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? Our jet sales analysis may reveal that it is.
At some point, the acquisition cost of a new aircraft can be offset by operational costs that are less than your older, less efficient airplane in our jet sales analysis
Depending on the situation, yes!
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.
Jet Sales Analysis
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:
| Selling our clients’ old Challenger 601 |
Gained $3.5 million |
| Purchase price of the new Citation Sovereign |
Spent $10 million |
| Capital Outlay |
Additional $6.5 million |
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.
|
Operating cost per hour |
Hours Per Year |
Operating Costs per year |
|
| 1990 Challenger 601 |
$4,400 |
x 300 |
$1,320,000 |
| 2007 Citation Sovereign |
$2,000 |
x 300 |
$600,000 |
| Annual Savings |
|
|
Save $720,000/year |
If our client keeps the airplane 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.
Brad Harris
Brad Harris is founder and CEO of Dallas Jet International. Mr. Harris holds a Bachelor of Science Degree in Professional Aviation and Airway Science and a Masters Degree in human resources from Louisiana Tech University. Mr. Harris entered the aviation industry in 1989 as a corporate pilot for a Fortune 500 corporation. In 1993, he started a successful aircraft leasing and renting company which expanded to a successful aircraft management company in 1995. In 1993, Mr. Harris began his aircraft sales career and, in a very rapid fashion, became one of the most highly respected aircraft brokers in the World. In 1998, Mr. Harris started an aircraft sales, consulting, and brokerage company that is known today as Dallas Jet International. Mr. Harris is a current airline transport pilot who is type-rated in ten (10) different jet aircraft including the Gulfstream 550, 450, 350, GV, GIV, GIII, GII, Hawker 125, Falcon 10, Citation 550/500, Beechjet 400, 400A, Lockheed Jetstar II, Diamond Jet and King Air 300/350. In the many different aircraft markets, Mr. Harris parlays extensive hands-on knowledge and experience into clear results for his clientele. In addition to Mr. Harris maintaining a career focus on jet sales, he also has extensive experience in aviation consulting and management. Included on his client list are several clients for whom Mr. Harris and his firm have set up flight departments, consisting of aircraft crewing, aircraft management, aircraft maintenance and aircraft operating budgets. He and the firm are currently managing a Gulfstream V, a Gulfstream IV, a Falcon 50, a Citation II, a Citation ISP, a Citation Mustang, a Hawker 400XP, and two King Air 350’s.What most people do not know about Mr. Harris is that he possesses significant entrepreneurial experience in real estate and commercial insurance. This business experience, combined with his unparalleled experience in all facets of corporate aviation, has been the foundation of success for Dallas Jet International and its clients.
