On December 17, 1903, Wilbur and Orville Wright made one giant leap for mankind by flying the first aircraft. From this point, different kinds of aircrafts specializing in different forms of air travel were invented. These include fighter jets that can fly at several times the speed of sound, commercial aircrafts that transport hundreds of people at once, and even cropdusters that are used for spreading pesticides over large tracts of land. Our focus, however, is on private jets. A private jet is simply an aircraft that has been designed to transport a small group of people. These people are generally high net-worth individuals for whom privacy and flexibility of schedule are a necessity. A luxury like a private jet comes with a big price tag which can depend on a variety of factors. So, without further ado, let’s get into it.
Buying vs renting a private jet
Considering the large price tag that is associated with buying a private jet, many people end up going for the option of renting a private jet instead. However, there are situations where this option is not recommended. When considering buying or renting an aircraft, it is important to first make a fair assessment of what your needs are. If you fly for less than 50 hours a year, it is recommended that you go down the path of private jet charter whenever you need to. In order to rent a jet, one must contact a private jet charter company that specializes in this particular field. The associated costs (which we will get into later on) which are separate from the purchase price of a jet are considerable. For people who are looking at about 50-100 flying hours a year, the cost of owning a jet becomes hard to justify. It is only when you start to exceed the number of 150 hours is when you can consider buying an aircraft for yourself. To sum it up, this decision is dependent upon the number of hours that you are going to fly in a year.
Leasing a jet
Between renting and buying, there is a third way that might prove to be best suited for a lot of people. Leasing gives you the same advantages as owning an aircraft without actually committing the whole purchase amount. You can even rent out your private jet and earn a decent bit of cash with that. Dry leasing refers to the practice of leasing an aircraft without the staff, maintenance, or insurance. On the other hand, wet leasing has these privileges also included in the cost. Either way, leasing proves to be much less expensive than buying a jet. Leasing an aircraft is a great way of exiting the contract at the end of the specified term without worrying about the biggest cost associated with aircraft ownership, the depreciation. It must be noted that personal jet ownership is looked upon quite favorably by the IRS. A private jet only has a shelf life of 5 years according to the IRS. Moreover, a business can write off 70% of the cost of the private jet within the first 3 years.
Since private aircrafts can cost anything between $2 million and $90 million (with prices going above even this number), the price tag can detract a lot of buyers. Fractional ownership is another option that is available to people interested in owning an aircraft which means you don’t have to pay for the entire aircraft yourself. It is logical that if the aircraft is not going to be in constant use by you throughout the year, buying it jointly with other people is a good option. From a tax and legal standpoint, fractional ownership is similar to buying an aircraft outright. Flyers essentially buy a share in the aircraft through a management company. NetJets (one such management company) first introduced this scheme in 1987 which revolutionized the way people looked at aircraft ownership. This scheme was so successful that NetJets continues to operate today as one of the leaders in this industry. In 2012, they set the record for the largest aircraft order which totaled out to a $17.6 billion dollar bill.
What are the associated costs of private jet ownership?
When you buy a jet, a vast range of associated costs also surface. These costs are actually quite complex to understand, and anyone interested in buying an aircraft must educate themselves on this topic. We can broadly divide these costs into 2 parts: fixed costs and variable costs.
In fixed costs, the cost of a hangar, aircraft Insurance, flight crew, flight crew training, and aircraft stocks and supplies are included. An aircraft needs a 24-hour operational hangar. The cost of the hangar access is dependent on the size of the aircraft and the location of the airport. Insurance is also a must, with hull insurance and coverage being the two parts of it. The liability limit generally goes close to $100 million. The number of people in the flight crew is entirely dependent on the size of the aircraft and the requirements of the individual buying the aircraft. Their training includes ground, flight, and simulator training as well. The plane itself must be stocked with food for the crew and the owner to consume as well.
Variable costs are the expenses that are dependent on the frequency of use of the aircraft. These include fuel costs, aircraft maintenance, crew expenses, and landing fees. The fuel cost part is self-explanatory. The more miles the jet travels, the greater the travel costs. The fuel cost is also dependent on the size and model of the aircraft. Older aircrafts tend to be much heavier on fuel. One of the major costs associated with private aircrafts is their maintenance. Private aircrafts count as high-maintenance machinery and require monthly maintenance, the cost of which can accumulate over time. The crew’s hotel, meals, and travel expenses on a trip must also be borne by the owner of the aircraft. Whenever an aircraft lands at an airport, landing and parking fees also become an expense. The amount of these fees is largely dependent on how busy the airport is.
These are all the associated costs that are in addition to the price tag of the aircraft.
Types of private aircrafts and their prices
Prices of private aircrafts vary quite a bit, so it is important to first divide them into subcategories. They are generally divided into three broad categories that are light jets, medium jets, and heavy jets. The choice of aircraft is mostly dependent on the mission profile of the trips that the aircraft is expected to take on.
For journeys that are less than 1500 miles, light jets are generally considered to be the best option. They are the most fuel-efficient and generally have a 3-5 persons capacity. One big disadvantage of these lighter aircrafts is that the cabin height is less than 6 feet which means that taller people might have trouble standing upright in the aircraft. They can cost anything between $2 million to $8 million. Some notable examples are Citation M2, Citation Mustang, Nextant 400XT, Phenom 100 and Phenom 300.
For journeys up to 2000 miles, medium aircrafts are the default choice. Their prices can run between $14 million to $18 million. Some examples include Challenger 300, Citation X+, Falcon 2000LX, Gulfstream G200, Hawker 4000, Hawker 900XP and Citation Latitude.
Transcontinental flights and flights over international borders come under the umbrella of heavy jets. With ranges that exceed 3000 miles, transatlantic flights can only be achieved with planes of this class. With cabin heights of over 6 feet, most people can walk upright in these aircrafts. Their prices often exceed $20 million and there’s no upper limit to this amount. Some examples are Challenger 850, Falcon 900LX, Gulfstream G450, and Global Express XRS.
Private jet ownership is an experience that certainly has its advantages and disadvantages. However, with the advent of leasing and fractional ownership, there are a plethora of options available for people who are interested in doing more than just rent a private jet. Moreover, the advantages of renting a private jet are also readily observable. Owning an aircraft also means that a lot of associated costs also become visible. These costs can combine into a hefty amount that can cross the $1 million dollar mark per year depending on the usage of the owner. However, there is no doubt that owning a private jet is a unique experience and on top of that, extremely cool. Happy Flying!