Client Affairs
GUEST ARTICLE: Buying A Business Jet? A Guide To Taking To The Skies

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.)