ROI in Private Aviation: Is It Possible to Offset Your Costs?

Private jets are strategic assets. Here’s how to maximize the return on your investment.

Making the decision to purchase a jet that fits your lifestyle and needs is the easiest part of the whole transaction. Figuring out where to hangar the aircraft, who will bear the responsibility of maintaining it and who will fly it are just the first hurdles that come your way after you’ve committed to the purchase. We are going to discuss some ideas about aircraft management and how it benefits different types of ownership situations. Not all ownership situations are created equal. We will also explore how chartering your jet helps to offset ownership costs. Depreciation alone doesn’t always provide the full strategic financial benefit of aircraft ownership, which is why we feel it’s important to address the topic of offsetting costs. Whether you own a jet or manage one, we hope this guide will help to answer some important questions and jump start some ideas about offsetting jet ownership costs.

Joint Ownership

One of the more underrated ways for jet owners to offset costs is by partnering with other individuals who are also in the market to purchase a jet. This situation is not for everyone and is perhaps the reason it is so predominantly underrated. Joint ownership involves a lengthy process of contractual obligations between the parties involved and decisions about whether to own the aircraft as an LLC, unincorporated association, or as a corporation. For some, joint ownership takes place under a structured fractional program where multiple individuals invest in “shares” of an aircraft solely meant for use by the group itself. For others, joint ownership is split among a smaller group, usually two or three individuals, where terms are negotiated in a more flexible manner and on an ad hoc basis. The latter situation is often suitable to offset costs for those individuals who fly less than 200 hours each year, more effectively than the former fractional situation. Joint ownership outside of fractional programs also allows the ownership group, however it is formally organized, to remain open to the prospect of offering the aircraft up for charter by a separate entity. Depending on the jointly owned aircraft type, market demand for private charter, and willingness of the owners to take advantage of the charter demand when it spikes, it can be a highly effective strategy to break even.

Sole Ownership

The challenge of offsetting costs is magnified for individuals who choose to own a jet by themselves. The threshold to achieve sole ownership is much higher and not realistic for every high net worth individual. Maintenance and upkeep costs alone can be an excessive financial burden for just one owner. The benefits of sole ownership, however, include not having to negotiate with ownership partners on each aircraft related decision and, in most situations, greater depreciation value come tax season. Also, from a legal perspective, owning your own jet is much simpler. With whole aircraft ownership, individuals have more latitude to choose the most suitable jet management company with reputable broker partners. The more your aircraft is flown for hire as a sole owner, the greater your offsetting cost potential.

Aircraft Type Considerations

Buying a jet is a big financial move, and as mentioned in the beginning of this guide, the easiest decision of even more complicated ones that come shortly after. If a jet owner is looking for the most potential to offset costs, then they need to consider how the type of jet they choose might play a role in achieving that end. Charter demand ebbs and flows, and certain aircraft sizes are more in demand than others. Initiating discussions with the jet management company that you want to work with is a wise place to begin. You can talk to brokers directly to get a handle on which aircraft types are quoted most and where the advantage(s) lie for your ownership situation. Maybe the jet management company you would like to work with specializes in large cabin aircraft with intercontinental range, but you have your heart set on a midsize jet. You need to widen your search for management companies that specialize in or have experience with the aircraft in your price range that meets your own usage needs. One specific piece of guidance we can offer from experience is that long range jets have consistent charter demand and are among the most versatile of options on the market.