Owning a private jet is a complex business. This article sets out a pre-flight checklist for anyone considering such a purchase.

A few days ago this publication carried an article on aviation finance as a niche area of investment worth the attention of family offices. This article focuses on the practical points to consider when purchasing a private jet. (See another article on the same topic here.) It is written by Brian Johnson, technical director, Estera Aviation, Isle of Man, and Graham Williamson, president, TAG Aviation Europe. It first appeared in Illumina, a new publication of Estera, a provider of offshore fiduciary and administration services. The views expressed here are not necessarily shared by the editors of this publication but they are pleased to share these contributions and invite readers to respond.

If you believe one of the leaders in the industry, the market for business jets is set to soar over the next decades. Driven by wealth creation and the globalisation of trade, Bombardier, the private jet manufacturer, predicts 9,000 business aircraft deliveries over the next 10 years, worth a combined $267 billion. In 2014, the last full year for which figures were available, the industry reached 601 aircraft deliveries, which was a 6 per cent increase from the year before.

Private jets have proven to be a cost-effective, fast and safe way to travel, allowing ultra-high net worth individuals and successful international businesses the benefits of on-demand scheduling, the ability to conduct business privately while in flight, direct access to company sites and reduced travel times. Bombardier expects North America, Europe, China and Latin America to be its largest markets over the next decade.

But while wealthy individuals, entrepreneurs and business leaders may see the appeal of owning their own jets, few know where to start when it comes to taking the leap into private aviation. Graham Williamson is the president of TAG Aviation Europe, an aircraft management business that works on behalf of more than 100 owners to operate, manage, maintain and, if required, charter their jets. The company trains and manages crews on behalf of owners, so that they can always have their dedicated choice of pilot and, as requested by the owners, can charter out aircrafts when not in personal use. All maintenance is handled from the company’s centres at Geneva and Farnborough, in the UK.

Williamson says: “Private aviation is a highly specialist business, so it’s absolutely essential to do things properly.  For example TAG has invested considerably in how we select and train our pilots. Each one is put through a simulator assessment, panel interview and psychometric testing and once selected, undergoes regular phased training to maintain the highest levels of quality and safety. TAG has global reach with 24-hour operation centres across Europe, Asia and the Middle East which means that we can solve problems for our customers wherever they arise, be that volcanic eruptions, poor weather conditions, or any other challenge.” 

Williamson has four tips for first-time buyers of private jets. The first is to make sure you choose the right aircraft for the missions you wish to fly: “The first ever meeting that I had with a client when I joined TAG was in Poland. The client had just ordered a mid-size jet, and the first trip he wanted to do was down to the Caribbean. The aircraft didn’t have the range, so he was disappointed from the start. Other clients buy very long range aircraft, but then rarely use them for long flights.”

Bombardier predicts the bulk of sales over the next 10 years will be in the light category of jets, with a typical purchase price of between $9 million and $20 million, and a range of 2,000 to 3,000 nautical miles. The 2014 fleet of 8,770 such jets is expected to grow to 11,085 by 2024, with 3,400 deliveries and 1,085 aircraft retirements, producing a 2.4 per cent compound annual growth rate. 

At the top end of the market, larger jets worth between $50 million and $75 million, with a range of 5,000 miles and bigger cabins, are predicted to grow from 1,620 to 4,070 jets over the next decade, equating to 9.6 per cent growth year-on-year. This category will generate 2,500 deliveries, but will see only an estimated 50 retirements.

“One of our biggest frustrations is that people come to us and say they have bought a jet and they need a management company, but they are then disappointed with the aircraft they have purchased,” says Williamson. “So establish what you need before you make the momentous decision of spending tens of millions of pounds on a piece of equipment that may not be fit for purpose.”

His second piece of advice is to engage a specialist operator early in the process, not only to ensure that the correct purchase is made, but also to oversee that the pre-purchase inspections are carried out correctly. There is also the question of where the aircraft should be registered and any tax implications of importation. Brian Johnson is the technical director of Appleby Aviation, leading the firm’s focus on the aviation sector, and advising clients on aircraft registration.

Previously director of civil aviation for the Isle of Man and responsible for establishing the Isle of Man Aircraft Registry, Johnson joined Appleby in 2011. In the last few years, he has been involved in the launch of the Jersey Aircraft Registry, which became operational in November 2015 and is the fifth offshore register, alongside Guernsey, Bermuda, Cayman and the Isle of Man, all jurisdictions in which Estera has a presence.

Johnson says: “Historically, aircraft were registered in the country where the owner was based, and where the pilots were normally licensed. But national registers were usually bureaucratic government departments, with no understanding of the urgent service needs of a business jet operation.”

He adds: “Over the last decade, there has been a large movement to register business aircraft ‘offshore’, with the emergence of dedicated business aircraft registries that are more customer-focused on the needs of their business aviation clients. Jersey and Guernsey are the latest jurisdictions to respond to that demand.”

Once purchased and registered, Williamson advises potential purchasers to make sure they regard their jets as an asset: “You need to see it as an asset so you want to be with an operator who will protect the value as much as possible. That means ensuring the maintenance records are immaculately kept, and that all loose equipment is properly looked after. It will depreciate, but you really want to protect its value as much as you can.”

Finally, he says it is critical to stay abreast of regulatory developments. For example, a new European regulation comes into force on 25 August 2016 requiring compliance with Part-NCC for all non-commercial (privately operated) complex aircraft, where the beneficial owner or operator has a principal place of business or residence in any EASA Member State. These regulations apply to all operators or owners of aircraft that fall within specified weight and size guidelines even if the aircraft is registered in a non-EASA country: over 5,700kgs for fixed-wing and over 3,175kgs for rotary-wing.
 
“Owners need to address this sooner rather than later,” says Williamson, “because if they haven’t established that the aircraft is with an approved operator, they will be required to submit a Compliance Declaration to their National Aviation Authority accepting responsibility, accountability and liability for their operation under these regulations.”

A growing number of private jets will be taking flight in the coming years, but these are purchasing decisions not to be taken lightly. 

(To see another item on the business of owning, leasing or investing in private jets and yachts, click here.)