Eagle Creek in the News

Business Aircraft Operating Costs vs. Purchase Price

One of the most important steps in an aircraft acquisition is a detailed cost-benefit analysis. No surprise here; deciding on any multi-million-dollar asset is subject to deep due-diligence. But airplanes are sufficiently different from many other high-cost products in some very important ways. As with many large purchases associated with a business, the cost to buy a business jet is only the beginning. And the artificially low purchase prices for aircraft resulting from the current economic environment can be a mixed blessing for buyers.

In the challenging economic times since late 2008, the inventory of available jets swelled and the selling prices dropped dramatically. Buyers may have been tempted by aircraft that fell to within their purchase price range, but remained very expensive to operate on an annual basis. It might be fine to buy what used to be a $10 million jet for $2 million, but the cost to operate a private jet have not changed. Similarly, the operating costs could easily run as much as the purchase price every year. The analysis would easily show this.

Fixed costs such as insurance, maintenance, crew, training, parts etc. don’t become cheaper, just because the selling price was low. In fact, some parts and services for older aircraft can grow artificially high as they get older and require more maintenance.

Engine efficiency and avionics technology have also seen great advances that have left many older models behind. That bargain jet could be powered by engines that burn significantly more fuel and require much more expensive shop visits and expense than a newer model. In the case of early Stage 2 and Stage 3 engines, there are a growing number of airports that will not allow them to take off and land due to noise restrictions.

Cockpit avionics in an older jet might be long overdue for modernization to operate efficiently in today’s fast changing air traffic control system. One example is the onboard equipment required for operating at Reduced Vertical Separation Minimums (RVSM), a recent change in air traffic control procedures designed to maximize efficiency by allowing airplanes to fly closer together. It was based on the precision of satellite-based avionics compared with what was the norm before GPS. But there are strict requirements. If its electronics and associated systems do not permit RVSM, a jet can be denied clearance to fly at the most fuel efficient and cost advantageous altitudes. Similarly, even more sophisticated equipment requirements for pending upgrades to the air traffic system, known as NextGen, could be prohibitively expensive for some older aircraft.

A NARA-Certified Broker understands the complexities associated with making the right choice in an aircraft based on a combination of ‘wow’ factor and prudent number crunching. And the network of NARA Products and Services Members offer support and expertise in both the acquisition and operation of business jets to ensure that NARA-Certified Brokers will be able to deliver an accurate, expert prediction of the short- and long-term operating expenses of their customers’ aircraft of choice.

NARA Certified Aircraft Broker

 

 

 

Eagle Creek Aviation is a proud to be a Certified NARA Broker Dealer.

Look for the NARA Certified logo when you search for an aircraft broker or dealer.
When you see this emblem on an aircraft broker or dealer’s website, you’ll know that they subscribe to the principles, rules and regulations of the National Aircraft Resale Association, ensuring that you are working with one of the most respected and highly experienced professionals in business aviation.

Article is courtesy of NARA as featured in their NARA Perspective, No. 3