FULL OWNERSHIP

Full aircraft ownership offers many benefits, including exclusive use of the aircraft on demand, complete tax depreciation, total control over safety, and the ability to charter the aircraft to help offset costs.

As with any form of ownership, there are disadvantages as well. When purchasing an entire aircraft, the owner is subject to a potentially large capital outlay and must also pay all costs associated with operation and maintenance. Further, when the aircraft is down for maintenance, it is not available for travel, and another aircraft must be chartered in its place.

In order to help defray ownership and operation costs, the owner may elect to place the aircraft under management with a third party that owns a Part 135 commercial charter certificate. For a flat monthly fee all aspects of the aircraft can be managed. Typically, these agreements can also help save on the cost of necessary items such as fuel or hangar space.

Chartering Your Aircraft to Offset Operational Costs

How it Works
Operating an aircraft of any size is a serious undertaking that requires careful planning and execution. One way to simplify this task is to outsource the management to a company that can not only maintain the aircraft, but that can also make it available for commercial charter. For a reasonable fee, the company will hangar the aircraft, place it on its 135 charter certificate, and manage the aircraft's master schedule. The company will further usually train the pilots you hire to 135 standards if they are not already, and will oversee all aspects related to government compliance issues. The company may also opt to share liability of the aircraft when it is being flown in a charter capacity.

A standard charter agreement provides for a 10-15% commission for the charter company, with the rest going to the owner. Terms vary, but many agreements call for the charter company to get final approval for each charter from the owner prior to booking a trip. Additionally, the charter company is usually held liable for collecting the money for these charter trips, and must make up any financial shortfalls.

Depending on the type of aircraft and market, yearly charter usage can range anywhere from 100 to 400 hours per year. The revenue associated with even moderate usage of 250 hours per year can go a long way toward defraying operational expenses. Combined with tax depreciation, chartering your aircraft can make owning it a sound financial decision.

What to Watch Out For
As always, there are disadvantages to offering an aircraft for charter that must be considered. Of primary importance is liability. When signing a management and charter agreement, be sure to carefully review and understand all issues related to liability. Aircraft placed on a charter certificate require higher insurance coverage, which results in higher premiums.

Another factor to consider is wear and tear. Flown on a regular basis with a variety of clients, the interior of a chartered aircraft is subjected to higher than normal wear and tear that can end up costing the owner quite a bit of money if not carefully managed.

Finally, be sure to clearly communicate in the agreement how the aircraft will be utilized. Usually, the owner or owners will allow chartered trips to take precedence over owner flown trips in order to generate the highest possible amount of revenue. However, some owners elect to have their travel take precedence, and others fly their aircraft so often that it is rarely available for charter. Therefore, you should carefully consider your travel needs prior to signing any agreement.


Tax Depreciation Advantages
One of the biggest benefits of purchasing an aircraft is the ability to depreciate it in order to offset income on annual tax returns. In a given situation where a prospective owner could benefit from sizably reducing taxable income, an aircraft can be a great investment. As an added bonus, though the end of 2004, any aircraft purchased and put into service by January 1, 2005 is subject to an accelerated depreciation schedule that allows the owner to save even more in the first two years of ownership alone for both new and used aircraft. Additional special rules relating to aircraft may also allow at least partial bonus depreciation for equipment placed in service through January 1, 2006.

For details on how this bonus schedule can work for you, please consult a tax specialist, or contact Executive Air Services at 1-800-579-1694.


Safety Considerations
One of the biggest advantages to owning and operating an aircraft is the ability to control all aspects associated with safety. The owner is able to choose pilots, maintenance companies, and storage locations for the aircraft, not to mention which passengers are able to use the aircraft.