Dec. 3, 2020

With many companies and individuals looking to buying their first aircraft for business, an NBAA GO Virtual Business Aviation Convention & Exhibition (VBACE) session offered tips for what to consider before embarking on a purchase.

The session, Buying a Private Aircraft: What First-Time Private Aircraft Buyers Need to Know, was moderated by NBAA’s Senior Vice President of Strategy and Innovation Mike Nichols, CAM, along with aircraft transactions experts Amanda Applegate, a partner at Aerlex Law Group, and Deborah Bew Liu, founding president of Aircraft Acquisitions, Inc.

The walked through six key considerations:

1. Buying an Aircraft Is a Team Sport

A prospective aircraft buyer should assemble a team of experts to help guide the process. Applegate explained buying an aircraft is a complex process and no single person can be an expert on all issues at play, including tax planning, insurance, aviation maintenance and legal compliance.

2. Define Your Mission Profile.

“Start with a mission profile analysis and consider factors such as where you need to go, how often and how many passengers [you’ll carry],” said Liu. “Bigger isn’t always better. It’s really about finding the right fit.”

Liu suggested first-time buyers purchase an aircraft that meets the majority of their mission needs. For example, if most trips are within the continental U.S. and a few will be to Hawaii, don’t buy an aircraft to meet the Hawaii mission. Buy an aircraft for the majority of your trips and consider other options, such as chartering an aircraft, for the outliers.

3. Know Your Options

While whole aircraft ownership might be the right choice for some buyers, other options including partnership or fractional ownership are also available. Some aircraft users might benefit from a jet card program or membership program instead of ownership. Applegate and Liu shared the pros and cons of various ownership structures.

4. Plan an Optimal Ownership and Operational Structure

Nichols explained many agencies, including the FAA and IRS, have regulations that impact aircraft ownership, so it’s important to consult with your team to make the best arrangements for regulatory compliance and tax planning.

“Putting together the team early and having the ownership structure in place prior to closing is so important,” said Applegate, as early engagement helps a buyer plan properly for regulatory and tax variables.

5. How Much Does It Cost?

Liu suggested prospective buyers consider costs not in terms of a budget but as simulations – comparing aircraft models and potential fixed and variable costs associated with those models. Depreciation, tax benefits and cost of financing or opportunity cost of funds also factor into the buying decision, whether buying a new or used aircraft.

6. Buy the Aircraft

Finally, the experts discussed the general timeline of an acquisition, from the letter of intent to the closing. They also shared common mistakes in the transaction process, and how to avoid them.

Read NBAA’s Aircraft Transactions Guide for more information.