What Your Own Business Jet Really Costs - The Formula Explained

If you decided to go out today and schedule your first lesson at a flight school, and if you like it and wanted to follow-through to the completion of your mandated course of lessons (40+ flight hours, including dual and solo flights, cross country flights and testing requirements) you will spend somewhere between $7,500 to $12,000 to attain the FAA issued Private Pilot’s Certificate. After this, if you want to go on to your Commercial Certificate with an Instrument Rating, look to spend about $50,000 to $75,000.

The Airline Transport Rating and beyond will put you out about $150,000 to $200,000 more. A Jet Rating obtained through Flight Safety International will cost between $18,000 to $40,000 depending on the model that you choose to get rated in. All of this training is conducted in a classroom and simulators.
Most people that own their own business jet don’t have a pilot’s certificate, and therefore the above information is moot.

However just like when you peruse the luxury department at Harrods, or the amazing unique jewelery creations at Cartier, you quickly realize that no-one wants to talk about pricing until you have well and truly been totally captivated by the splendor of the luxurious piece. Business aviation is also rather like this at times, too. Therefore I wanted to disperse some of the smoke and smash some of the mirrors that often surround the pricing of my industry.

As a buyer looking for the best value corporate and personal jet-travel ‘bang-for-your-buck’, you will quickly find that there are four options open to you outside of having to buy a ticket on the airlines, and these are:

• Purchase of a Jet Card or of Block-Time
• Fractional Ownership
• Charter
• Private Ownership

There are many companies that sell jet membership, or block-time cards. These are either licensed resellers of unused fractional shares, or they are charter brokers who make arrangements with charter companies who sell blocks of time to them, at a discounted rate. Rarely is the program provided by an aircraft owner directly, however there are as many ways as there are thoughts that run through a person’s head.

Virtually all these flights are conducted under FAA mandated ‘charter rules and regulations’ (cfr. 14, FAR part 135.) There is no shared depreciation that comes with this option. The occupied rate charged against a card, or an account of block-time, is usually (but not always) charged at a higher rate than that which would be charged to a fractional owner, or a charter client.

Fractional Ownership has been given its own set of rules by the FAA: cfr. 14, FAR part 91, subpart K. There are several fractional share companies in operation today, and it’s not limited to just aircraft. Cars, yachts and holiday homes are also available to fractional buyers. The normal share divisions are “Whole,” “Quarter,” “Eighth,” and “Sixteenth.” Your percentage increment share of depreciation is available to you, with this option. Fractional ownership can offer the advantage over charter, whereby the “dead-head”; (one-way, i.e. the return journey, if you are staying at your destination) is not charged against you.

Charter is very similar to a jet card or block-time arrangement in that there is no depreciation available with this expense. There are a lot more charter companies than there are jet card or fractional companies, and therefore it is possible to shop around until you find your ideal level of service, equipment, people, and cost. Often a “dead-head” will be charged against you, even though you only wanted to fly one way.

Private ownership is where you are the King or Queen of your own destiny. You have full-100% depreciation available to you. Every time that you are on a trip, you can leave personal belongings on-board, because your jet is not leaving until you are ready to leave. Best of all, you control who, and who does not ride on your aircraft; you hand-pick your staff, and you outfit, equip, style and decorate the aircraft anyway that you so desire. Okay, now it is time to lift up my dress and show you some of my flesh…To illustrate the numbers I will use two examples, each a current production business aircraft (see inset images):

• The Pilatus PC12
• The Cessna Citation X

The Pilatus PC12 is built in Switzerland and is a single-engine Turbo-Prop with 9 passenger seats, plus one pilot. It has a 310 mph cruise speed. 1,668 mile range and costs $4.0Mil, new; and $1.8Mil to $3.92Mil used. The Cessna Citation X (“Ten”) is built in Wichita, Kansas,and is a twin-engine jet with 9 passenger seats, plus 2 pilots. It has a 580 mph cruise speed. 3,700 mile range and costs $21.6Mil, new; and $7.7Mil to $15.5Mil used. Here are the numbers for both aircraft under each ownership/use scenario:

The Jet Card

Offered by several resellers of fractional shares. Same services but with no monthly fee. The hourly rate is 50+% more than it is for a contract owner.

Jet Card Use PC12


100 Hours per Annum
(limited by Card – 25 hour increments)
21,618 Nautical Air Miles per Annum
Total Annual Cost = $261,531
Cost per Hour = $2,615.31
Cost per Mile = $12.10
No mandatory paid returns
No Depreciation possible

Jet Card Use Citation X

100 Hours per Annum
(limited by Card – 25 hour increments)
47,100 Nautical Air Miles per Annum
Total Annual Cost = $690,000
Cost per Hour = $6,900
Cost per Mile = $14.65
No mandatory paid returns
No Depreciation possible

Fractional Ownership 

Normally available in 1/8, 1/4, and ½ share increments. Usually a 5-year contract that provides a specific number of hours per year of use. A monthly fee is applicable, too.

1/8 Share PC12

100 Hours per Annum (limited by Contract)
Effective Hours = 50
21,618 Nautical Air Miles per Annum
Effective Air Miles = 10,809
Total Annual Cost = $174,354
Cost per Hour = $1,743.54
Cost per Mile = $8.07
Mandatory paid returns
Depreciation Available


1/8 Share Citation X


100 Hours per Annum
(limited by Card – 25 hour increments)
Effective Hours = 50
47,100 Nautical Air Miles per Annum
Effective Air Miles = 23,550
Total Annual Cost = $537,540
Cost per Hour = $5,375.40
Cost per Mile = $11.41
Mandatory paid returns
Depreciation Available

Charter

Offered virtually everywhere. An all-In Expense.


Charter PC12

100 Hours per Annum (unlimited)
21,618 Nautical Air Miles per Annum
Total Annual Cost = $144,000
Cost per Hour = $1,600
Cost per Mile = $6.66
Possible mandatory paid returns
No Depreciation possible


Charter Citation X

100 Hours per Annum (unlimited)
47,100 Nautical Air Miles per Annum
Total Annual Cost = $460,000
Cost per Hour = $4,600
Cost per Mile = $9.77
Possible mandatory paid returns
No Depreciation possible

Private Ownership

You are the King or Queen of your own destiny.


Private Ownership PC12


100 Hours per Annum (unlimited)
21,618 Nautical Air Miles per Annum
Total Annual Cost = $275,774
Cost per Hour = $2,757.74
Cost per Mile = $12.76
No mandatory paid returns
Depreciation Available


Private Ownership Citation X


47,100 Nautical Air Miles per Annum
Total Annual Cost = $876,608
Cost per Hour = $8,766.08
Cost per Mile = $18.61
No mandatory paid returns
Depreciation Available

The Magic Formula: After analyzing the numbers listed above, you will see that there is a magic formula that comes in-to-play when you are deciding whether you should rent, or lease, or own. In this case we learn that you will have the lowest operating cost, per flight-hour ‘overall’, if you own your aircraft when your annual utilization is above 240 hours of flight-time. See the chart below.

Source - Forbes Aviation