Why do you want an airplane? Do you feel there is a genuine need (not counting pleasure aircraft, of course), or is this more of an ego/image thing? While airplanes are expensive, their operating and maintenance costs are the true surprises of aircraft ownership. Depending on fuel prices, a rough rule of thumb is that operating and maintenance expenses will equal the purchase price within the first five years of operation. Accelerate this projection for older, less efficient aircraft or for above average fuel prices.

All aircraft represent a series of compromises. Be prepared to pay for flexibility. An aircraft suited to regional operations (500 miles or less) will not be able to fly cross-country with a full load of people and luggage. If you need true transcontinental range, but only occasionally, your best bet may be to buy a less capable aircraft and augment your longer-range requirements with airline or charter options.

A detailed aircraft needs analysis should, at the very minimum, harmonize your requirements/budget and available aircraft options in the following areas:

• Short and long term corporate plans and philosophy
• Anticipated and/or expected business gains as a result of aircraft ownership
• Typical destinations served
• Travel time constraints
• Expected annual usage
• Aircraft Capabilities and Size
• Ownership Options
• Depreciation Scenarios
• Tax Implications
• Realistic Cost Analysis

Professional assistance is encouraged when undertaking this type of analysis.Your return on investment should be many multiples of the initial outlay. But insure the firm you retain has the integrity to advise you against any aircraft purchase. Unfortunately, an analysis from many brokers’ and dealers’ reveals the best option just happens to be part of their inventory.

The Budget

When looking at what you can afford you must first remember that the purchase price is but a small component of the overall cost of the aircraft. Expenses include:

• Hangar rent/lease/purchase
• Crew salaries, benefits, and expenses (for those not operating the aircraft themselves)
• Training
• Insurance
• Maintenance, both routine and unplanned. The use of maintenance contracts, particularly for turbine engines, is a very popular method of maintaining a more predictable maintenance budget.
• Airframe, avionics and interior upgrades
• Fuel & oil
• Landing fees
• FBO fees and service charges
• Taxes
• Loan payments

Unfortunately, many new entrants into aircraft ownership get burned very quickly on the unexpected expenses they faced soon after acquisition. Planning ahead now can save considerable money and heartburn.

Analyzing the Options

At this point we're going to assume you've established a reasonable and workable budget and have determined that an aircraft would, in fact, further your stated goals. With that behind you, what type of aircraft is available to fit within the parameters defined by your requirements?

A thorough analysis should look at the capabilities of the aircraft and how those capabilities will mesh with your requirements and budget. At this stage it is particularly important to remove as much emotion from the process as possible. Give up on the notion of having a sleek and sexy aircraft and focus on the one that will most appropriately fit within the defined parameters.

Aircraft capabilities include range (the distance the aircraft will travel with adequate reserve fuel), useful load (the amount of people, cargo, and fuel the aircraft can carry), speed, comfort (cabin size, on-board lavatory, galley, etc.), and avionics (navigation and communication equipment). When analyzing capabilities the crew and maintenance options must be looked at again. More complex aircraft require more specialized maintenance and crew training which translates into increased operational cost.

Once your requirements are understood and a suitable aircraft type is found the search can begin. This search may include a review of both new and used aircraft, depending on budget.

New or Used?

That's the million, or perhaps ten million, dollar question. While newer aircraft are more expensive, they will typically have better warranty coverage, the latest flight and safety equipment, and will be more fuel efficient. Budgeting for maintenance is easier due to both the newness of all components and warranty coverage. Reliability will also be higher.

Used aircraft have their advantages too and should be looked at carefully. The used aircraft market is filled with many makes and models, some of which are proven performers even if they're no longer in production. Initial cost is lower and the ability to begin aircraft operations will usually be shorter because there is no wait for a factory production slots. Depending on make and model, physical depreciation may also be less than for a new aircraft. The siren song of older aircraft is that many can be had "on the cheap." This may be true for acquisition but is certainly not the case for operational costs. The old trick in aircraft sales is to slap a fancy paint job and interior on an otherwise tired old dog. Look beyond the surface and into the "heart" of the airplane to avoid finding yourself in a very expensive situation.

Ownership Options

1. Owner - Operator. This is the most common type of ownership. With this method, two distinct categories exist. One, the owner flies the aircraft him/herself and handles all the tasks required to ensure continued safe operation (training, maintenance scheduling, administrative tasks, etc.); or two, the owner delegates all operational considerations to an in-house flight department. While the most flexible and responsive method of operation, the Owner-Operator option also tends to be the most expensive.

2. Owner - Outsource. With this method the owner hires a third-party to manage the aircraft and its operation. This method tends to be less flexible and responsive but is often ideal for smaller aircraft and/or owners with just a single aircraft. On one end of the spectrum are professional organizations such as some FBO's or charter operators while on the other end are the "one-man-band" operations. Many professional organizations do a great job at managing aircraft, but don't assume that because they have a big, fancy office and hangar that they are competent and safe. Talk to their current and past clients before putting your asset into their hands. Likewise, the "one-man-band" may be a great way to save money but such savings may come at great cost. Many "one-man-bands" do a fantastic job, many others don't. Due diligence here is imperative.

3. Owner - Leaseback. If you don't fly your aircraft enough to make it economically viable then the Owner-Leaseback option may be for you. This option typically involves an FBO or charter company operating and maintaining your aircraft with the agreement that it will be available to them for their charter needs. While this option allows owners to recoup some costs, you will never make money. If someone tells you otherwise, look for another advisor...fast! This option is often combined with the owner-outsource option discussed above.

4. Fractional. Fractional ownership pools multiple owners together into a single airplane and charges monthly and hourly fees for the operation of the aircraft. But, while you may technically own a percentage of a specific aircraft, don't expect to fly in "your" aircraft. In order to meet the scheduling needs of all fractional owners any number of aircraft may transport you. This method offers a high degree of flexibility and is an enticing way for first time owners to experience the benefits of business aviation. Fractional aircraft tend to lose their economic benefit for high frequency fliers. A thorough analysis should be performed before jumping into this method of ownership.

Purchase Guidance

Whom do you Trust?

From the manufacturer, to the traditional broker/dealer, to the "one-man band," many resources are available to offer purchase and sales advice. Trouble is, most offer a singular perspective and do not have either the resources or experience or insight to understand and apply aircraft ownership as a business in and of itself.

If you choose to partner with a firm to buy and/or sell your aircraft, research the prospects fully and ask a lot of questions. We've put together the guide Choosing a Marketing Partner to help you navigate the waters of aircraft brokerage. Understanding the philosophy of most brokers is key to a successful transaction.