Ownership of your FIRST AIRCRAFT is not intuitive

Ownership of your FIRST AIRCRAFT is not intuitive
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Post Pandemic First Time buyers acquiring aircraft

Acquisition of this Asset is considerably more complex

FAA rules limit the utilization of these vehicles

 

The Wall Street Journal (below) delivers excellent news that post pandemic business aviation is flourishing. The writer makes the point that many of the new aircraft owners are first time buyers. The infusion of demand is a positive message for aviation in general.

Owning an aircraft is not comparable to buying an automobile. This aerial asset is far more complex to operate, maintain, store and utilize. The fact that your new shiny wing with engines is more difficult becomes clear when you think about flying it yourself.

  • The skills are so demanding; the requirements of extensive training and regulatory approval are more intuitive. Perhaps more difficult to comprehend is the currency required to be qualified to fly. The obvious solution is to hire a pilot.
  • Maintenance is another obvious difference. The technical expertise is at an extremely significant level, and the most common solution is to contract with an authorized company.
  • Parking a sophisticated piece of equipment needs shelter to protect its systems from weather. Again, the new purchaser will likely opt to rent hangar space.

[ here is an article with thorough commercial advice.]

One way to address these three concerns is to hire an aviation company to manage your new acquisition. These organizations are qualified to meet all of the FAA regulatory rules, find competent pilots, manage the plane’s airworthiness and protect it.

aircraft management company

A charter management company not only can do these basics, but can reduce the cost of ownership by renting your new aircraft out to 3rd parties. That additional level of service ONLY if the managing entity is found qualified by the FAA under 14 CFR Part 135. Before committing to any such relationship, a detailed assessment of the Chartering Organization’s business reputation, safety practices and FAA compliance. Any weakness in these criteria could impact the value of your airplane.

It is the “utilization” aspect of aircraft ownership that is complicated . You cannot just take it and UBER it. While you might loan, for a rental fee, your Jeep or other specialty vehicle, charging an acquaintance to use your plane is prohibited, likely could lead to paying a penalty to the FAA and even result in criminal proceedings. Perhaps the most damaging consequence is an accident; there your insurer could deny any claims because you did not have the required safety and economic authorities.

This is an area of FAA law that is complex and may seem to defy ordinary logic. The FAA and industry are in a “dragnet” mode to find the operators of “the Gray Market”. Here is a brief compendium on this issue, enforcement actions and explanations of why this is considered a FAA safety rule:

legal illegal

·       Red Flags For Charter Consumers

·       FAA Dragnet On The Gray Market

·       Gray Charters Become A Federal Case

·       Shedding Light On The Gray Market By NBAA

·       GRAY CHARTER MARKET: 2 More FAA Actions Against Illegal Flights And 1 Proactive Addition To The NBAA Small Aircraft Exemption

·       FAA’s Attack On Illegal Charters Continues With Seven Figure Proposed Civil Penalty—IMPACT ?

·       FAA Should Increase The VOLUME On Its Attack Of The GRAY CHARTER MARKET

·       FAA’s $1,000,000 CP Should Deter The Gray Charter Market

legal illegal

No doubt that these aircraft are incredibly valuable business and personal tools. A new owner has invested a very large amount of cash in this class of asset. The complications, not insurmountable, must be definitively addressed!!!

aviation expert

 


Private Flying Takes Off, Boosting Demand for Business Jets

Some well-heeled, would-be private-jet fliers are being turned away as industry booms

passengers boarding

 

By 

Doug Cameron

Nov. 27, 2021 9:00 am ET

A boom in private flying is helping revive business-jet sales, but it is also challenging charter operators who are scrambling to meet the holiday-travel rush.

After a multiyear slump, flying by private jet is soaring again. The number of flights in the U.S. over the Thanksgiving travel period is forecast to be up as much as 10% from 2019, according to WingX. Private-jet flights were up 60% in the first half of November compared with a year earlier, the data tracker said.

The boom comes after a long, fallow period since the global financial crisis. The more than 495,000 private-jet flights in the first 10 months of the year is up 9% from the same period in 2019, and just ahead of the previous high in 2007, according to the Federal Aviation Administration.

Demand has risen during the Covid-19 pandemic thanks in part to fliers’ desire to avoid crowded commercial planes and airports, as well as cuts in airline service to smaller communities. The increased availability of on-demand private-jet services also has helped.

Private-jet operators and charter brokers, who secure aircraft and then rent them out to private customers, said they are stocking up on spare parts and trying to secure pilots.

Ryan Waguespack

“They know the surge is coming,” said Ryan Waguespack[1], senior vice president at the National Air Transportation Association, a trade group.

Amid the surge, sales of new jets are booming. Orders in the third quarter rose more than 50% over the past year, according to the industry’s four largest manufacturers— General Dynamics Corp.’s Gulfstream, the Cessna unit of Textron Inc., TXT -0.82% Bombardier Inc. and Embraer SA . New private jets sell for between $5 million and $70 million.

aircraft management company

 

Sales are being propelled by wealthy individualsmany of them first-time buyers—and companies that sell shares in jets or charter planes, according to aircraft manufacturers. Plane makers are responding by boosting production after a decadelong slump stretching back to the 2008 financial crisis.

Gulfstream, the world’s largest business jet maker by revenue, has its biggest backlog of orders in six years. Brazil’s Embraer is sold out of private jets until the first quarter of 2023.

Jet makers, especially those making smaller planes carrying six to 10 passengers, said buyers who have never owned a private jet account for as much as a quarter of sales, far higher than historical levels. Some customers include fliers who previously traveled commercially but have shifted toward business jets for health and safety reasons during the pandemic, according to Eric Martel, chief executive of Bombardier.

Industry executives said as many as a quarter of buyers of new planes this year haven’t previously owned a jet. Michael Amalfitano, CEO of the executive jet arm of Embraer, said at a recent industry conference that users were also getting younger, including millennials and those from Generations X and Z.

A shortage of used aircraft has some buyers snapping up multimillion-dollar planes on the spot, rather than after the more typical extended due diligence, said aircraft brokers. The average asking price for a used jet increased to $10.7 million in October, about $1 million higher than its pre-pandemic level two years ago, according to JPMorgan.

Executives say all the demand has led to the tightest market for used aircraft in a decade. The number of previously owned business jets for sale in November fell by half from a year earlier, according to investment bank Jefferies Group LLC.

“You’ve got used aircraft available for sale at record low numbers, particularly if you look at something that’s [newer than] a 10-year-old aircraft,” said Scott Donnelly, chief executive of Cessna owner Textron Inc.

Fliers are mainly heading to U.S. beaches, mountains and other leisure destinations rather than to slowly reopening offices and factories, said charter operators and flight-tracking services.

A pilot shortage has led some jet ride-share operators to say they are introducing blackout periods for flights.

Private-plane operators such as NetJets, a unit of Berkshire Hathaway Inc., BRK.B -0.45% offer prepaid blocks of private flights to customers. For instance, a traveler can buy a certain number of flights to and from Chicago and Palm Beach, Fla., during a certain time period. The company also offers common ownership of jets, providing them rights to the jet much like a condo share.

NetJets suspended new sales and memberships to maintain service for existing customers. The company expects demand over the Thanksgiving period to be up 42% over 2019. Wheels Up Experience Inc. in October told most new members they can’t fly for 90 days after joining. Other operators have frozen new business completely.

Kenny Dichter, chief executive of Wheels Up, said on an investor call last month that the industry had missed out on hundreds of millions of dollars in potential revenue by limiting or suspending new membership and charter sales to protect services for existing customers.

“We have done thorough analysis of flight patterns and behaviors and we are confident we can deliver in a responsible manner for those members,” said a Wheels Up spokesperson.

Write to Doug Cameron at doug.cameron@wsj.com

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the November 29, 2021, print edition as ‘Business-Jet Purchases Take Off.’

[1] Ryan Waguespack served as the Chair of NATA’s WorkForce Development Committee and Illegal Charter Task Force, as well as Vice Chair of the Air Charter Committee as an association member. As Vice President, Ryan leads the Association and industry effort to combat illegal charter, working with the FAA and its Field Offices to educate the public on the risks, assisting the FAA in enforcement through data collection and reporting, and leveraging existing data sources to help the agency focus enforcement efforts.

Walmart NE Arkansas



 

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