A cost analysis for pre-owned jets is an essential step for any buyer looking beyond the initial price tag. While older aircraft may seem like a bargain, hidden expenses can quickly change the picture. Maintenance requirements, fuel efficiency, and potential obsolescence of systems all factor into the true cost of ownership. Buyers who take the time to understand their mission needs and operating budgets will make more informed decisions. In the end, a well-executed cost analysis for pre-owned jets can save both money and regret.
Today’s pre-owned business aircraft marketplace offers many examples of well-depreciated older jets being offered at a low price point. Although they may look like great value on the surface, more experienced buyers will know to delve deeper.
For example, such aircraft will have amassed several years of usage. Their engines and landing gears may have high cycles with potential overhauls coming due in the next 12-18 months. It’s also likely that they will have long been out of production, requiring the buyer to research what kind of aftermarket support is offered in terms of aircraft OEM, MRO and parts. And don’t just look at the airframe/engines. Are the systems installed in the plane obsolete or likely to become so anytime soon?
There are many questions prospective buyers of pre-owned aircraft should be asking beyond what appears to be an attractive asking price.
Defining Your Pre-Owned Candidate Aircraft
When you’re buying a pre-owned business jet, an aircraft’s performance as well as the total cost of ownership – not just the acquisition price – should be your primary focus.
For example, how well aligned is the aircraft’s range, seating and payload capacity, and runway performance with your travel needs? Can the aircraft achieve at least 80% of your anticipated trips?
As you address these questions, you’ll begin to identify a candidate list of prospective aircraft models on the pre-owned market. Once you have a list of between three and five models to begin with, you and your aircraft broker should conduct an initial multi-aircraft cost analysis.
The analysis will be based on a set of defined assumptions, projected travel analysis and operational criteria.
There are two approaches buyers can take here. Firstly, they can execute a quick analysis of their travel profile and mission, define what an affordable annual operating budget is, then scour the market for the intended aircraft to be procured. This is proceeded by the ‘number crunching’ part as the buyer aims to eliminate the more expensive aircraft from the pool of candidates.
Alternatively, buyers could do their homework first, ensuring they understand the current market demand, prepare a financial model and then look for the pre-owned aircraft candidates that meet or better their criteria and cost assumptions. This latter approach is the one we’ll focus on here.
High Level Pre-Owned Jet Cost Analysis
Once an in-depth analysis of your mission profile and current, short- and mid-term travel expectations have been executed, and you have defined your acquisition and operational cost budget, aligning financing if required, it’s time to execute a high-level cost analysis, focusing only on fuel and maintenance costs for each of the aircraft identified for your shortlist.
A pre-owned aircraft’s fuel cost represents >40% of its total variable cost. In the case of an aircraft greater than 10 years old, that cost can be nearer 50%. And with maintenance cost also substantial and typically increasing with aircraft age, it makes sense to benchmark each aircraft’s costs based on those two key cost drivers initially.
Particularly for pre-owned aircraft above five years old or with more than 3,000 hours on the airframe/engines, careful analysis of projected maintenance cost for the next five to 10 years should be undertaken to understand the impact of engines, airframe, avionics and APU manufacturer warranty expiry.
Using various sources to determine costs, you and your broker should be able to narrow the shortlist down to two or three jets that will best meet or exceed your requirements and budget.
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Original article published on avbuyer.com
