Is it time to upgrade your business jet?

Alasdair Whyte
By Alasdair Whyte November 12, 2012 11:58

Is it time to upgrade your business jet?

Is it cost effective to sell your older, less expensive aircraft and upgrade to a newer aircraft with a higher acquisition cost, but with a lower operating cost? Depending on the situation, Brad Harris, CEO of Dallas Jet International, says yes!
A Brazilian-registered Challenger 300 (Photo: J.P. Gosselin).

A Brazilian-registered Challenger 300 (Photo: J.P. Gosselin).

A real-world example can be very helpful in understanding the importance of balancing acquisition cost with operational cost.

A client approached us with this very question several months ago. He owns a 1990 Bombardier Challenger 601 for the last 10 years. The operational costs seemed high, and the aircraft was not serving his needs as well as it used to.

Dallas Jet International (DJI) performed an analysis of his current aircraft value and recent sales of comparable aircraft. We also performed our usual process for analyzing his current needs, including, among many other factors:

  • Budget for the acquisition
  • Annual budget for operational costs
  • Usual range of travel
  • Passengers/Luggage
  • Conditions of typical destinations (high, hot, short runways, other considerations)
  • City Pairs
  • Domestic/International travel needs
  • Cabin and amenity preferences and requirements

Based on our client’s needs, we provided a short list including a (newer) Bombardier Challenger 300, a Citation Sovereign, or a Falcon 2000. We provided information and discussed the particulars, and decided upon a Citation Sovereign as the ideal solution for their needs.

Together, we determined that a Citation Sovereign was the ideal aircraft. Our client requested that DJI begin looking for on- and off-market Citation Sovereigns available to acquire.

Here’s a simplified breakdown of the numbers:

So far, it certainly seems as though our client is spending considerably more money. But the “rest of the story,” as Paul Harvey used to put it, is this: Our client flies approximately 300 hours per year. At that rate, they save about $720,000.00 per year in operating costs.

If our client keeps the aircraft for nine years, he has saved more than enough to cover the additional outlay in acquisition cost, including the interest or opportunity cost of using that money.

In addition to the cost savings realized over time, our client also enjoys many benefits of an aircraft that is seventeen years newer:

  • Faster, easier and less frequent required maintenance
  • Better dispatch reliability
  • A safer, more reliable airplane
  • More advanced avionics
  • A much newer, more luxurious interior

As always, it’s our objective to find the best outcome for each client’s individual situation. A newer, more expensive airplane may NOT be the best choice for you. But if you’re flying an older aircraft, you fly a lot, and you find that your airplane is becoming less reliable and potentially facing expensive repairs, please give us a call and let’s talk about your situation and options.

Alasdair Whyte
By Alasdair Whyte November 12, 2012 11:58

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