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Private Aviation Considerations For Family Offices

High net worth individuals and family offices have the unique ability to take full advantage of private aviation for travel.  The exact composition of what this looks like varies by individual and family office since every component of your journey is customized and bespoke.  Private aviation affords all users the rare capability to save time and travel in an efficient, safe and comfortable manner.  Key areas to review are price points of entry, Aircraft Charter and Management (ACM) considerations, and additional aircraft lifecycle requirements such as Fixed Base Operator (FBO) and Maintenance, Repair and Overhaul (MRO) services.

Points of entry

Ownership innovation over the last 25 years has created new entry points for private aviation users.  Instead of having to choose between acquiring a whole aircraft or using on-demand charter, fractional ownership, jet card programs, block purchase agreements and more user-friendly options have made this form of travel much more accessible and convenient.

Generally speaking, aircraft follow other asset classes in the classic “buy versus lease” decision matrix:  acquisition and outright ownership represents the most cost effective form for asset utilization but requires a greater capital commitment than leasing.  Most people who can afford an airplane still prefer the freedom of individual ownership.

You own an airplane.  Now what?

After you have completed an evaluation of your mission requirements and have acquired an airplane which meets those needs, what is your next step?  Are you going to staff up a flight department of your own and directly manage it?  You certainly can, or you may choose to hire a professional management company.  Why take this route?  The straightforward answer is that it frees you from extraneous obligations and is more efficient (which is probably why you chose to use private aviation). The decision may also come down to whether you desire exclusive use of your airplane (flying under owner control and Part 91 of Federal Aviation Regulations) or whether you would like to put your aircraft out for hire to third parties under Part 135.  Part 91 operations can be much simpler, but they allow for only limited expense reimbursement under FAA, Department of Transportation and IRS regulations.  If, like many family offices, you have a network of interconnected Limited Liability Corporations to optimize your tax situation, you have to very careful how you structure your flight department in order not to fun afoul of reimbursement regulations and create a situation where your flying could be characterized as illegal charter. Having your aircraft out for hire requires the aircraft to be on a Part 135 certificate and creates significantly more administration but also provides the opportunity to offset a material portion of the overall ownership costs.  In any case, you should sit down with an aviation professional who understands your mission requirements and develop a detailed proforma forecasting the costs and revenues (if any) associated with your expected usage.

Managing services through the life cycle of your aircraft

Regardless of whether you hire a professional management company or self-manage your flight department, your aircraft will require numerous services from third parties throughout your ownership lifecycle:  fuel, hangar, maintenance, avionics, flight planning, and perhaps even paint and interior work.  Purchasing all of these services in a vacuum can lead to less value for the cost compared to a thoughtful, well-prepared plan.  Again, you should consult a trusted, experienced aviation professional to help you develop an outcomes based strategy which meets your operational requirements and your financial goals.

About Global Aviation Infrastructure

Global Aviation Infrastructure is a leading aviation management company which provides Fixed Base Operation (FBO), Maintenance Repair and Overhaul (MRO), Aircraft Charter and Management (ACM), and aviation infrastructure management for aviation asset owners, corporations, airports, private equity firms, family offices and financial institutions.  For more information please visit www.aviationinfrastructure.com

For more information please contact:

Steven Levesque, Principal

+1 (843) 412-6881

  • Posted by admin
  • May 11, 2017
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