Steve Varsano featured by Business Jet Traveler August 2015

With the cost of pre-owned jets coming down, this is an opportune time for business ship travelers to consider moving up to full ownership of an aircraft. We spoke to some industry insiders about this value proposition. Owning an aircraft is not for everybody; it really depends on how much use you have for an airplane.

Normally, we think 150 to 175 hours of usage is really the break point where you should go from chartering an aircraft to actually buying an airplane. If you actually have 200 hours of use, you really want the flexibility to be able to have an airplane at your beck and call. We see people who have had some experience with aircraft, either through charter, but primarily maybe say through a fractional share or a jet club of some sort.

The worst thing that can happen when you're buying an aircraft for the first time—and it happens quite frequently—is that they say, "My friend told me that they have such and such an airplane and it's a great airplane and I should buy one," and that's a big mistake. Because what your friend has has nothing to do with what you need.

So you really need to be educated on which airplanes fit your profile. You want to know how much you want to spend, how far you want to go, how many people you have to carry, and really how old of an airplane you are willing to own. Once you decide to purchase an aircraft, you have to choose between new and pre-owned. For many, pre-owned can make more sense.

The prices for pre-owned aircraft have continued to slide downward, and in fact, recently at the National Aviation Finance Association conference, they were talking about evaluating differently depreciation schedules. Where we have looked at three to four percent per annum off the declining balance, now it's more like 7 to 10 percent. Today it’s actually a very good market to buy; it's a buyers market.

There are a lot of airplanes available, so you do have a pretty steep discount for a pre-owned airplane compared to a new airplane. Like the plane behind me, for instance, a new version of that airplane will probably cost 42 and a half million dollars, and this one can be bought for thirty-four to thirty-five million dollars. So it's a great advantage, and it's a brand new plane; it's only two years old and has still warranty left.

So you do get instant reward and you get a great deal. Sometimes new models of aircraft will have growing pains, and pilot training can be costly. So when you have a new aircraft, a new technologically advanced aircraft, sometimes they have issues that have to be ironed out for the first few months or first hundred hours of the airplane.

Also, just for the pilots' familiarization, if you have a new model introduced into the market, there are not as many pilots that have been flying that model airplane for a long time. As in any specialized market, it helps to have an expert on your side to make sure the purchase goes smoothly.

So when you're in the market and you are looking for an airplane, first of all, it's very important to have the right people around you and the right advice, especially on the pre-owned market. Because an airplane can be a good airplane or a bad airplane depending on its history, the way it was maintained, and the way it was flown.

So a small mistake can cost you a lot of money. You do have to be diligent, and you do have to hire professionals to help you around finding the right airplane. So when you choose a broker, obviously you're going to go through your selection process.

The main issue when you look for a good broker is which do they have. Do they have the right airplanes in their inventory that you're looking for? And do they have the right expertise, both from a financial and market value perspective, but also from a technical perspective?

Get a better choice of different models of different airplanes that are around the world. Obviously, if you're just calling a manufacturer, they want to sell you just that brand, even if it's in the pre-owned market. But if you really want to know how one airplane compares to another, a broker has a wider net that's covering different models and different airplanes of the same m...