner, as in any business deal. The ability to offset some of the costs and make it a more financially viable proposition can also be achieved by chartering the aircraft out if you take an AOC operator. Check though that the AOC company has the commercial nous and track record to support their claim.

I Concur with herbaceous. If it was a CJ2 I would be talking with Phil.

Phil,
true, but.... If a small ops has just a few flights that go out of their comfort/knowledge zone, then it makes perfect sense to use someone else.

They are also a great help - if competent - to get permits and to use the correct handler, setup payment schemes etc. I use a company for these things as well mainly because my company does not like to pay up out front. They know that it costs us more (our trip supporter charges 8% on top), but they prefer it that way - their decision.

OTOH I always ask for an cost estimate and that alone has saved us a lot of money when local agents try to pull 'special fees' from where the sun don´t shine.

If longer trips pop up with short notice while you´re on the road then it makes perfect sense to use em as well to use time as efficient as possible.

So its not black or white. IMO.

Sorry, that is just plain bulls.


The flight planning I always do myself, otherwise one ends up with totally stretched out plannings that don´t allow for anything going awol. (like planning on max level with LRC without actual wind - been there, done that)

No assumptions Mr. Brockwell, just my 20 years in the game and seen it all myself...

Hi Dude,

Of course it is always the Capts final decision to accept a flight plan. If the company that has been tasked with the planning cannot do it efficiently or safely then get rid of them and find one that can. When you're working hard in the pointy end, maybe weather issues, or technical issues and perhaps facing a divert situation, your mind should be wholly focused on the safe operation of the aircraft, and not having to balance out a whole load of hassle if you do have to divert with handling, surface transport for your boss in the back etc...The Egelsbach accident was really down to bad decision making by the PIC which seemed to be hindered by the overwhelming desire not to divert knowing that to arrive at EDDF without any provisions being made is a nightmare. A decent ops team would have everything already set up at your divert before you arrive. The pilots principle task is to ensure the safe operation of the aircraft. Nothing should ever detract from that basic task.


FNPL

FlyMD,

It's amazing how so many of us with 20+ years of experience in this game can have such opposite opinions that we pass off as fact, I suppose it depends who you spent all those years working with. We've all got horror stories, both first hand and from FBO tittle tattle from both sides of the fence. If I were an owner, I'd want my Pilots doing their job and my Ops team doing theirs, just saying, at 400MPH I'd appreciate a bit of focus on the task in hand.



PB

PB,

'Nuf said, it IS about 2 sides of the fence, and the respective opinions of driver-monkeys and sales-weenies..

At the end of the day the guy with the money will speak to both of us and make up his mind.

FlyMD

Lot of opinions here, particularly people defending their corner.

I've no axe to grind, not involved in either part of the market. In my day job for an OEM however I was involved in discussions with prospective and current owners about which route to go down so over the years I have formed some opinions.

Phil.
You previously said 'as previously demonstrated'. You didn't demonstrate anything. Just put up a couple of numbers which mean nothing. You could well be correct. However on first glance I'm not sure I agree with you, particularly regarding the depreciation figure. You can depreciate an aircraft at any rate you like, but ultimately what it sells for and how quickly it sells are the deciding factors. After 5 years your example aircraft will have flown 1500 hrs more. That is a lot of depreciation. Also much closer to HSI's, overhaul, timed maintenance. There is an actual example on the market just now. Two serial numbers apart but one has double the hours of the other, and a similar proportion of cycles. The higher houred one just won't sell as too many similar aged aircraft with much lower hours are on the market. I do stand by my original post on this topic. I've seen dry rates which don't even cover engine and maintenance program payments never mind anything else.

In saying that though to balance the argument. A lot of pilots like to think they can manage aircraft, and many do a fine job. But a lot just don't have the patience, knowledge or contacts. Particularly on a new type. They then get railroaded by 'experts' who invariably have a finger in a pie with someone. This applies to the acquisition stage as much as the subsequent management phase. Mistakes in this business are expensive so it pays to weed out the Walter Mittys. A quick google of aircraft management companies shows so many vague and wooly websites where I doubt they've even seen a real aircraft in some cases. But that hasn't stopped them paintshopping their logo along the side of one they downloaded from the web.And remember if it's going to be vastly under-utilised that does more harm than flying the bottom out of it.

Flynowpaylater hit the nail on the head on one point. It's the management of the asset which is crucial here. It really doesn't matter who files an fpl. And there are plenty of third party providers out there who do a great job for very small money.

Which then begs the question what to do?

It depends a lot on the type, age and how the owner is disposed to aviation.

An old aircraft which had already racked up the hours may be better suited to charter than a brand new one. The depreciation has levelled out, any snags have been worked out and depending on the inspection state it may well need any income possible just to replace gear legs, overhaul engines etc. Also with the best will in the world charter aircraft do get knocked about so a new cabin will age very quickly.

The type determines just how often maintenance occurs. Is it an Phenom which from what I gather can go for ages or is it something shall we say more maintenance intensive.

Is the owner disinterested completely and just wants a turnkey solution. Or do they prefer to have an interest in their machine, what is being billed for and how it's being used.

Answering all these honestly may be the first stage in at least determining which road to go down.

And the type of operation is also critical. There are private operators who contract CAMO out to third parties who are excellent at it and also objective due to having no internal influence. This is crucial in my opinion. And bizarrely the most important aspect of the whole thing can be bought in at a competitive rate. Ask any potential operator who does this. Also how are their pilots trained? I would be looking for simulator at least annually. Preferably a full recurrent at a training organisation. Where is maintenance done? Get quotes individually on this to make sure you're seeing this 'purchasing power'.

On brand new aircraft the best setups I've seen are private. Usually on the M registry.

I'll certainly say that from what I hear Phil is exceptionally reputable, and if the original poster (who has probably stopped reading this by now!) were to go down the AOC route on a CJ, well worthy of consideration.

Excellent points silverknapper but this, particularly, is spot on:

Refreshing to see people thinking this way :cool: