The growth in the private jet charter business combined with ongoing consolidation among charter operators has created an environment where an increasing number of high-net-worth individuals and businesses are rushing to purchase their first private jet before the end of Trump-era tax incentives favouring outright aircraft ownership. So says Daniel Jennings, CEO of Palm Beach, Florida-based broker The Private Jet Company (TPJC). He adds that first-time buyers are making at least five avoidable mistakes along the way.

“Compared to the past several years, we've been seeing more than double the number of first-time private jet buyers this year, typically with budgets of $2 to $5 million,” notes Jennings. These buyers are looking for used jet aircraft, because manufacturers are sold out for as long as three years from now. TPJC provides sales, acquisition and a wide range of consulting services to private jet buyers and sellers.

“While pre-owned aircraft are always coming on the market as owners upgrade to larger jets, the supply is not keeping pace with the demand,” Jennings goes on. “There are five big first-timer mistakes.”

The first mistake is to believe everything the seller tells you, not knowing what questions to ask in your due diligence. “Sellers don't necessarily misrepresent their aircraft, they just don't always tell you everything, such as whether a major inspection is due soon,” says Jennings. Inspection schedules are set by manufacturers and the FAA, and this can impact the buyer's downtime and financial liability. The cost and downtime for inspections are substantial, as much as $750,000 when a Gulfstream VSP reaches 5,000 landings, then an equal amount when the plane has flown 15,000 hours. While the cost and schedule of inspections varies with each aircraft, inspection costs increase over time. In addition, the aircraft is out of service for two to four months for each inspection. “An experienced jet owner knows to pull a due list for the inspection status and forecast for the future,” Jennings confirms.

The second mistake is focusing only on purchase price. “The easiest part is buying the aircraft, the hardest part is keeping it flying,” Jennings declares. The cost of maintaining and inspecting the aircraft adds no value to the plane as it is required for airworthiness, although not maintaining it clearly diminishes its resale value. “For some older jets, the cost of ownership exceeds the resale value of the craft. Your budget for buying a jet must include the cost of maintenance and inspections,” cautions Jennings. Engine maintenance programmes are another ongoing expense, adding to the total cost of jet ownership. Engines on almost all aircraft have multi-million dollar overhauls and midlife services that are required based either on the calendar, say every 10 years, or total flying time, whichever comes first. “With some aircraft, you definitely want an engine maintenance programme, with regular, predictable payments and coverage. With others, it would cost less to pay for an overhaul later or buy replacement engines.” First-time buyers are advised to consult with an experienced aircraft broker on whether an engine programme makes sense and which one to select, depending on the make and model of the aircraft, the owner's financial situation and the availability of spare engines.

The third mistake is thinking you will fly for free because you charter your jet out. “Chartering out your own plane does indeed help offset the costs of ownership, but it is never going to allow you to fly for free,” says Jennings. Charter revenue will vary month by month: “Some months you'll generate significant income, and some months you'll want to pull your hair out because you weren't making any money on the plane. But you will likely never fly for free when you also consider the value loss of a depreciating asset.”

The fourth mistake is not understanding the importance of ‘pedigree’, where a used aircraft came from. Where a used aircraft was registered and where it has ‘lived’ can greatly impact the condition of the plane. Pedigree factors include: whether the aircraft was kept in a hangar or outside on the tarmac; which facility maintained the aircraft and updated the logbooks; and local and national aviation regulations. Generally, the US and western Europe have the most experienced maintenance facilities and the most strictly enforced regulations on inspections and record keeping. “The Chinese civil aviation authority can require a lengthy deregistration process, which means buying a used jet from China can take significantly longer than it does when the plane is registered in the US or Europe,” explains Jennings.

The final big mistake is assuming it is inexpensive and easy to make layout changes to an aircraft. While it is relatively inexpensive to change the colours of the interior or repaint the aircraft, and the costs of doing so are up to 75 per cent recoverable when the aircraft is resold, the same is not true of moving seats and divans and changing the layout of a private jet, or anything structural. “If you want to move the divan from front to back or make any other major layout changes, you have to consider the cost of those modifications an addition to the purchase price, and you will never recover that cost, because it is just a personal preference,” Jennings concludes.