2005 Buying Tips 6 02 Lyt.Qxp
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PURCHASINGPURCHASING GUIDEGUIDE Buying business aircraft Photo by Dan Sherman Flying is easy compared with acquiring an aircraft. Know the marketplace before you start shopping. By Clay Lacy Pilot author Clay Lacy with N1965L, a 1965 Learjet 24A he has operated for many years. While there are advantages to buying new, quality used bizjets are also a viable option. ATP/Helo/CFII Boeing 747, Gulfstream II/III/IV, Hawkers, Learjets, Citations and on the engines, it appeared to be ried out by a company familiar 25 misc type ratings an attractive purchase. After buying with the aircraft type would have the aircraft from a Mexican-based saved this buyer all kinds of grief operator, the new owner discov- and money. t’s a buyers market out there for ered that the engines actually had I’m an advocate of new business business jets. I don’t believe 5300 hrs, well beyond the normal aircraft for those who can afford Iprices are going to go much Lear 24 overhaul life of 5000 hrs. them. There are lots of good rea- lower than they are today and it’s a sons for buying new, including great time to invest in a preowned Buyer beware warranty advantages, the latest or new business aircraft. avionics and upgrades, the best I always advise that you resist the The former owner, as it turned product support from manufactur- temptation of buying the cheapest out, had gotten hold of a service ers and certain tax benefits. aircraft on the used market. You center stamp. He’d stamped off all These days, there are early deliv- need to look for quality and not kinds of inspections, including a ery positions available on most just at price. Always investigate the 12-yr inspection, which had never makes and models of new business logbooks thoroughly, research the actually been done. aircraft. However, there are many previous owner as much as you The new owner now has about people who want to take advantage can and have the aircraft test flown $800,000 invested in this air- of business aviation but who cannot by a qualified pilot you trust. plane—the $400,000 purchase yet afford the price of a new jet. For I know someone who recently price plus $400,000 to bring it up this market niche, there are a lot of came across a “great deal” on a to date. In today’s market, he great choices in the preowned mar- Learjet 24. The price was about could probably sell this aircraft for ket. $400,000 and, with 2500 hrs left $550,000. A thorough prebuy car- With more than 15% of all busi- 102 PROFESSIONAL PILOT / June 2002 Photo by Jack Sykes Plenty of literature is available to help prospective aircraft owners check the pricing, features and availability of various aircraft models. Direct listings allow buyers to deal with owners directly, though many buyers and sellers choose to work through aircraft brokers. ness jets for sale these days—the (BBJ). with. I’ve also worked with brokers aircraft are relatively cheap. A good Prices of new aircraft aren’t com- over the years to buy and sell air- indicator of the state of the resale ing down. A new GIVSP costs more craft and I’ve found most of them jet market is the thickness of than $32 million, compared with to be good, honest people. Executive Controller magazine. It $17–$18 million for a used GIV. When you’re buying an aircraft, was pretty thin a year or 2 ago, but Last time we had a downturn in the it’s often a good idea to hire a now it’s about 200 pages. business aircraft market was in buyer’s broker. You tell them what A good Learjet 35, selling for $3 1992. Just when people had the you’re looking for and, for a fee, million 1 1/2 years ago, is going for feeling that business jet prices were they’ll act on your behalf. I’ve often $2.3 million today. You can make a as low as they were going to go, found it’s better to let a broker do great deal on a Gulfstream II for things started moving and prices the haggling for you. When the $5–$6 million compared with $6–7 really began to escalate. deal is between brokers there’s a million a couple of years ago. mutual respect. Learjet 55s are down about $1 mil- Making the deal They both want to make a deal lion to $3.5–$4 million. and they don’t try to make the I recently had someone offer me Over the years I’ve bought pre- price higher than it should be. A a nice Honeywell TFE731-powered owned aircraft direct from owners, common situation among owners is Lockheed JetStar 2 for just $1.6 direct from the factory and through that they feel their aircraft is worth million. While it goes through fuel brokers. You can find good deals more than it will realistically bring a little faster than some other air- anywhere. When I bought my GII on the market. Their broker is often craft, you can have an almost Gulf- back in 1992, a lot of people were able to talk them down a little and stream-sized cabin for a low trading up to GIVs and Gulfstream make sure they’re realistic. upfront investment and it’s a great had 28 GIIs they wanted to get rid With the Internet and today’s free aircraft for domestic operations. of. So I was in a position to make a flow of information, there are hard- One of the all-time sleepers these good deal with the factory. ly any secret deals out there. If you days, in my opinion, is the corpo- My 1965 model Learjet 24, specify that you want an aircraft rate-configured Boeing 727. which I use as my personal and between such and such a serial They’re down in the $6–8 million corporate transport, was owned by number, and give the same infor- range and have the same cabin as a a radio evangelist who was willing mation to 4 brokers, they’ll usually $50-million Boeing Business Jet to sell direct at a price I was happy all come up with the same aircraft. PROFESSIONAL PILOT / June 2002 103 Before buying an aircraft, you However, these days there’s rea- and he told me the banks are real- need to evaluate all your options, sonable availability of freelance ly keen on financing corporate including charter, fractional own- corporate pilots as a result of pilot jets. Historically, banks have very ership, having your aircraft man- jobs shed in flight department low loss rates on these types of aged and setting up a traditional mergers. Many corporate pilots loan, compared with financing of flight department. If you’re flying enjoy this freelance work, and typ- other chattels. more than 40 hrs a month, you ical rates in the Los Angeles area One of the great things about can usually justify buying your run $400–$450 per day for a GIV preowned aircraft is that they bring own corporate aircraft. While it’s captain and $300 per day for a into the market business jet users often less expensive to have a Learjet 35 captain. who will invariably become buyers management company look after Putting your aircraft out on char- of new aircraft. your new corporate aircraft, many ter will help cover operating costs If someone would really like a owners want their own pilots, and defray total ownership costs. Citation Bravo at $6.3 million, but their own mechanics and their Chartering out a GII brings an can only afford a Citation II at $2 own hangar. owner about $1700/hr, while let- million, it’s better for everyone, ting out your GIV will usually including the manufacturers, to get Doing the research bring you close to $3000/hr. the prospect into a used jet If you consider that a preowned because he or she will be a poten- If you choose to go the managed GIV costs about $260,000 a month tial new jet buyer down the line. option, and you’re in the Los to own, including finance costs, Take your time in selecting a pre- Angeles area, you’re looking at a you’ll be able to offset this by owned aircraft. Examine the log- management fee of about $3000– $120,000 a month or so with 40 books carefully and work with $5000/month for a Gulfstream-type hrs of charter. experienced pilots who’re quali- aircraft, about $5000 in hangar Corporate aircraft insurance has fied in type. It’s worth paying more rental, $500 per day in crew costs, escalated 25–100% since the ter- up front for a mechanically sound plus aircraft maintenance. If you rorist attacks last September. In our aircraft with current inspections. choose to hire your own pilots, case, we’re paying about 30% If the airplane you’re looking at you’re looking at a salary of more for hull and liability insur- has just had a landing gear inspec- $80,000–$140,000 for a Gulfstream ance than last year. However, air- tion, that can make a $30,000 dif- captain, $50,000–$80,000 for a first craft insurance is still not a really ference. And a recently completed officer and $60,000 for a mechanic. big expense. It runs about $55,000 12-year inspection on a small to There’s been a growing shortage a year on a $5-million GII hull midsize jet can add more than of qualified corporate pilots over value.