January 3, 2022
Buying a Used Private Jet to Charter for Revenue: Is it a Good Idea?
The Answer May Surprise You!
Owning a private jet requires a sizable investment and ongoing financial responsibilities. But it’s not that uncommon to wonder whether it’s a reasonable investment to purchase a business jet, and then charter it out, using it occasionally for your own travel needs for free.
But is this even possible? We took a look at all the factors, and came to a stunning conclusion for you.
Consider the Expenses for Owning a Private Jet
Simply owning a private jet comes with a long list of costs, and they can vary depending on the aircraft you purchase. For example, large jets cost more to operate and maintain than smaller aircraft.
Remember that when you buy a preowned jet for sale, you’re on the hook for paying for all your fixed costs, including crew salaries, insurance premiums, training, hangar fees, and more, as well as the variable costs, like fuel, maintenance, and landing fees at the airport. Add to these your capital costs - the expenses you must pay for financing, for example.
But here’s the catch. Those expenses will vary not only from model to model, but also from jet to jet. Take two Bombardier Challenger 300 jets, for example. The cost of ownership for them will not be identical. Cost estimates are just that - estimates based on the average used private jet with average cycles and average conditions.
So, unless you’re forecasting cost of ownership for a jet based on its specific tail number or serial number, the estimated cost is an educated guess at best.
Don’t Forget Expenses Associated with Buying Private Jets for Sale
Once you’ve calculated the purchase price of the jet, plus its fixed and variable costs of ownership for one year, you must also remember to add in the costs related to the purchase transaction.
You’ll need to pay your broker or dealer for their work for you, plus for any services others provide during the process, like inspections, legal fees, documentation fees, finance fees, and more.
Take Total Depreciation Into Account
The 2017 Tax Cuts and Jobs Act in the United States amended the Internal Revenue Code of 1986, making broad changes to taxation for many people.
Under this law, certain taxpayers can take the full depreciation of an asset used for business purposes in the first year of ownership. For example, you could buy a $5 million private jet, and then take that $5 million write-off in the same tax year.
Ask your CPA or tax professional for more information on how this may affect your business’ tax filing and to better understand what this means for purchasing and owning a private jet for charter revenue.
Hiring a Management Company to Keep Your Business Jet in Shape to Fly
Simply put, your jet is not allowed to fly without proper, ongoing maintenance. The aviation industry is heavily regulated, so you cannot skip a maintenance plan and expect to charter your jet - or fly independently, for that matter.
An aircraft management company oversees all your aircraft maintenance for you, so that you understand your jet’s maintenance schedule and costs. A good management company provides this for you in advance, so you’re aware of and can plan for jet maintenance expenses.
Be sure to add the management company’s fee into your estimate for cost of ownership, so you can compare every expense to the amount of money you could earn from chartering your business jet. And remember: hiring a management company can actually reduce your overall maintenance expenses, so it’s worth it.
Securing Charter Flight Hours
A charter management company is yet another expense to consider. If you expect to charter your jet to recoup costs or make money, then you’ll need to work with a charter management company to obtain charter hours for you. Some are better than others.
Realize that the charter companies available to you may only guarantee you up to 100 flight hours per year, and larger guarantees are far less common, but not impossible.
Most management agreements require you, the jet owner, to pay a monthly management fee and for the costs of ownership. Then, you’d receive a portion of the hourly charter revenue, generally around 85 percent. In total, you’re paying for a monthly management fee, plus 15 percent commission on charter earnings.
So, Can You Make Money from Owning a Private Jet?
The answer to whether you could cover the costs of your own private aviation travel or even make money off of chartering a jet you own is a succinct “maybe.”
Making money from this endeavor requires so many factors to go perfectly, and one slip could put you into the red. Plus, you must also be in a financial position already to use the depreciation of your jet and foot the bill for start-up costs. Whether it’s feasible is a case-by-case consideration.
And if you’re only planning to fly thirty or so hours per year, a jet card may be a smarter investment for your business.
Want to Buy a Used Private Jet?
If your heart is set on joining the exciting world of private aviation, to make money from chartering, or to simplify and de-stress your business travel, an International Aircraft Dealers Association (IADA) Accredited Dealer can help you find the right plane to meet your needs, and connect you to an array of the most reputable service providers in the industry.
Connect with an IADA Accredited Dealer on AircraftExchange.com, a monitored aircraft listing site with legitimate used private jets for sale.