Strict record-keeping becomes essential to preserve a remarkable tax break, said Jerald D. August, tax partner and head of the international tax and wealth planning practice group at Fox Rothschild.
But that doesn’t include flight costs, like fuel and pilot time. Those hourly fees are more expensive than the hourly cost if you operated the plane on your own — sometimes more than double. There are also fractional fees. Of course, you’re sharing the expense of the plane with other owners. The fractional jet company is making a profit as well as taking care of maintenance.
When it comes to buying your own jet, there are a minimum number of flight hours that make it cost efficient. Mr. Drohan said the total was about 150 hours. An aviation lawyer pegged it at 300 or more. The most a jet flies in a year are 1,200 to 1,400 hours.
Mr. Papariella said his company, Jet Edge, worked to charter planes to offset fixed costs to owners, but those savings come at the cost of hours on the plane’s engines. He said the company’s fleet of under 100 jets flew a total of 1,100 hours in September and 1,460 in October.
Charters offer a balance between having more control over when you fly and lowering some of the costs of ownership. Jet Edge’s average client has a minimum net worth of $50 million, which is low in the private jet world.
Mr. Papariella’s clients often look to buy used jets, some decades old, that still perform at a high level but cost less up front, he said. A Gulfstream G4 from 2002 might cost $3 million — far better than $60 million plus for the current G650. But that old Gulfstream still costs $1 million or more a year to operate, he said.
“Even if you’re very wealthy, you could still be shocked by a monthly bill,” he said. “We want to include the owner in how we make money. It’s for guys who are used to having information at their fingertips.”
Still, some buyers don’t want to share.
A lawyer who advises on jet purchases said the plane was just another asset for his billionaire clients. Many of them are happy for the plane to sit idle when they’re not using it, even if it entails paying for a crew to be at the ready.
Management companies like Executive Jet Management, a part of Berkshire Hathaway’s NetJets, and Solairus Aviation focus primarily on managing jets for the owners, which includes negotiating down fixed costs like fuel and pilot training but also ensuring compliance with flight and safety regulations.
“First and foremost, owning an aircraft is a very technical ownership experience,” said Brian Hirsh, president of Executive Jet Management. “Unlike real estate, there’s a lot of regulatory compliance factors to consider like pilot training, standards, certification, aircraft airworthiness. The role of the management company is to make it hassle free.”
EJM, as it is known, charges $5,000 to $20,000 a month for its management services. Additional costs like fuel, pilots and crew are passed through to owners but at discounts achieved by buying alongside NetJets.
“Collectively, we have 766 aircraft, which makes us the fifth-largest airline between United and Southwest,” he said. “We take those discounts and pass them through to owners.”