Aircraft Purchase Common Questions Asia: Here Are 4 Common Questions Answered
Can I Put My Aircraft Out to Charter and Make a Profit?
While it may seem like a good idea to put your newly purchased aircraft out to charter to help offset the costs, empirical evidence suggests that this is rarely a feasible option. For example, a brand new aircraft typically depreciates at a rate of 30% in the first year and 10% on average in subsequent years. If you purchased a Cessna aircraft for $10 million, this means you would incur an expense of USD $300,000 in the first year and USD $100,000 in the following years, making it difficult to recover these expenses through chartering.
Why Do People Say Buying a Plane is a Tax Question?
In USA, corporate aircraft depreciations can be incorporated into finance books and used for tax deductions. We recommend involving your Finance Controller at the very initial stage of aircraft purchase to study feasible depreciation management mechanisms to reduce loss. However, if you don’t have any finance facility in place to claim tax deductions on the aircraft depreciation, budgeting should be in place to prepare for the aircraft depreciation expense.
Who Should Buy a Plane?
The decision to own an aircraft should not be based solely on the number of hours flown per year, as other factors need to be considered. Managing an aircraft, including hiring and managing a chief pilot and crew, as well as dealing with maintenance downtime, can be complex and time-consuming. Additionally, owning an airplane is not a liquid asset and can take over a year to sell, with value fluctuations beyond the owner’s control. It is essential to think carefully about whether owning an aircraft is the best option, as there are many other alternatives available, such as charter, fractional shares, or jet cards.
If owning a plane can save enough time to offset the cost, it might be worth considering, but if not, other options should be explored. Ultimately, the decision to own an aircraft should make life easier, not more complicated.
What Strategy Should I Think About Before Buying a Plane?
The Exit Strategy. Never make a purchase without having an exit plan, especially for aircraft as they are susceptible to marketplace fluctuations. We would highlight that aircraft owners rarely make a profit when they sell, but they are more likely to lose money; the only question is how much. Do thorough comparisons before you purchase and pre-plan the exit strategy. Compare thoroughly the exit strategies too before purchase to avoid manufacturer marketing gimmicks.