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NEWS & EVENTS


Five Questions Before You Get Your First Aircraft - All It Takes Is Money

 

Do you have a budget and know how to use it? Owning an aircraft extends well beyond the initial acquisition price. Do you know what it costs to operate the aircraft? Do you have a first year's budget? If you are buying a used aircraft, where in its maintenance cycle is it? Is there a major inspection or overhaul looming on the horizon? Have you analyzed the impact of these costs, and do you have the cash available to pay for these? Just because you can afford to buy the 28-year old Challenger 600, doesn't mean you can afford to operate it?

Do you have emergency money? The aircraft you just bought has no major scheduled inspection due for over a year. Great! What about that unscheduled repair? It could be a few thousand or a few hundred thousand. A broker friend of mine tells his customers who are buying business jets to budget for the first year's maintenance and upgrades. They often don't need it, but it is better to have it available. I can't stress enough that aircraft are expensive. Whether a light piston twin or a global business jet, it does take a lot of money to own and operate them.

In order to save money up front, you may wish to look at financing. Financing is available although not as available as you may like.

How is your credit? If you are a company like Apple with $40 billion in cash reserves, then asking to finance a global jet should get you several offers. If you can afford to pay cash, and have an outstanding credit rating, then financing is available and at good rates. As you depart from that optimum, the financial risk increases and so will the rates and pre-conditions. Financial institutions will look at stable income. Winning the lottery will not get you financing for an aircraft. If you or your company have weathered the recent economic storm in good order, that will mean a lot to the financial institution.

Do you have an existing relationship with a financial institution? We get asked, who do I talk to about financing an aircraft? While NAFA is one place to research, a better first place is a financial institution with which you have a relationship. Have you done business with an institution for many years, and do you have an excellent track record with them? Financial records and debt ratios are important, but even more so is a record of trust and reliability that only comes with having done business with the financial institution.

How old is the aircraft? Rule of thumb: the aircraft age at the end of the finance/lease term should be no greater than 20 years. Newer aircraft are easier to sell. No financial institutions want to have the risk associated with taking back an aging aircraft that will have low residual value and be difficult to sell. They will adjust for the residual value, but if it takes 15 months to sell, the bank wants nothing to do with parked aircraft! In general, the older the aircraft, the bigger the down payment or tougher the terms will be.

There are some great aircraft out there and great bargains. Now is the time to buy. But, if this is your first foray into acquisition of an aircraft, make sure that you understand as much as possible before beginning the search. And as stated above, get your acquisition team together early! 

 
About Us
The mission of Conklin & de Decker is to furnish the general aviation industry with objective and impartial information in the form of professionally developed and supported products and services, enabling its clients to make more informed decisions when dealing with the purchase and operation of aircraft.

With over 2,000 clients in 90 countries around the world, we combine aviation experience with proven business practices.
 
 
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